Jeopardizing Prototype Status

[Randy Watson]

Would use of a separate trust agreement jeopardize prototype status?

[ETA Consulting LLC]

Not by that fact alone. It would be a good idea to ensure the Trust Agreement has been vetted by the IRS. Not sure about the semantics, but a plan is allowed to rely on the prototype's opinion letter while using a separate trust agreement. Typically, that separate trust agreement should've been reviewed by the IRS.

Good Luck!

[Guest Sieve]

My understadning is different. If you read Rev. Proc. 2005-16, opinion letters are issued to a plan and a related trust agreement (multiple trust agreements can be submitted and approved for use with a single plan document), so adoption of a trust ageeement not specifically approved with a particular plan document causes the adopting employer to lose reliance given to the underlying plan by the IRS opinion letter. Doesn't mean that the plan is disqualified, or that you can't apply for and obtain a favorable letter with respect to the employer's adoption of the plan and trust, but just that reliance is lost.

[Kevin C]

Sieve, I read Rev. Proc. 2005-16 as saying it is possible to amend the trust provisions of a NS prototype or VS document without losing reliance on the opinion letter as long as you don't amend in a way that would disqualify the plan.

Section 19.03(5) An adopting employer cannot rely on an opinion or advisory letter if the adopting employer has modified the terms of the plan's approved trust in a manner that would cause the plan to fail to be qualified.

Section 5.09 says a NS prototype can amend administrative provisions of the trust without becoming an individually designed plan.

Section 14.04 says a VS can amend adminstrative provisions of the trust without becoming an individually designed plan.

That doesn't necessarily mean they can substitute a new trust without submitting for a letter, but they may be able to modify the trust to do what they need witout losing reliance on the opinion letter. It would also be a good idea to consult with an ERISA attorney before amending the trust.

[Guest Sieve]

Administrative changes to a trust document which is part of the pre-approved Plan are OK. Substantive changes to the trust may even be ok. But, adopting a separate stand-alone trust document with a pre-approved prototype plan (which was the OP's issue), where the trust document has not been pre-approved as part of the prototype's approval, will eliminate reliance on the prototype plan (but will not necessarily cause the plan to lose its qualified status). (Corbel, for example, has a list of trust documents from other providers that have been approved for use with the Corbel pre-approved documents.)

It's just as if you recevied a favorable letter for a document, and then amended the plan or trust--it doesn't disqualify the plan, but, without an updated FDL, reliance on the FDL is lost (with some exceptions).

[ETA Consulting LLC]

I think there is common ground here. I think that the separate trust agreement in question would've been reviewed by the IRS for use with prototype plans, but was not submitted with the used of any particular prototype. The issue, then, is that you cannot use "ANY" trust agreement and maintain reliance on the opinion letter, but it is possible given the trust agreement has been approved for use with prototypes in general. I think there are trust agreements that were approved by the IRS with that understanding.

With that said, I admit I never researched directly but this type of understanding was consistently applied with several organizations I worked with. Nonetheless, it is always good to actually look at the rule to actually see what's driving this operation.

You guys rock!

[Guest Robertg8r]

The IRS allows modifications of NS and volume submitter plans - but they never interpreted that to mean a replacement of all the trust provisions by using a separate trust. They also do not have a process to get a trust approved for use with ALL pre-approved plans. Rather, a trust must be approved for use with the specific pre-approved plan being used. The sponsor of the pre-approved plan can submit the trust so that it can be used by any employer using that pre-approved plan. But, that same trust can't be used with the pre-approved plan of other sponsors unless they also submit it for approval for use with their plan. The other option is to submit the one plan using the trust for a determination letter.

[QNPG]

Would use of a separate trust agreement jeopardize prototype status?

If you use a Relius document:

The IRS position is that using a separate trust destroys automatic reliance on a pre-approved plan unless the separate trust was specifically approved for use with the plan. [Rev. Proc. 2005-16 permits minor changes to the trust or custodial provision of a nonstandardized or volume submitter plan, but it does not permit the entire replacement of the trust provisions with a separate trust.]

Relius submitted a specific list of trusts as a courtesy to their clients. The IRS has approved a list of trusts for use with the SunGard Prototype and Volume Submitter Defined Contribution Plans. It does not matter whether the plan being used is based on the Corbel or PPD documents. The IRS does not issue formal approval letters for the separate trusts. Rather, the IRS merely retains the trusts in the file containing the SunGard pre-approved plans.

[ETA Consulting LLC]

Would use of a separate trust agreement jeopardize prototype status?

If you use a Relius document:

The IRS position is that using a separate trust destroys automatic reliance on a pre-approved plan unless the separate trust was specifically approved for use with the plan. [Rev. Proc. 2005-16 permits minor changes to the trust or custodial provision of a nonstandardized or volume submitter plan, but it does not permit the entire replacement of the trust provisions with a separate trust.]

Relius submitted a specific list of trusts as a courtesy to their clients. The IRS has approved a list of trusts for use with the SunGard Prototype and Volume Submitter Defined Contribution Plans. It does not matter whether the plan being used is based on the Corbel or PPD documents. The IRS does not issue formal approval letters for the separate trusts. Rather, the IRS merely retains the trusts in the file containing the SunGard pre-approved plans.

This is what I was attempting to allude to; even though what I stated was poorly articulated. Thanks Nerdy