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News Items, by Subject

Ret plans - amendments required, incl. EGTRRA

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Affected Parties Suggest Reasons, Methods for Expanding IRS Determination Letter Program
"The circumstances believed to warrant determination letter applications included: [1] Significant legislative and regulatory changes; [2] Significant plan design changes; and [3] Mergers and acquisitions.... Under one suggested approach for obtaining an IRS stamp of approval, the agency would establish or provide official recognition of a third-party certification system to fill the void left when it contracted the determination letter program -- an idea that the IRS raised years ago in a 2001 White Paper." (HR Daily Advisor)
Stakeholders Propose Ideas for Expanding the Determination Letter Program
"The main themes in comments from employee benefits trade organizations ... included: [1] Significant legislative and regulatory changes ... [2] Significant plan design changes ... [3] Mergers and acquisitions ... The comments also included recommendations on other avenues for obtaining the IRS stamp of approval[:] Third-party certification ... Letter rulings ... [and] Limited scope reviews." (Conduent)
[Guidance Overview] IRS Umbrella Closing Agreement Program Available to Correct Missed Deadlines
"Financial institutions and providers can still make corrections through the Voluntary Correction Program. However, with the umbrella closing agreement option, there does not have to be a system-wide error. Instead, this allows the financial institution to seek correction across a group of employers. An umbrella closing agreement correction can be more cost-effective and simpler for providers looking to make group corrections." (Butterfield Schechter LLP)
IRS Appears Likely to Expand Determination Letter Program in 2019
"The end of the [cycle-based program in 2017] left plan sponsors with no way to obtain a confirmation from the IRS that their plans continued to satisfy the formal requirements for qualification after multiple amendments and changes to the law. Based on recent IRS announcements, however, it appears that individually designed plans will have restored access to the program, possibly as soon as next year." (Verrill Dana LLP)
[Official Guidance] Text of IRS Form 14568-B: Model VCP Compliance Statement -- Schedule 2: Other Nonamender Failures and Failure to Adopt a 403(b) Plan Timely (PDF)
"The plan identified above was not amended to comply with the applicable provisions of the following legislative and regulatory requirements by the applicable deadlines in accordance with Internal Revenue Code (IRC) Section 401(b) and the regulations thereunder[.]" [Rev. June 2018] (Internal Revenue Service [IRS])
[Opinion] Joint Trade Association Letter to Senators Proposing SCP Expansion Be Included in Senate IRS Reform Proposal (PDF)
"[This] proposal would direct the IRS to expand the self-correction program (SCP) within the IRS's Employee Plan Compliance Resolution System (EPCRS), to enable businesses with retirement plans to more easily correct common mistakes. Expanding SCP to address common mistakes enables businesses to fix these problems without a submission to the IRS and the payment of a user fee. Timely and efficient correction protects participating employees by providing them with their expected retirement benefits, including favorable tax treatment." (American Society of Pension Professionals & Actuaries [ASPPA])
[Opinion] Groom Law Group Urges IRS to Expand Determination Letter Program
"[Groom Law Group submitted letters] recommending consideration of the following plans as applicants for updated determination letters: [1] Plans with a cash balance or similar benefit formula whose last determination letter was before the effective date of the final IRS hybrid plan regulations. [2] Plans that address income replacement and inflationary pressures through adoption of a variable annuity feature. [3] Traditional pension plans that convert to a cash balance-type formula. [4] Plans that undergo major changes that otherwise make certain compliance testing unnecessary -- such as safe harbor 401(k) plans. [5] Plan changes accompanying significant workforce adjustments, such as downsizings or corporate separations. [6] Corrective plan amendments submitted as part of an EPCRS submission. [7] Governmental plans where there has been a significant change in the governing state or local law." (Groom Law Group)
Pre-Approved DB Plan Restatement Period Opened May 1, 2018
"If your defined benefit plan is currently on a pre-approved document or if you want to start using a pre-approved document, it is time to begin the plan restatement process." (Warner Norcross & Judd LLP)
House Subcommittee Chair, Ranking Member Press IRS for VCP Update
"In a letter to Sunita Lough, Commissioner of the IRS's Tax Exempt/Government Entities (TEGE) division, ... Subcommittee Chairman Dave Brat (R-VA), and Ranking Member Dwight Evans (D-PA)... [asked] [1] If the IRS planned to expand the Self-Correction Program; if so, how, and if not, why not; [2] To explain 'how the Self-Correction Program is limited because of 'real tax consequences to the participants'; [3] To provide an update on whether the program would be streamlined, if so how and when, and if not, why not." (American Society of Pension Professionals & Actuaries [ASPPA])
Unapproved 403(b) Plan Documents: Plan Sponsors Can Take Remedial Steps Now
"[1] If your plan was established or restated in the last year, confirm whether or not your current document is a pre-approved prototype or volume submitter plan with an opinion or advisory letter. If so, it is likely that no further action is required. [2] If the current plan document does not have an opinion or advisory letter, consider adopting ... a pre-approved plan document retroactively to January 1, 2010 or, if later, the plan's effective date." (Benefits Bryan Cave)
[Opinion] ERIC Comment Letter to IRS on the Determination Letter Program
"Plan sponsors should be allowed to request a determination letter during the 2019 calendar year with respect to a plan merger that has occurred since the plan's last determination letter was issued ... Hybrid plans, employee stock ownership plans (ESOPs) and plans incorporating a non-safe harbor accrual or allocation formula should be allowed to request a determination letter with respect to certain matters on which the IRS did not previously opine ... IRS should consider establishing or providing official recognition of a third-party certification system that would fill the void left by the suspension of the determination letter program[.]" (The ERISA Industry Committee [ERIC])
[Opinion] American Benefits Council Letter to IRS in Support of Expanded Determination Letter Program for Individually Designed Plans
"[C]ertain types of individually designed plans and transactions [are] particularly in need of access to the program.... [1] Significant plan design changes, especially defined benefit plan changes ... [2] Multiple employer plans and multiemployer plans ... [3] Corporate transactions ... [4] Significant changes in the law." (American Benefits Council)
IRS Considers Expanding Determination Letter Program in 2019 for Certain Individually Designed Plans
"[T]he IRS announced that it is soliciting comments from the public to help identify any additional types of plans for which it might be appropriate for plan sponsors to be able to request determination letters during the 2019 calendar year.... The public comment period closes on Monday, June 4, 2018." (Compliance Dashboard)
[Official Guidance] Applications for Pre-Approved DC Plan Opinion Letters: Third 6-Year Remedial Cycle
"The IRS is accepting applications for opinion letters for pre-approved Defined Contribution (DC) plans for the third six-year remedial amendment cycle. For the IRS to consider the third cycle's application, the pre-approved DC plan provider must verify compliance with the second cycle's requirements by: [1] Stating that an opinion or advisory letter wasn't requested for the DC preapproved plan for a prior cycle or at any prior time; [2] Attaching the plan's most recent opinion or advisory letter for the second six-year remedial amendment cycle; or [3] Including a satisfactory explanation of why an opinion or advisory letter wasn't requested during the second six-year remedial amendment cycle and how the second cycle's qualification requirements were timely satisfied by employers who adopted the plan." (Internal Revenue Service [IRS])
[Official Guidance] IRS 'Umbrella' Closing Agreement Program Allow Providers of Pre-Approved Plan to Correct Multiple Missed Deadlines
"While plan sponsors may continue to make VCP submissions for correcting a failure to restate their plans by the deadline, the IRS invites financial institutions or other service providers to submit proposals for umbrella closing agreements to correct the same failure on a larger scale by addressing employers affected by the failure as a group." (Internal Revenue Service [IRS])
IRS Requests Input on Possible Expansion of Determination Letter Program in 2019
"The Treasury and IRS have indicated that they will issue guidance if they identify any additional types of plans that may request a determination letter during 2019. However, they reserve the right not to expand the program at all, given the still limited IRS resources and the focus on tax reform[.]" (Groom Law Group)
[Guidance Overview] IRS Considering Expanding Determination Letter Program in 2019 for Certain Individually Designed Plans
"Following the close of Cycle A on January 31, 2017, the IRS now only makes determinations on individually designed plans for initial plan qualification, for qualification upon plan termination, and in certain other limited circumstances the IRS has described in specific published guidance.The IRS has left open the possibility that it may consider opening up the determination letter program in the future for certain types of individually designed plans. In Notice 2018-24, the IRS is soliciting comments on what specific types of plans it should consider accepting for determination letters in 2019." (Kilpatrick Townsend)
[Official Guidance] Text of IRS Notice 2018-24: Request for Comments on Scope of Determination Letter Program for Individually Designed Plans During Calendar Year 2019 (PDF)
"This notice requests comments on the potential expansion of the scope of the determination letter program for individually designed plans during the 2019 calendar year, beyond provision of determination letters for initial qualification and qualification upon plan termination. In reviewing comments submitted in response to this notice, the [Treasury Department] and the [IRS] will consider the factors regarding the scope of the determination letter program set forth in section 4.03(3) of Revenue Procedure 2016-37.... The Treasury Department and the IRS will issue guidance if they identify any additional types of plans for which plan sponsors may request determination letters during the 2019 calendar year." (Internal Revenue Service [IRS])
Restated Preapproved DB Plans Learn from DC IRS Amendment Cycle
"Taking a page from the books of their DC plan sponsor compatriots that have been through this process, all employers can: [1] Understand the role of the employer in the process. [2] Schedule changes in plan design. [3] Manage the payment of document provider costs.... [4] [C]onsider basing the [cash balance plan] interest-crediting rate on the actual plan asset rate of return. [5] For an employer considering terminating a DB plan, coordinate the restatement process with the termination process. [6] For an employer with an individually designed plan document, consider the pros and cons of moving to a preapproved plan document." (HR Daily Advisor)
[Official Guidance] Text of IRS Rev. Proc. 2018-19: Retroactive Reduction of Form 5310 User Fee (PDF)
"[T]his revenue procedure changes one user fee set forth in Appendix A of Rev. Proc. 2018-4, Schedule of User Fees, with respect to applications on Form 5310, Application for Determination for Terminating Plan. That user fee is reduced from $3,000 to $2,300, effective January 2, 2018. Applicants who paid the $3,000 user fee listed in Rev. Proc. 2018-4 will receive a refund of $700." (Internal Revenue Service [IRS])
[Official Guidance] IRS Announcement 2018-05: Opinion and Advisory Letters for Pre-Approved DB Plans, Deadline for Employer Adoption, and Opening of Determination Letter Program for Adopters (PDF)
Announcement 2018-05 provides that the IRS intends to issue opinion and advisory letters for master and prototype and volume submitter defined benefit plans (pre-approved) that were restated for changes in plan qualification requirements listed in Notice 2012-76 (the 2012 Cumulative List) and that were filed with the IRS during the submission period for the second remedial amendment cycle. The IRS intends to issue the letters on March 30, 2018 or as soon as possible thereafter. The period for employer adoption of these plans will end on April 30, 2020. Starting May 1, 2018, and ending April 30, 2020, the IRS will accept applications for individual determination letters from employers who adopt such plans and are otherwise eligible to submit a determination letter request. This announcement also provides that a delayed beginning date for the third six-year remedial amendment cycle will be announced in future guidance. (Internal Revenue Service [IRS])
[Opinion] ARA Comment Letter to IRS: Revised EPCRS User Fee Structure Is Unfair to Small Businesses (PDF)
"ARA recommends that the IRS immediately amend Revenue Procedure 2018-4 to: [1] Provide that the applicable general VCP user fee is the lesser of the general VCP user fee in effect on January 2, 2018, or the general VCP user fee in effect immediately prior to January 2, 2018, pursuant to Revenue Procedure 2017-4; and [2] Reinstate the special reduced VCP user fees in effect immediately prior to January 2, 2018[.]" (American Retirement Association [ARA])
[Guidance Overview] IRS Reduces Fees to Encourage Employers to File VCPs for Qualified Plan Errors
"The new VCP fees are based on the assets of the plan instead of its participants and are capped at $3,500.... Note that certain types of errors were previously eligible for reduced VCP fees. For example, a VCP covering only a small number of loan failures for non-key employees was eligible for a reduced fee of as little as $300. Most of these special fees have now been eliminated so that the [new fee schedule] will apply to most VCPs." (Mazursky Constantine LLC)
[Guidance Overview] Spousal Consent/J&S Issues Under 403(b) Plans May Trigger Document Conflicts
"[T]he only way the spousal rights rules apply to 403(b)plans is through ERISA Section 205. This means that if you have a non-ERISA 403(b) plan, the spousal rights rules DO NOT apply. Be careful to avoid inadvertently applying them in the restatement.... HOWEVER, many non-ERISA 403(b) annuity contracts impose the spousal rights rules as a matter of contract language ... It is typical for a 403(b) plan to provide a set percentage of pay as the employer benefit under the plan, much like a money purchase plan. There is a very real and unresolved issue as whether or not this set formula makes the plan a 'money purchase plan' which is subject to the J&S rules[.]" (Business of Benefits)
[Guidance Overview] IRS Releases 2017 Required Amendments List for Qualified Retirement Plans
"[1] Cash balance/hybrid plans must be amended ... to comply with the market rate of return and other requirements in the final regulations that become applicable ... for the plan year beginning in 2017. [2] An eligible cooperative plan or eligible charity plan, not already subject to the benefit restrictions under Internal Revenue Code Section 436, generally becomes subject to the restrictions beginning with plan years on or after January 1, 2017....[3] Defined benefit plans that permit benefits to be paid partly in the form of an annuity and partly as a single sum (or other accelerated form) must do so in compliance with Code Section 417(e)." (Findley Davies | BPS&M)
[Official Guidance] Text of IRS Notice 2017-72: 2017 Required Amendments List for Qualified Retirement Plans (PDF)
"This notice contains the Required Amendments List for 2017 ('2017 RA List').... Pursuant to section 5.05(3) of Rev. Proc. 2016-37, this notice provides that December 31, 2019, is generally the last day of the remedial amendment period with respect to a disqualifying provision arising as a result of a change in qualification requirements that appears on this 2017 RA List. As a result, under sections 8.01 and 5.05(3) of Rev. Proc. 2016-37, December 31, 2019, is also generally the plan amendment deadline for a disqualifying provision arising as a result of a change in qualification requirements that appears on the 2017 RA List. However, a later date may apply to a governmental plan ... pursuant to sections 8.01 and 5.06(3) of Rev. Proc. 2016-37." (Internal Revenue Service [IRS])
[Official Guidance] Employee Stock Ownership Plan (ESOP) LRM and Information Package, October 2017 (PDF)
43 pages. Oct. 2017, published online Nov. 2017. "This information package contains samples of plan provisions that satisfy certain requirements of the Code applicable to ESOPs. Such language may or may not be acceptable in specific plans depending on the context in which used. To expedite the review process, plan sponsors are encouraged to use the language in this package. A partnership or a joint venture is not eligible to maintain an ESOP. However, a partnership or a joint venture that has elected to be taxed as a corporation may be a Participating Employer as defined in this ESOP LRM." [Editor's note: the Oct. 2017 revision appears to replace the version released in June 2015.] (Internal Revenue Service [IRS])
[Official Guidance] Cash or Deferred Arrangement LRM and Information Package, October 2017 (PDF)
43 pages. Oct. 2017, published online Nov. 2017. "This information package contains samples of plan provisions that satisfy certain specific requirements of the Internal Revenue Code... Note that these CODA LRMs assume the plan will permit catch-up contributions (defined in Code Section 414(v)) for participants age 50 and over and Roth Elective Deferrals (defined in Section 402A)." [Also online: 45-page red-lined version showing changes from the previous (October 2011) version.] (Internal Revenue Service [IRS])
Year-End Compliance Issues for Single-Employer Retirement Plans (PDF)
"This [article] looks at key areas -- including administrative compliance issues -- that sponsors of such defined benefit or defined contribution plans should address by Dec. 31, 2017." (Milliman)
IRS Issues Model Amendments for Bifurcated Distribution Options (PDF)
"Plan sponsors may limit the extent that bifurcation is available with respect to a participant's accrued benefit. Other limitations may include the number of forms of distribution among which an accrued benefit may be bifurcated or the combinations of forms of distribution that are made available. The model amendments include language that allow for these limitations." (Prudential)
IRS Clarifies Use of Effective Date Addendums to Pre-Approved 403(b) Plan Documents
"Adoption of the pre-approved document itself may not take into account plan provisions that were in effect at varying times during this period.... The IRS has taken the position that such plans may continue to rely on their pre-approved opinion or advisory letter if they create an 'effective date addendum' to the plan document." (Ascensus)
[Guidance Overview] When Must Discretionary Amendments to a 403(b) Plan be Adopted?
"The Remedial Amendment Period (RAP) for 403(b) plans ends on March 30, 2020 for plan sponsors using IRS pre-approved 403(b) plan documents.... [W]hat happens if a plan sponsor changed the operation of the plan but did not adopt an amendment reflecting that change? ... The answer 'appears' to be that the plan can be retroactively amended when it is restated.... [T]his is one area where the rules for qualified plans differ from the rules for 403(b) plans." (FIS Relius)
[Guidance Overview] Understanding Pre-Approval of 403(b) Plans
"In March 2017, the [IRS] began issuing advisory and opinion letters to the first preapproved retirement programs described in Internal Revenue Code Section 403(b) ... [This] article discusses preapproved 403(b) plans, including their advantages, legal pitfalls, and other issues that an eligible employer may consider when determining whether to convert its existing 403(b) plan into a preapproved plan." (Venable LLP)
[Discussion] Timing of Corrective Amendment for 2016 and Going Forward for 2017
"We have a client that has allowed participants into the match portion of the plan earlier than the document allows. We are doing a corrective amendment for 2016, but can we also do a corrective amendment now for 2017? My concern is that I thought that a corrective amendment was only available after the plan year ended. Client has changed the entry conditions for match to tie to those of the deferral with an amendment effective August 1, 2017. But there is still the issue of the period from 1/1/17 to the date of amendment." (BenefitsLink Message Boards)
[Guidance Overview] IRS Preapproved Plan Program Gets a Makeover (PDF)
"Plan sponsors of individually designed plans may want to consider this guidance if they are considering moving to a pre-approved plan document. And plan sponsors who already use pre-approved plans may want to review the guidance to see what changes will be coming. Of course, these new defined contribution documents will not be available for a few more years." (Groom Law Group, via TAXES The Tax Magazine)
IRS Modifies Preapproved Retirement Plan Program
"The modifications are designed to further the IRS's stated intention to encourage sponsors of individually designed plans to transition to a preapproved plan format. However, the changes are relatively modest and most large plan sponsors will likely find other ways to mitigate their higher compliance risk since the curtailment of the individually designed determination letter program. The IRS plans to continue enhancing and expanding the preapproved plan program 'in whole or in part, from time to time, with some of the changes based on comments from program users." (Willis Towers Watson)
[Guidance Overview] IRS Has Revised Its Qualified Plans Correction Program to Address the Determination Letter Program Changes (PDF)
"This column discusses the major changes made to the Employee Plans Compliance Resolution System (EPCRS) by Revenue Procedure 2016-51 to address the determination letter program changes.... [1] Determination letter requirement for self correction eliminated ... [2] Requirement (or ability) to apply for a determination letter as part of EPCRS eliminated ... . [3] IRS VCP fees and schedules moved ... [4] IRS audit cap sanctions revamped to address the lack of a recent determination letter ... [5] Plan amendment and plan document failures clarified." (Groom Law Group, via Journal of Pension Benefits)
[Guidance Overview] IRS Notice 2017-44 Provides Model Amendments to a DB Plan Document to Add Bifurcated Benefit Distribution Options
"Plan sponsors may: [1] Limit the extent to which a participant's accrued benefit may be bifurcated; [2] Specify the number of forms of distribution among which an accrued benefit may be bifurcated; [3] Limit the combination of forms of distribution available for bifurcation. Notice 2017-44 provides examples of acceptable ways a plan may limit bifurcation of a participant's accrued benefit." (Thomson Reuters Practical Law)
[Discussion] Handwritten Amendment to Plan Document?
"On November 30, 2016 plan sponsor decides they want to change the safe harbor match formula from plan year to pay period effective January 1, 2017. They call the vendor, vendor says no way it is too late as the safe harbor notice is due the next day. Plan sponsor decides to hand write on the document crossing out plan year and writing in pay period. Required signatures and dates are written in to the margin as well as the execution page making it clear their intent. Plan sponsor changes the safe harbor notice by typing the notice and just changing plan year to pay period. Plan sponsor delivers the safe harbor notice timely with pay period wording. Plan sponsor sends the hand-written amendment and signatures to the vendor. Vendor refuses to honor the hand-written changes. Are handwritten amendments acceptable?" (BenefitsLink Message Boards)
[Official Guidance] Text of IRS Notice 2017-44: Model Amendments to Add Bifurcated Distribution Options to Defined Benefit Plans (PDF)
12 pages. "This notice provides model amendments that a sponsor of a qualified defined benefit plan may use to amend its plan document to offer bifurcated benefit distribution options to participants in accordance with final regulations issued under Section 417(e) of the [Code] ... [A] plan that provides for a bifurcated distribution option is not required to include this specific model language. The sponsor of a plan that currently provides for bifurcated distributions under plan terms that comply with the provisions of Section 1.417(e)-1(d)(7), relating to either implicit or explicit bifurcation, does not need to amend those plan terms. In addition, use of the model language by an employer that has adopted a pre-approved plan will not cause the plan to fail to be identical to the pre-approved plan." (Internal Revenue Service [IRS])
IRS Issues New Procedures for Pre-Approved Plans (PDF)
"Over the years, the IRS has expanded its Pre-Approved Program and lessened the distinctions between different Pre-Approved Plan types. The new program continues this trend by making the Pre-Approved Plan program much more straight-forward and cost effective. This is beneficial to organizations sponsoring Pre-Approved Plans and adopting employers. The new program also helps the IRS in dealing with its budget and staff issues, by encouraging the use of Pre-Approved Plans rather than individually-designed plans." (ASC)
IRS Requests Input on Upcoming Presentation on Pre-Approved Plans Opinion Letter Program
"[IRS is] developing a [video] presentation on this topic and would like your input on what to include ... The presentation will cover: [1] Merger of the 'master and prototype' and 'volume submitter' programs; [2] Differences between standardized and non-standardized plans; [3] Opinion letter application period for defined contribution plans; [4] Other changes made by Revenue Procedure 2017-41. [Send an email to the IRS at] by 5 p.m. ET on September 1, 2017 with any suggestions for this presentation." (Internal Revenue Service [IRS])
[Discussion] 'Scrivener's Error' in Document Preparation
"Plan is new comparability design, 3 classes. Adoption Agreement allows allocation for each class to be: [1] a percentage of compensation; [2] a fixed dollar amount; [3] the greater of method 1 or 2. Plan design always was intended to be method 3 (greater of% or $) -- and plan always has used method 3 in operation. When preparing a PPA restatement effective Feb. 1, 2015, we mistakenly checked box 1 instead of box 3. This error was missed when doing the 1/31/2016 year-end valuation, but we've caught it now. Can we simply document the error and correct that page of the Adoption Agreement?" (BenefitsLink Message Boards)
[Discussion] Retroactive Amendment, Self-Correction, Pre-Approved Plan
"Client has a pre-approved 401(k) plan. Recently discovered error allowing early inclusion of noneligible employees following purchase of company. Employees of purchased company were allowed to enter plan immediately; however, plan requires one year of service. Client would like to retroactively amend plan to allow immediate entry into plan for these employees in conjunction with the purchase. Rev. Proc. 2016-51, Appendix B, Section 2.07 allows correction by plan amendment and requires submission of the amendment to the IRS for a determination letter. Section 6.05 states that determination letters shall not be submitted with the VCP application and addresses determination letters and pre-approved plans under VCP or Audit CAP (but does not mention SCP). Can anyone confirm for me that if we correct through SCP with a retroactive amendment to a pre-approved plan whether we are required to submit the amendment (i.e. the plan) for a determination letter?" (BenefitsLink Message Boards)
Why Do I Need to Restate My 403(b) Plan Document?
"What is the deadline for getting this done? ... What if we don't restate our plan? ... Is there any benefit to this process other than the IRS Pre-Approval? ... How do I select a consultant to do this work? ... What about the investments? ... The insurance company will give me a low cost document and some investments they chose. Isn't that sufficient?" (QBI)
IRS Issues 2017 Cumulative List for Pre-Approved Defined Contribution Plans
"Providers of pre-approved defined contribution plans and their advisors should carefully review the 2017 Cumulative List to ensure that their plan documents and opinion letter applications address all of the issues that the IRS has identified.... Beginning with the 2017 Cumulative List, the Cumulative Lists no longer apply to individually designed plans; instead, the IRS has begun to issue an annual Required Amendments List for these plans[.]" (Thomson Reuters / EBIA)
[Guidance Overview] IRS Revamps Pre-Approved Qualified Plan Program (PDF)
"Sponsors of master and prototype and volume submitter plans will want to take this new guidance into account, and in the case of defined contribution plans, prepare for a filing season to begin October 2, 2017. Sponsors should also watch for anticipated updated 'LRMs' which may be released in the near future. Many of these changes appear to be designed to make pre-approved plans more attractive and usable in place of individually designed plans[.]" (Groom Law Group)
[Discussion] PPA Restatement and Plan Termination After Dissolution of Plan Sponsor
"Let's say the plan was a one-person profit sharing plan. The sponsor was the sole participant's medical professional association. The participant died in 2014. The plan provides that the plan terminates upon dissolution of the plan sponsor. I believe the P.A. might have been dissolved in 2013. The plan never was formally terminated or paid out. Would the plan need a PPA restatement?" (BenefitsLink Message Boards)
IRS Paves the Way for More Preapproved Plans
"A pre-approved plan may have either of two formats: an adoption agreement and basic plan document or a single plan document; a money purchase pension plan can now be combined with either a 401(k) or profit-sharing plan; an ESOP can now include a 401(k) feature, but it must be a nonstandardized plan; a Cash Balance plan may now provide that the rate used to determine an interest credit be based on the actual return on plan assets (not a subset of plan assets), but it must be a nonstandardized plan[.]" (Findley Davies | BPS&M)
[Guidance Overview] IRS Updates the Pre-Approved Plan Document Program
"The most significant change outlined in [Rev. Proc. 2017-41] is the restructuring of the M&P and VS programs into a single Opinion Letter program with two types of plan documents: Standardized and Nonstandardized. This change eliminates the distinctions between M&P and VS plans and expands the Nonstandardized Plan program to allow for greater flexibility in plan features and options (in effect, Nonstandardized plans will fill the role traditionally filled by VS documents)." (FIS Relius)
[Guidance Overview] IRS Makes Major Changes to Qualified Pre-Approved Plan Program
"Nonstandardized plans may be customized, within IRS limits, without becoming individually designed plans.... The program now includes nonelecting church plans. A nonstandardized plan may allow hardship distributions of elective deferrals for non-safe harbor reasons. The IRS will no longer review and approve a plan's trust or custodial agreement and will require that the trust agreement or custodial account agreement be in a document separate from the plan." (Ascensus)
[Guidance Overview] IRS Revises Opinion Letter Procedures for Pre-Approved Plans, Issues 2017 Cumulative List
"The M&P Plan and VS Plan programs are combined and replaced by a single opinion letter program for standardized plans and nonstandardized plans ... A pre-approved plan may have one of two formats: as an adoption agreement plan or a single document plan ... An adopting employer of a nonstandardized plan may adopt minor modifications to the plan ... A money purchase plan may be combined with a 401(k) plan or a profit-sharing plan in the same pre-approved plan document.... A nonstandardized plan that contains an employee stock ownership plan (ESOP) may include a 401(k) plan ... A cash balance plan may now permit the rate used to determine an interest credit to be based on the actual return on plan assets." (Thomson Reuters Practical Law)
IRS Overhauls Opinion Letter Process for Pre-Approved Plans, Combines Prototype and Volume Submitter Programs
"The overhaul of the pre-approved plan program is not surprising given the IRS's significant reduction of the determination letter program for individually designed plans ... Comments are specifically requested regarding the possibility of allowing adopting employers to continue to maintain certain 'legacy' benefit formulas (such as frozen or continuing benefit formulas for certain participants due to a merger or acquisition) when adopting a pre-approved plan." (Thomson Reuters / EBIA)
[Official Guidance] Text of IRS Notice 2017-37: Cumulative List of Changes in Plan Qualification Requirements for Pre-Approved Defined Contribution Plans for 2017 (PDF)
11 pages. "This notice contains the Cumulative List of Changes in Plan Qualification Requirements for Pre-Approved Defined Contribution Plans for 2017 ... Cumulative Lists identify changes in the qualification requirements of the Internal Revenue Code that are required to be taken into account in a pre-approved plan document submitted under the pre-approved plan program administered by the [IRS] and that will be considered by the IRS for purposes of issuing opinion letters. The 2017 Cumulative List is to be used to submit opinion letter applications for pre-approved defined contribution plans during the third six-year remedial amendment cycle, which began February 1, 2017, and ends January 31, 2023 ... Defined contribution plans may be submitted for approval during the on-cycle submission period, which begins October 1, 2017, and ends October 1, 2018." (Internal Revenue Service [IRS])
[Official Guidance] Text of IRS Rev. Proc. 2017-41: Changes to Opinion Letter Program for Pre-Approved Retirement Plans (PDF)
"This revenue procedure sets forth [procedures] for issuing Opinion Letters regarding the qualification in form of Pre-approved Plans under Sections 401, 403(a), and 4975(e)(7) of the Internal Revenue Code [and combines] the master and prototype (M&P) and volume submitter (VS) programs into a new Opinion Letter program. [It also] modifies and supersedes, in part, Rev. Proc. 2015-36 ... and modifies Rev. Proc. 2017-4 ... and Rev. Proc. 2016-37[.] [It also] modifies the on-cycle submission period for the third six-year remedial amendment cycle for Providers of pre-approved defined contribution plans so that it begins on October 2, 2017 and ends on October 1, 2018. [It also] modifies the IRS's historic approach to Pre-approved Plans in order to expand the Provider market and encourage employers that currently maintain individually designed plans to convert to the pre-approved format." (Internal Revenue Service [IRS])
Adopting a New Pre-Approved 403(b) Document? It's a Good Time for a Plan Compliance Review (PDF)
"[P]lan sponsors will need to take care that they choose a pre-approved document that can accommodate their plan design, and, once they select an appropriate document, that all of the plan's provisions are correctly restated on the new document.... [The authors] have compiled [a] high level list of provisions that bear scrutiny. This is not a complete list, but it highlights some common areas where the operation of the plan may not be consistent with the terms of the document or with applicable law[.]" (Boutwell Fay LLP)
[Guidance Overview] Changes to Puerto Rico's Tax Code and Trust Act Could Impact HCEs
"The Act sets the threshold for HCEs to $150,000 (currently $120,000 in the U.S., and previously the threshold under P.R. law). This HCE threshold is fixed, while the U.S. threshold is subject to cost-of-living adjustments.... Limits on per-participant contributions to defined contribution plans are currently the same under both the P.R. and U.S. tax codes: the lesser of 100% of compensation or $54,000. The Act limits contributions to the lesser of 25% of 'net income' or $75,000." (Willis Towers Watson)
[Guidance Overview] Recent Legislation Impacts Puerto Rico Tax-Qualified Retirement Plans
"[S]ome of the main changes adopted by the Act include ... New maximum on contributions ... New definition of Highly Compensated Employee (HCE) ... New safe harbor for Cash or Deferred Arrangement (CODA) Plans ... Although the Act was effective immediately and, technically speaking, requires Puerto Rico qualified plans to adopt amendments incorporating its provisions ... PR Treasury officials informally instructed [practitioners] ... to wait before adopting and implementing the Act until PR Treasury examines the scope of the new qualification requirements and issues guidance regarding their implementation." (McConnell Valdes)
Protecting Your Qualified Retirement Plan Now That the IRS Determination Program Is (Mostly) Closed
"[A] more practical solution is to continue the discipline forced by the old determination program and use that discipline for systematic reviews of ongoing compliance. This does not mean constant full-scale review, but rather setting up a system to ensure that key elements of the plan document and administration will be reviewed periodically[.]" (Proskauer's ERISA Practice Center)
[Official Guidance] Text of IRS Memo for EP Rulings and Agreements Staff: Changes in Tax Exempt Quality Management System (TEGMS) and Mandatory Review Standards (PDF)
"Effective May 1, 2017, ... the following applications are subject to mandatory review: [1] Cases with interested party comments.... [2] Terminations with reversions of more than $5,000,000; and two percent of all other terminations. [3] Technical advice requests.... [4] Proposed adverse determination cases.... [5] Variable annuity plans. [6] Cases designated by a Determinations Manager, Determinations Area Manager or the Manager, EP Ruling & Agreements QA." [TE/GE-07-0417-0018, Apr. 28, 2017] (Internal Revenue Service [IRS])
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