When might a plan sponsor prefer an individually-designed plan document?

If an ERISA-governed retirement plan has access to a recordkeeper’s or third-party administrator’s IRS-preapproved plan documents, what plan provisions or other circumstances would lead a plan’s sponsor to state the plan using an individually-designed document?

(I have no stake in this because my law practice is not, and won’t become, available to write a plan document for an ERISA-governed retirement plan.)

In my experience, the most common situations where an individually designed plan is used are for:

• companies that are actively involved in mergers & acquisitions, and the company wishes to preserve certain plan features available to employees of an acquisition;
• companies that have had plans in place for decades and the company wishes to preserve features that are no longer made available for more recently hired employees;
• companies that have several classifications of employees and the benefits vary among the classifications.

I have not seen a situation where a company uses a pre-approved plan document and the IRS determines that the document has been heavily modified so the document no longer is considered a pre-approved plan document, but this could happen. 

I have seen some plans that have an excessive number of entries or very long entries in "Describe" lines provided in pre-approved plan Adoption Agreements, or in blank lines available for custom language (particularly in an Appendix), and have wondered if the plan could have crossed the line and become an individually designed plan.

Agree completely with Paul I. I also think these are typically larger plan sponsors and is also more prevalent with defined benefit plans that have been around for a long time, older cash balance conversions, and possibly ESOPs that pre-dated their inclusion in pre-approved plans.

Most of this could be inertia, and then there is not wanting to continually restate and submit modified pre-approved plans. 

Paul I and CuseFan, thank you for your gracious help.

Following Paul I’s observation that a user of IRS-preapproved documents could vary from them so much that the IRS would find that the user may not rely on the IRS’s opinion letter:

Is the consequence only that the IRS would evaluate whether the written plan, including the user’s additions and variations, states provisions that meet § 401(a)’s tax-qualification conditions?

Or is there some other consequence that results from having an individually-designed plan?

The only consequence of having an IDP is the inability to request and secure periodic ongoing determination letters. Some view those cycles as a safety net while others see an unnecessary cost and inconvenience.

If you modified a preapproved document, those changes would have to be substantial. I've yet to see any plan with modifications that IRS rejected from preapproved status.