The IRS issued Revenue Procedure (“Rev. Proc.”) 2017-41 which updates the procedures for issuing opinion letters regarding the qualification of pre-approved plan documents under Internal Revenue Code (“Code”) sections 401, 403(a), and 4975(e)(7). The Rev. Proc. modifies the pre-approved document program by combining the master and prototype (“M&P”) and volume submitter (“VS”) programs into a single program. The IRS makes clear that the intent of the changes is to provide greater flexibility in the design of pre-approved plan documents, expand the document provider market, and encourage employers maintaining individually designed plans to convert to the pre-approved format.
The most significant change outlined in the Rev. Proc. 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). Additional modifications to the non-standardized plan program include:
· The adopting employer of a Nonstandardized plan may adopt minor modifications;
· A Nonstandardized plan that contains an ESOP may also include a 401(k) feature;
· A Nonstandardized plan that contains a cash balance formula may also include an interest crediting rate based on the actual return on plan assets; and
· A Nonstandardized plan may provide for hardship distributions under either safe harbor or non-safe harbor rules.
The Rev. Proc. also included broader revisions to the pre-approved document program. The highlights include:
· A pre-approved plan document may use either an Adoption Agreement and Basic Plan Document or a single plan document;
· The prohibition against combining a money purchase pension plan and a 401(k) or profit sharing plan in the same document is removed;
· The prohibition against submitting Opinion Letter applications for non-electing church plans is removed;
· The on-cycle submission period for the third defined contribution plan remedial amendment (restatement) cycle is changed to October 2, 2017 through October 1, 2018;
· Opinion Letters will be modified to clarify that the IRS does not rule on Title I issues under ERISA (as such items are under Department of Labor Jurisdiction); and
· The IRS will no longer rule on the exempt status of a pre-approved plan’s related trust or custodial account under § 501(a) and the trust provisions must be contained in a separate document.
The changes are effective October 2, 2017 and only apply to applications for Opinion Letter applications submitted as part of the third (or subsequent) remedial amendment cycle. This means, for example, that the ability of a cash balance plan to have an interest crediting rate based on actual rate of return would not be available with the pre-approved defined plans that are expected to be approved in the first quarter of 2018. We are hopeful, however, that the IRS might change its position and allow the upcoming plans to include this option.
We will provide more details on the documents FIS will be offering in the next defined contribution restatement cycle early next year.
We will address this topic in the Chicago Advanced Pension Conference, September 6-8, as well as at the upcoming 403(b) Workshop Series. See below for details.
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Chicago Advanced Pension Conference - September 6-8 – Register by 7/31, save $150
You may see the complete list of topics and register online, here: http://www.relius.net/Events/seminardetail.aspx?CID=27050
Form 5500 Workshop and ERISA Workshop – Register early, get the early fee
Presented back-to-back: Syracuse on August 14-15, Kansas City on August 17-18, Milwaukee on August 21-22, and Seattle on September 14-15.
Attendees can earn up to 7 CE credits for each 1-day session. Register online, here: http://www.relius.net/Events/events.aspx?Seminar
403(b) Plans for 401(k) Administrators Workshop and 403(b) Prototype Document Workshop (2-day program) - Registration to Open in early August
Presented back-to-back in October/November -- Boston, Chicago, Atlanta, Kansas City, Denver, Dallas, Portland, and Pittsburgh.
Details and online registration will be available in August, here: http://www.relius.net/Events/events.aspx?Seminar |
