The IRS announced today (IRS Announcement 2014-4) that it intends to add cash balance plans to the pre-approved defined benefit plan program. As part of this announcement, the IRS has stated that it will extend the pre-approved defined benefit plan submission deadline from January 31, 2014 to February 2, 2015.  However, the IRS has reserved the right to specify a separate (presumably later) deadline date for submitting preapproved drafts of PPA DB specimen documents that have a cash balance feature. 

Immediate action may be warranted if you prepare cash balance plans  

You may be able to avoid all future cash balance determination letter submissions – but attention is needed for those plans you have been preparing to submit by January 31, 2014 to meet the Cycle C deadline (which is generally applicable to plan sponsors with an EIN ending in a 3 or 8). For these plans (and all cash balance plans) if the employer and prototype sponsor/volume submitter practitioner sign IRS Form 8905 indicating an intention to adopt a pre-approved plan, then the deadline to submit the plan will be based on the 6-year cycle for pre-approved plans. We do not know what the deadline for adoption of pre-approved plans will be because the submission period for these was just extended to February 2, 2015. If the IRS takes 2 years to approve the plans, then we would expect the restatement period to begin no sooner than early 2017. If the plan is restated onto a pre-approved plan by the deadline and no modifications to the plan are made, then no determination letter submission is necessary (the IRS will not even accept the submission since the plan is already pre-approved).  

What is the deadline to adopt Form 8905 in order to extend the deadline?  

The form must be adopted by the last day of the otherwise applicable deadline that applies to the plan. For Cycle C plans, the deadline would ordinarily be January 31, 2014.  However, IRS Announcement 2014-04 extends the deadline for Cycle C plans to adopt a Form 8905 to March 31, 2014. You might wish to consider having every cash balance plan sponsor sign the Form 8905 prior to March 31, 2014 (that way you ensure all cash balance plans are covered by the extension).  

SunGard expects to be able to include cash balance provisions in both the individually designed formatted volume submitter plan AND the new prototype formatted volume submitter plan. The new prototype formatted volume submitter plan is a replacement of the nonstandardized adoption agreements (integrated and non-integrated). Subject to any IRS parameters, we expect this new adoption agreement to include, in one single adoption agreement, options for integrated, nonintegrated, and cash balance provisions.  However, these details are not in the Announcement, and so they are still somewhat speculative on our part.  Judging from the fact that the IRS may have a separate deadline for plans with a cash balance feature, it may well be that they will also require a separate adoption agreement (as opposed to an expanded adoption agreement). 

If you will be a sponsor of SunGard's prototype formatted volume submitter plan, then you can sign the Form 8905 as a sponsoring organization/practitioner along with the employer that intends to restate its cash balance plan using this document. If you are intending to use SunGard’s individually design formatted volume submitter, then SunGard is the volume submitter practitioner and SunGard and the employer that intends to restate its cash balance plan using this document must sign the Form 8905. You can obtain the SunGard signed form (for the IDP-formatted DB plan) at:
http://www.relius.net/News/OtherResources.aspx?T=P 

More details to follow

The IRS will issue additional guidance regarding this welcome change. In the meantime, questions remain. For example, will those who already submitted under Cycle C (or possibly even pending Cycle B submissions) be able to withdraw their submissions and use the pre-approved plan cycle? Or, will the expansion include other hybrid defined benefit plans?  

We don’t have information beyond what is stated above. There will be time to address other details as guidance is issued. For now, your attention is needed on the Cycle C plans that you are in the process of restating and submitting.

I’ve already submitted my Defined Benefit restatement forms and fees. What happens now?  

We will disable the PPA Restatement website for Defined Benefit plans until further notice. We will hold IRS user fees that have already been paid to SunGard until it is time to file with the IRS near the extended deadline of 2/02/2015. We will notify you of any changes as we become aware of them.  

If you have additional questions, please submit them to Relius.PPARestatement@sungard.com. 

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