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Pension and Employee Benefits: Code, ERISA, & Regulations
This series provides an authoritative and comprehensive reference to the full text of benefits-related provisions of the Internal Revenue Code, the full text of ERISA, and related proposed and final regulations, as well as the official IRS and DOL preambles, and Committee Reports.
The IRS has relaxed the restrictions on off-cycle applications for new pre-approved plans, if certain requirements are met. The modifications apply to sponsors of pre-approved plans that adopt the language word-for-word of a mass submitter plan that has received a favorable EGTRRA opinion or advisory letter. A sponsor may also adopt the identical language of a mass submitter plan for which an application for such opinion or advisory letter is pending. The new application must also be filed according to the procedures governing mass submitter plans under Rev. Proc. 2005-16 (CCH Pension Plan Guide ¶17,299R-58).
The restrictions that are affected by this guidance were included in Rev. Proc. 2007-44 (CCH Pension Plan Guide ¶17,299S-25), which contained procedures for individually-designed and pre-approved plans under the cyclical remedial amendment program. The IRS wanted to ensure that the use of IRS resources to administer the pre-approved program (on a six-year cycle) did not adversely affect the determination letter program (on a five-year cycle). Pre-approved defined benefit plans have a different cycle than pre-approved defined contribution plans.
Generally, after the IRS issues a new opinion or advisory letter, the pre-approved plan’s adopting employers must adopt the new plan restatement with the adoption period announced by the IRS. In Announcement 2008-23 (CCH Pension Plan Guide ¶17,097T-24 ), the IRS announced that the adoption period for pre-approved defined contribution plans that have received opinion or advisory letters under EGTRRA will end on April 30, 2010.
Rev. Proc. 2007-44 included certain exceptions applicable to new pre-approved plans (which were created after the submission period for the applicable six-year cycle):
Under Rev. Proc. 2008-56, sponsors or practitioners will not be precluded from submitting an off-cycle application for an opinion or advisory letter because they previously submitted an on-cycle application. To get this relief, the new application for a plan must be word-for-word identical to a mass submitter plan that has received a favorable EGTRRA opinion or advisory letter, or for which an application for such a letter is pending. Further, the new application must be filed according to the procedures governing mass submitter plans under Rev. Proc. 2005-16.
Adopting employers of a new pre-approved plan that is word-for-word identical to a mass submitter plan will not fail to be eligible for an applicable six-year cycle merely because the pre-approved plan is submitted to the Service for an opinion or advisory letter after the beginning of the announced adoption period for that cycle. Regardless of when the application is filed or when the opinion or advisory letter is issued, however, the announced adoption period for any applicable six-year cycle will not be extended.
An otherwise eligible adopting employer as described in section 17 of Rev. Proc. 2007-44 may rely on a pre-approved plan’s current opinion or advisory letter to retroactively amend its plan under Code Sec. 401(b) and Rev. Proc. 2007-44 by adopting the pre-approved plan within the announced adoption period for the applicable six-year cycle. This applies regardless of whether the opinion or advisory letter application for the plan was filed off-cycle (and regardless of whether the plan is word-for-word identical to a mass submitter plan).
For example, an eligible employer may rely on a pre-approved plan’s EGTRRA opinion or advisory letter to retroactively amend its plan for EGTRRA and the other qualification changes listed in Notice 2004–84, “the 2004 Cumulative List,” by adopting the pre-approved plan within the adoption period ending on April 30, 2010, even if the application for the opinion or advisory letter for the plan was submitted off-cycle. Any EGTRRA opinion or advisory letters that have been issued with a caveat prohibiting retroactive reliance will be reissued by the Service to remove the caveat.
Until further notice, the IRS will continue to accept off-cycle applications for opinion or advisory letters filed by M&P and VS mass submitters for pre-approved plans that are word-for-word identical to a mass submitter’s currently approved plan that meets the requirements stated above. The IRS, however, will not accept applications for opinion or advisory letters for other plans submitted after the beginning of the adoption period announced for an applicable six-year cycle because there will not be sufficient time for the IRS to review the plans and for employers to then adopt the plans before the end of the adoption period.
Lastly, the modifications in Rev. Proc. 2008-56 discussed above will be considered effective as of the effective date of Rev. Proc. 2007-44, which is June 13, 2007.
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