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Determination, Opinion and Advisory Letter for Retirement Plans - Adopting Employer

An adopting employer is an employer that adopts a pre-approved plan (master & prototype plan (M&P) or a volume submitter plan (VS)). An adopting employer may need to make a few choices regarding plan options before signing and dating the adoption agreement.

If an adopting employer makes changes to the pre-approved plan document or adoption agreement other than choices in the adoption agreement or other IRS-sanctioned changes (see Revenue Procedure 2011-49, sections 5 and 14), the plan may become an individually designed plan. If the plan becomes individually designed, an adopting employer can no longer rely on the pre-approved plan sponsor’s opinion or advisory letter and will need to file for a determination letter to rely on the form of the plan.

Adopting a pre-approved plan

  • The pre-approved plan sponsor drafts an IRS-approved plan document.

  • The pre-approved plan sponsor furnishes the IRS-approved plan document to the adopting employer.

  • The adopting employer may need to make a few choices regarding plan options before signing.

Reasons to adopt a pre-approved plan

  • Generally, the pre-approved plan sponsor can timely amend the plan document for law changes for adopting employers after the initial adoption.

  • The pre-approved plan sponsor keeps the plan updated for law changes and notifies the adopting employer when it needs to sign a new document.

  • The pre-approved plan sponsor may provide plan administration services for the adopting employer.

  • Generally, an employer’s cost to implement a pre-approved plan is lower than that to implement an individually designed plan.

How to adopt a pre-approved plan

An employer must sign and date the adoption agreement when it first adopts an M&P plan and must complete and sign a new adoption agreement if it changes the plan or the adoption agreement or if the plan has been restated. Generally, M&P plan sponsors make amendments on behalf of adopting employers and employers select options in the adoption agreement.

An employer must sign the VS plan and the adoption agreement, if applicable. Under certain circumstances, a VS practitioner may amend the plan on behalf of adopting employers. See Announcement 2005-37.

When to adopt a pre-approved plan

The IRS announces when adopting employers must adopt restatements of pre-approved plans. Generally, this period will be a two-year window after the IRS issues the opinion or advisory letter to the restated plan.

The two-year window for employers to adopt pre-approved defined benefit plans is currently open. Employers must adopt their EGTRRA-approved defined benefit plan document by April 30, 2012. See Announcement 2010-20.

The deadline for employers to adopt pre-approved defined contribution plans (restated for EGTRRA) was April 30, 2010 (see Announcement 2008-23). Adopting employers who missed the April 30, 2010 deadline may correct the error using the Voluntary Correction Program.

Additional resources

 

Page Last Reviewed or Updated: 13-Nov-2013