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Opinion & Advisory Letters for Pre-Approved Plans- Submission Procedures

The IRS maintains a program for the “pre-approval” of plans qualified under sections 401 and 403(a) of the Internal Revenue Code. 

Revenue Procedure 2011-49 provides details on IRS procedures for issuing opinion and advisory letters on the form of pre-approved M&P and VS plans. Revenue Procedure 2007-44 describes the five-year remedial amendment cycle for individually designed plans and the six-year cycle for pre-approved plans.

 

 

 

 

Summary of Pre-Approved Plans

Master & Prototype:

An M&P plan consists of a basic plan document, an adoption agreement, and a trust or custodial account (that may or may not be included in the basic plan document). The difference between a “master” plan and a “prototype” plan is that all employers use the same trust or custodial account in a “master” plan, whereas each employer has a separate trust or custodial account in a “prototype” plan. The two types of M&P plans are standardized and nonstandardized. The main difference between the two is that a standardized plan has more required provisions in the plan and fewer changes are allowed (Rev. Proc. 2011-49, sec. 5.09).

The main players in the M&P world are mass submitters, sponsors, and adopting employers, and each one is involved at a different “level” in the process (Rev. Proc. 2011-49, sec. 4). The IRS issues opinion letters (on the acceptability of the form of the plan) to mass submitters and /or sponsors of M&P plans that have been submitted to the IRS for approval. The sponsor then makes its plan(s) available for employers to adopt.

M&P Mass Submitter

A “mass submitter” of an M&P plan is a U.S. business that submits opinion letter applications on behalf of at least 30 unaffiliated “sponsors" that have “word-for-word identical” plans to the mass submitter’s lead plan. Mass submitters who have met the “30 sponsor” requirement can submit additional applications for sponsors with identical plans and sponsors that have “minor modifications” to the mass submitter’s plan. In addition, if the mass submitter has additional plans, it can submit applications regardless of the number of sponsors for the other mass submitter’s plan(s).

Mass submitters usually have reduced procedural requirements and get expedited treatment from the IRS, because of the high volume of sponsors they represent, and the number of identical or near-identical plans they submit to the IRS. This makes it easier and more efficient for review purposes.

All of these terms have specific meanings. For example, the term “word-for-word identical plan” includes a “flexible” plan. This type of plan allows sponsors to select some options and still be considered a word-for-word identical plan.

M&P Sponsor

A “sponsor” is a U.S. business that has at least 30 employer-clients each of which is reasonably expected to timely adopt the sponsor’s basic lead plan document. After that requirement is met for at least one plan, a sponsor can request opinion letters for any number of basic plan documents and adoption agreements.

A sponsor that does not use a mass submitter plan has different procedural requirements to apply for an opinion letter. “Substantially identical” plans may receive expedited review, even if they are not mass submitter plans.

Sponsors must make reasonable and diligent efforts to ensure that adopting employers of the sponsor’s M&P plan have actually received and are aware of all plan amendments and that such employers complete and sign new adoption agreements when necessary.

M&P Adopting Employer

The IRS will announce at a future date when adopting employers must timely adopt approved restatements of M&P plans. The employer must sign the adoption agreement when it first adopts the plan and must complete and sign a new adoption agreement if the plan has been restated. In addition, the employer must complete a new signature page if it modifies any prior elections or makes new elections in its adoption agreement.

Volume Submitter Plan :

A VS plan consists of a plan document and a trust or custodial account. It may or may not have an adoption agreement. A VS plan is a specimen plan (sample plan) of a VS practitioner that its employer-clients will adopt on an identical basis or substantially identical basis.

The VS program involves mass submitters, practitioners, and adopting employers. The IRS issues advisory letters to VS practitioners on the acceptability of the form of the specimen plans. The practitioner then makes its plan or plans available for employers to adopt.

VS Mass Submitter

A “mass submitter” of a VS plan is a U.S. business that submits advisory letter applications on behalf of at least 30 unaffiliated practitioners each of which is sponsoring, on a word-for-word identical basis, the same specimen plan. The 30 unaffiliated practitioner requirement has to be separately met for each specimen plan, in order for a VS mass submitter to be treated as a mass submitter with respect to the plan.

Mass submitters usually have reduced procedural requirements and get expedited treatment from the IRS, because of the high volume of sponsors they represent, and the number of identical or near-identical plans they submit to the IRS. This makes it easier and more efficient for review purposes.

VS Practitioner

A VS practitioner is a U.S. business that represents to the IRS that it has at least 30 employer-clients each of which is reasonably expected to timely adopt a plan that is substantially similar to the VS practitioner’s specimen plan. This requirement is lowered for a specimen money purchase pension plan if a practitioner has at least one other type of specimen plan that meets the 30 employer-client requirement. In such case, the practitioner only needs to have 10 employer-clients reasonably expected to timely adopt the money purchase pension plan.

VS Adopting Employer

The IRS will announce at a future date when adopting employers must timely adopt approved restatements of VS plans. Under certain circumstances, a VS practitioner may amend the plan on behalf of adopting employers, if the plan includes a provision authorizing the VS practitioner to do so.

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Description of Revenue Procedure 2007-44 on Staggered Remedial Amendment Cycles

Revenue Procedure 2007-44 describes the remedial amendment cycles applicable to pre-approved plans and individually designed plans. This discussion focuses on the rules applicable to pre-approved plans.

  • Six-Year Cycle
    Sponsors and practitioners must submit applications for letters approving plan language by a stated deadline within their six-year remedial amendment cycle. After that, the IRS reviews the plans, and announces when employers must adopt the pre-approved plans. Then, the next six-year cycle begins. The timing of the cycle depends on whether the plan is a defined contribution or a defined benefit pre-approved plan. The IRS accepts applications for opinion and advisory letters at the beginning of each cycle.

    In general, sponsors and practitioners maintaining mass submitter plans will have until October 31 of the calendar year in which the six-year remedial amendment cycle opens to submit opinion and advisory letter applications, while other types of applications for pre-approved plans (non mass submitters, mass submitters on behalf of word-for-word identical adopters, and mass submitters on behalf of minor modifier M&P plans (placeholder applications) have until the January 31 of the year after the cycle opens. See 6-Year Remedial Amendment Cycle for Pre-Approved Plans Chart.

  • Cumulative List
    The IRS will publish a Cumulative List every year (around November) to be used by plans whose remedial amendment cycle begins in the month of February following the publication of the Cumulative List. This List identifies all the changes affecting plan qualification requirements on a year-by-year basis that need to be in the plan document.

    Revenue Procedure 2007-44, section 4, provides details on the plan qualification requirements the IRS will consider in its review of applications with respect to a particular Cumulative List. It clarifies that, except as otherwise provided on the applicable Cumulative List, the IRS will not consider in its review any


    • guidance issued or statutes enacted after the October 1 preceding the date the applicable Cumulative List is issued. (This October 1 date with respect to guidance issued may be extended in the applicable Cumulative List for opinion or advisory letter applications.)
    • qualification requirements that become effective in a calendar year following the calendar year in which the submission period begins
    • statutes that are first effective in the year in which the submission period begins where there is no guidance.
  • 2-Year Review
    After approximately a 2-year review period (during which time the IRS will send out interim emails as described in Rev. Proc. 2011-49, and will issue opinion and advisory letters to sponsors and practitioners), the IRS will publish an announcement stating when adopting employers must adopt the pre-approved plan. It is expected that adopting employers will have about a 2-year period to adopt the updated plan and, if necessary, file a determination letter application. An adopting employer that adopts this plan within the deadline will have adopted it within the 6-year remedial amendment cycle.

  • Employer's Eligibility for Six-Year Cycle
    Rules in Rev. Proc. 2007-44 provide details on how an employer who already has adopted a pre-approved plan or an individually designed plan, or has not yet adopted any plan, is eligible for the six-year cycle. An employer’s plan is treated as a pre-approved plan and therefore eligible for a six-year remedial amendment cycle if the employer is a “prior,” “new,” or “intended” adopter, or an adopter of a “replacement” plan, and the sponsor or practitioner maintaining an “existing” or “interim” pre-approved plan timely submits an opinion or advisory letter application for the plan by the applicable deadline within the six-year cycle.  The terms are defined in detail in section 17 of  Revenue Procedure 2007-44.

  • Effect of Employer Amendments on Six-Year Cycle
    Generally, an employer making amendments to a pre-approved plan continues to be eligible for the six-year cycle on a continuing basis.

    However, a plan adopted by an employer stays on the six-year cycle only for the current cycle, and then switches to a five-year cycle, if (1) the employer is an intended or prior adopter of a pre-approved plan that instead adopts an individually designed plan, or (2) the employer amends the plan to incorporate a type of provision or plan that is not allowed in the pre-approved program (as listed in sections 6.03 and 16.03 of Rev. Proc. 2011-49) and that amendment is adopted more than one year after the employer initially adopted the pre-approved plan.

    An employer’s plan will immediately be subject to the five-year cycle if the employer (1) amends the plan to incorporate a type of provision or plan not allowed in the pre-approved plan program and that amendment is adopted within one year after the employer initially adopted the pre-approved plan, or (2) amends the plan to such an extent that the Service determines the plan should not receive the six-year cycle (see section 24.03 of Rev. Proc. 2011-49).

  • Interim and Discretionary Amendments
    Although pre-approved plans must be submitted for opinion or advisory letters only once every 6 years (once every 5 years for determination letters for individually designed plans) and the IRS will only consider changes as noted in the applicable Cumulative List, the list of changes does not extend the deadline for plans to be amended for interim or discretionary amendments. Section 5 of Revenue Procedure 2007-44 discusses the deadline for the adoption of interim or discretionary amendments, and the remedial amendment period.

  • Special Rules
    New pre-approved plans created after the submission period within a six-year cycle or late-filed plans are “ off-cycle” submissions. The application will be reviewed using the Cumulative List that the IRS would have used if the plan had been filed on-cycle during the most recently expired submission period for that type of plan. In any event, for adopting employers of such new or late-filed pre-approved plans to be eligible for the applicable six-year cycle and receive retroactive reliance, sponsors or practitioners must submit the new plans prior to the beginning of the announced adoption period for employers to adopt pre-approved plans. This gives the Service time to review the plans and provides time for adopting employers to adopt such plans.

    However, under Revenue Procedure 2008-56, pre-approved plans that are word-for-word identical to a mass submitter can be filed during the two-year window for adopting employers to adopt pre-approved plans.

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Drafting Resources
 
Drafting an M&P Plan:
  • LRMs
    The IRS publishes LRMs - Listing of Required Modifications - containing sample language that sponsors and mass submitters of M&P plans may use in drafting their plans. Defined contribution LRMs and CODA LRMs (for plans with cash or deferred arrangements) are available. The defined benefit LRM is also available.

  • Cumulative List
    Under the new system of reviewing pre-approved plans and individually designed plans, the IRS will publish a Cumulative List every year. This List will identify the changes affecting plan qualification requirements on a year-by-year basis that need to be in the plan document.

Drafting a VS Plan :

  • Alert Guidelines
    The IRS publishes Alert Guidelines (Worksheets to facilitate the review of retirement plans by IRS specialists), Explanations (of the applicable law), and Plan Deficiency Paragraphs (Checksheets with pre-approved wording). These are broken down by subject matter, and may be used by VS practitioners when drafting their plans. VS practitioners may also use LRMs for assistance in drafting their plans, as appropriate.

  • Cumulative List
    Under the new system of reviewing pre-approved plans and individually designed plans, the IRS will publish a Cumulative List every year. This List will identify the changes affecting plan qualification requirements on a year by year basis that need to be in the plan document.

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Application Procedures for M&P and VS plans

The current application forms for pre-approved plans (Form 4461, Application for Approval of Master or Prototype or Volume Submitter Defined Contribution Plans and Attachment I; Form 4461-A, Application for Approval of Master or Prototype or Volume Submitter Defined Benefit Plan; Form 4461-B, Application for Approval of Master or Prototype or Volume Submitter Plans - Mass Submitter Adopting Sponsor or Practitioner) reflect the streamlined procedures applicable to both M&P and VS plans. See the user fee schedule. Form 8717 must be submitted with the user fee. The application must also contain a certification regarding interim amendments signed by the M&P sponsor or VS practitioner.

When the IRS receives the applications, it will process them as follows:

  • Applications reviewed in Cincinnati:  The IRS office in Cincinnati now receives all applications with respect to pre-approved plans (both M&P and VS). See the instructions on Form 4461, Form 4461-A and Form 4461-B as well as section 20 of Rev. Proc. 2011-49 for the addresses.

  • Interim e-mail sent:  Before issuing an official opinion/advisory letter, the IRS will send an interim e-mail to the mass submitter, sponsor, or practitioner, stating that the plan(s) appears to be in compliance, for the convenience of the mass submitter, sponsor, or practitioner. However, this is not an official opinion/advisory letter, and the IRS may still make changes. In other words, no qualification reliance is provided by this interim e-mail. (Rev. Proc. 2011-49, sec. 7.07, 12.01, 17.05, 18.01).

  • Official Opinion and/or Advisory Letters Mailed.

  • Employer Reliance and Announcement by IRS for Adopting Employers: Adopting employers of pre-approved plans must adopt the plan by a date announced by IRS. Employers may not have to apply for determination letters because they can rely on the opinion or advisory letter. However, if an adopting employer makes certain changes to its plan, it may lose this reliance. It would then need to apply for a determination letter if it wants assurance that its plan is qualified. Depending on the changes, an employer may need to file Form 5307 or Form 5300. See section 19 of Rev. Proc. 2011-49 for a discussion of employer reliance on a pre-approved plan. See also Announcement 2008-23 for determination letter procedures for adopting employers of pre-approved defined contribution plans, Announcement 2010-20 for procedures for adopting employers of defined benefit plans, and Revenue Procedure 2008-56 for further rules on employer reliance on pre-approved plans.

Applying for an Opinion or Advisory Letter - Mass Submitters and Non-Mass Submitters:

 

Applying for an Opinion or Advisory Letter - Word-for-Word Identical Adopter (M&P/VS) and Minor Modifier Placeholder (M&P Only):

 

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Page Last Reviewed or Updated: 25-Mar-2013