Retirement Plans FAQs on Pre-Approved and Individually Designed Plan Programs (including Form 8905)
The following FAQs relate to the use of Form 8905, Certification of Intent to Adopt a Pre-Approved Plan. An employer’s plan is treated as a pre-approved plan and is eligible for the six-year remedial amendment cycle if the employer (maintaining an individually designed plan), along with a Master and Prototype (M&P) sponsor or a Volume Submitter (VS) practitioner who maintains the pre-approved plan, execute Form 8905 as an “intended adopter” before the end of the employer’s five-year remedial amendment cycle (Section 17.04 of Revenue Procedure 2007-44). Thus, this Form is used to shift from the five-year remedial amendment cycle used for individually designed plans to the six year remedial amendment cycle applicable to pre-approved plans.
May Form 8905 be signed with an electronic signature?
Yes, but only the M&P sponsor or VS practitioner may use an electronic signature. The employer must manually sign and date the form. The employer cannot use stamped or scanned signatures or dates.
Who is responsible for keeping the signed original of Form 8905?
The employer is responsible for retaining the Form 8905 certification as signed and dated by the employer and the M&P sponsor or VS practitioner. The original should be filed with the appropriate determination letter application (Form 5300, 5307, 5310) if such an application is filed.
When should a plan M&P sponsor, VS practitioner or employer file a Form 8905 with the IRS?
Form 8905 should only be filed as part of an application on Form 5300, 5307 or 5310. Only at that time should Form 8905 be attached to the application. If no Form 5300, 5307, or 5310 filing is made, the employer should keep the original certification in its records, but should not file Form 8905.
Should the Form 8905 ever be filed separately?
No. Form 8905 should not be filed with the IRS except as part of a filing with the Form 5300, 5307 or 5310 applications discussed above.
Can Form 8905 be used if the five-year remedial amendment cycle applicable to a particular employer ends before the deadline for the M&P sponsor or VS practitioner to submit an application for approval of its pre-approved plan?
Yes. The instructions to Form 8905, Part III, Line 4, state that the M&P sponsor or VS practitioner should enter the application deadline for an opinion or advisory letter application next to its signature.
The general rule under section 11.01 of Rev. Proc. 2007-44 is that a plan’s five-year remedial amendment cycle is determined on the basis of the EIN or status of the employer that is maintaining the plan after a cycle-changing event such as a merger, acquisition or a spin-off. However, special rules under section 11.03 may apply for determining a plan’s applicable cycle immediately after the event. (Assume for the purposes of these examples that there are no future changes after the described cycle-changing events described below in each example, so the general rule under section 11.01 would apply for the plan’s next-following five-year remedial amendment cycle as provided in section 11.02.)
Example 1 (section 11.01)
Plan S was on Cycle C (pre-change cycle) until a cycle-changing event occurred on 10/1/07. Employer X maintains Plan S after the event. Employer X ‘s EIN ends in 4. Thus, Plan S’s cycle changed from Cycle C to Cycle D. The general rule under section 11.01 applies, and the plan’s cycle (post-change cycle) is Cycle D.
Example 2 (section 11.03(1))
A cycle-changing event occurred on 12/31/07. Plan N’s cycle before the event (pre-change cycle) was D. Employer Y maintains Plan N after the cycle-changing event. Employer Y’s EIN ends in 2. Plan N’s post-change cycle (Cycle B) is open because the 12-month submission period had begun but had not expired as of the date of the cycle-changing event. Section 11.03(1) applies rather than the general rule under section 11.01, because the last day of Cycle B is 1/31/08 and the period remaining in the post-change cycle is less than 12 calendar months. Accordingly, Plan N’s post-change cycle is extended for twelve months from the last day of the open cycle submission period, to 1/31/09. The next five-year cycle will be shortened accordingly (the submission under the next Cycle B ends 1/31/2013, a period of four years after the 1/31/09 extended deadline). Plan N will be reviewed using the applicable Cumulative List based on the date of Plan N’s submission.
Example 3 (section 11.03(2))
On 7/31/08, a cycle-changing event caused Plan O’s cycle to change from Cycle C to Cycle A. Plan O’s applicable cycle is Cycle C with a deadline of 1/31/09, since the submission deadline of 1/31/07 for the post-change cycle, Cycle A, had expired at the time of the cycle-changing event. However, the rules under section 11.01 will apply for the plan’s next five-year remedial amendment cycle. Thus, the next five-year cycle for Plan O will be Cycle A, with a submission deadline of 1/31/2012.
Example 4 (section 11.03(3))
Plan P’s pre-change cycle was Cycle C. On 7/31/08 (during the 12-month submission period for Cycle C), Plan P had a cycle-changing event. Its post-change cycle is Cycle E, a cycle that is not yet open because the plan’s on-cycle submission period has not yet begun. Cycle C is open at the time of the cycle-changing event since the submission period for Cycle C is ongoing and ends on 1/31/09. Plan P is permitted (but not required) to treat Cycle C as the applicable cycle. The next five-year cycle for Plan P is Cycle E, with a submission deadline of 1/31/2016.
Example 5 (section 11.03(4))
Plan Q’s pre-change cycle was Cycle A. A determination letter application was timely submitted for Plan Q by the Cycle A deadline of 1/31/07. On 3/1/07 Plan Q had a cycle-changing event that changed its cycle to Cycle C. Plan Q can treat Cycle A (which has expired since the 12-month submission period has ended) as its applicable cycle, so it does not need to resubmit for a determination letter in Cycle C by 1/31/09. The next five-year cycle for Plan Q is Cycle C, with a submission deadline of 1/31/2014.
Example 6 (section 11.03(5))
Plan R’s pre-change cycle was Cycle E. Plan R had a cycle-changing event on 9/30/07 (which was during the submission period for Cycle B). Plan R’s post-change cycle is Cycle D. Plan R’s cycle is the post-change cycle, Cycle D, since neither cycle was open at the time of the cycle-changing event (i.e., the 12-month submission periods for Cycle D and Cycle E have not yet begun). This is the same result as the general rule under section 11.01.
Example 7 (section 19.04)
Plan S is a pre-approved volume submitter plan. More than one year after adopting the volume submitter plan document, Plan S makes a major modification to the plan. As a result of this change, Plan S will be considered an individually designed plan and should submit Form 5300 during the employer’s EIN-determined 5-year cycle.
Example 8 (section 19.04)
Plan T is a pre-approved prototype plan. Plan T adopts an addendum, which overrides certain provisions in the adoption agreement. The addendum, as with any change to a pre-approved plan, makes the plan individually designed. If the addendum was added within one year of the prototype adoption, plan T should submit its determination letter application on Form 5300 during the employer’s EIN-determined
Is a restated document required when submitting an individually designed plan for review within its remedial amendment cycle, or can all the amendments be attached to the existing document?
Yes, a restated document is generally required for an individually designed plan submitted for a letter within the applicable remedial amendment cycle. See section 7.04 of Revenue Procedure 2013-6 and section 12.03 of Revenue Procedure 2007-44.
Is a restated document required when submitting a pre-approved plan for review within its remedial amendment cycle, or can all the amendments be attached to the existing document?
A restated document is generally required for a VS and M&P plan, except when an adopting employer to an M&P plan makes changes to the underlying plan document. Any changes adopted by the employer must be made in the form of an amendment and not incorporated into the underlying M&P plan document. Changes to a pre-approved VS plan may either be incorporated into the VS document or made as separate “tack-on” amendments to the plan. If the changes are incorporated into the document, the application must also include a list describing the changes.
When will off-cycle applications for determination letters be processed?
Generally, off-cycle applications will not be reviewed until all on-cycle plans have been reviewed and processed. However, under Rev. Proc. 2007-44 some applications will be given the same priority as on-cycle applications. These are: terminating plans, new individually designed plans whose next regular on-cycle submission period ends at least two years after the end of the off-cycle submission period during which the plan sponsor submits its application, applications that the Service requires under certain events, and applications due to urgent business need. See section 14 of Rev. Proc. 2007-44.
In what situations can an employer adopting a pre-approved plan with a valid opinion or advisory letter rely on that letter without requesting its own determination letter?
In general, an employer that makes no changes or only specified minor changes to the plan document can rely on the opinion or advisory letter for the pre-approved plan. Minor changes allowed include: changing the effective date of a provision, correcting typographical errors, adopting model, sample or other required good faith amendments that specifically provide that their adoption won’t cause the plan to be individually designed. See Revenue Procedure 2011-49 for details.
Do the provisions in sections 2.03, 2.04 and 2.05 of Rev. Proc. 2007-44, which provide that the remedial amendment period for a disqualifying provision ends on the later of two dates, one of which relates to the due date for filing the employer’s tax return (including extensions), require that a request for an extension must actually have been filed?
Yes. Unless otherwise stated in specific guidance, an employer must actually file for an extension to have that extension date as the due date for filing the employer’s tax return. If no extension is filed, the regular due date will apply.
What user fees apply to determination, opinion and advisory letters?
User fees for retirement plan determination, opinion and advisory letters are determined under Revenue Procedure 2013-8. See the user fee page for more information.
How does the Sample Adoption Agreement Language of Section A, Participant Group Allocation work in operation?
Background: Revenue Procedure 2005-16, 2005-1 C.B. 674, allows adopting employers of non-standardized defined contribution Master & Prototype (M&P) plans to adopt an allocation formula that is designed to be cross-tested for nondiscrimination on the basis of equivalent benefits under I. T. Regs. 1.401(a)(4)-8.
The IRS issued cross-tested language in LRM #94 in October 2006. The language in LRM #94 is designed to allow the adopting employer of an M&P plan to select either a participant group allocation method or an age weighted method for determining allocations under the plan. LRM #94 restricts the number of allowable allocation rates under a non-standardized M&P plan using the participant group allocation method, based on the number of NHCE’s and HCE’s in the plan. While the purpose of LRM’s is to assist sponsors of M&P plans in drafting plan language to conform to applicable law and regulations, it is generally not mandated. However, in order to effect consistent application of cross-testing for nondiscrimination purposes in M&P plans the Service has taken the position that non-standardized M&P plans must follow the language contained in LRM #94 in order to receive an opinion letter.
Answer: By selecting the participant group allocation method, the employer agrees to divide plan participants into a limited number of allocation rates, (groups). Each group will have the same allocation ratio. The number of groups will be limited as provided in the sample plan language. The determination of the allocation rates under the plan and the division of participants into groups must occur on or before the due date of the employer’s tax return, including extensions, for the year of allocation.
For this reason, the blank/fill-in of the Sample Adoption Agreement Language may be filled in with the following phrase or something similar thereto: “on or before the due date of the employer’s tax return for the year of allocation through written instructions from the employer to the plan administrator or trustee.”
Is the cautionary language in bold under Participant Group Allocation of the sample adoption agreement required language, and how are the reasonable classification standards under Regs.1.410(b)-4(b) of this language satisfied in operation?
The cautionary language is required language for a Nonstandardized M&P plan. However, since the Participant Group allocation method provides that each eligible employee will constitute a separate allocation group, the last sentence of Regs. 1.410(b)-4(b) will be disregarded for purposes of meeting such classification standards.
If a plan sponsor electronically signs its M&P plan adoption agreement, as permitted under Revenue Procedure 2011-49, does any additional information need to be submitted with the determination letter application for the plan?
Section 5.11 of Revenue Procedure 2011-49 requires an adopting employer of an M&P plan to sign the adoption agreement when the plan is adopted or restated and when adoption agreement elections are made or changed by the employer. This requirement may be satisfied by an electronic signature that reliably authenticates and verifies the employer’s adoption of the adoption agreement, or restatement, amendment or modification thereof.
During its review of a determination letter application for a plan, the Service checks whether the plan and amendments have been timely adopted. If an adopting employer of an M&P plan has electronically signed the adoption agreement, the employer should include with the determination letter application for the plan information that will allow the Service to determine that the plan or amendment was timely adopted. For example, if the employer electronically signed the adoption agreement through a system maintained by the M&P sponsor, the employer may include with the determination letter application a statement from the M&P sponsor that the employer electronically signed the adoption agreement through a system that reliably authenticates and verifies the employer’s adoption of the adoption agreement. The statement must also indicate the date on which the employer electronically signed the adoption agreement. The M&P sponsor's statement attesting to the employer's electronic signature would have to be signed by the M&P sponsor, but the Service will accept the M&P sponsor’s facsimile signature on the statement.
As an alternative, the employer could submit dated correspondence from the M&P sponsor acknowledging receipt of the employer’s electronically signed adoption agreement. Other types of information may also be acceptable. Failure to include with the determination letter application sufficient information to allow the Service to determine when the plan or amendment was adopted may lead to requests for additional information from the Service and delays in processing the application.
What are the procedural submission requirements for an M&P plan where an adopting employer has made changes to the pre-approved basic plan document or adoption agreement?
An employer that makes changes to the underlying plan document may be considered to have adopted an individually designed plan depending on the changes made, as described in section 5.02 of Revenue Procedure 2011-49. In such a case, Form 5300 must be filed if a determination letter application is submitted to the Service. Since the plan is treated as an individually designed plan, it must be updated for the applicable Cumulative List based on the date of submission for a determination letter during the announced period (approximately a two-year window) for adopting employers to adopt the updated plans within the 6-year cycle. This would require submission of the approved EGTRRA adoption agreement along with the interim amendments made for the later applicable Cumulative List. The interim amendments must be in the form of tack-on amendments and cannot be integrated into the EGTRRA approved adoption agreement or basic plan document.
Does section 20.02 of Rev. Proc. 2007-44 (which prohibits a sponsor or practitioner from submitting an off-cycle filing for a timely submitted pre-approved plan) also apply to applications for new plans of the same sponsor or practitioner?
No. The purpose of section 20.02 of Revenue Procedure 2007-44 is to prevent a practitioner or sponsor who has timely filed an advisory or opinion letter application for a particular pre-approved plan (e.g. a nonstandardized profit-sharing 401(k) prototype plan) from filing a subsequent
What is the deadline for an employer to adopt the newly approved version of a pre-approved plan as defined in section 17.01(3)(c) of Revenue Procedure 2007-44?
An employer should adopt the newly approved version of a pre-approved plan when the sponsor or practitioner offers this version to adopting employers, during the announced adoption period described in section 16.03 and 16.04 of Revenue Procedure 2007-44. Before that time an adopting employer may adopt an existing or interim pre-approved plan, as defined under section 17.01(3).
Will the IRS require a copy of the plan document that redlines or otherwise highlights changes to be submitted with a determination letter submission?
No. Although practitioners are encouraged to redline their plan document, the IRS will not require submission of a redlined or highlighted copy.
Will the IRS reissue an advisory letter when there is an assumption of sponsorship of an approved volume submitter plan, without any amendment to the plan document, by a new entity, as evidenced by a change of the employer identification number, similar to the master and prototype user fee in Revenue Procedure 2013-8, section 6.03(6)?
Yes. For $300, per basic plan document, the IRS will reissue an advisory letter when there is an assumption of sponsorship of an approved VS plan, without any amendment to the plan document, by a new entity, as evidenced by a change of the EIN. The $300 fee listed in section 6.03 of Revenue Procedure 2013-8 for reissuing opinion letters in the case of assumption of sponsorship of M&P plans also applies in the case of assumption of sponsorship of VS plans.
Will a determination letter include a reference to unsigned amendments to pre-approved plans that are included in the application?
No. The IRS opinion or advisory letter for the pre-approved plan will not reference or "caveat" letters for a pre-approved plan sponsor’s unilateral amendments that haven’t been signed by adopting employers.
When there are statutory changes or regulatory changes with respect to plan qualification requirements that will impact provisions of the written plan document, the adoption of an interim amendment will generally be required by the applicable deadlines stated in Revenue Procedure 2007-44.
Since interim amendments must be made throughout a plan’s remedial amendment cycle, why does a plan have to be restated when an application is submitted for an opinion, advisory or determination letter?
Interim amendments are required to keep the written plan document up to date between a plan’s submission periods during the applicable remedial amendment cycles. When a plan is submitted for a letter, all language necessary to satisfy new guidance identified in the applicable Cumulative List must be restated into one document. For individually designed plans, all interim amendments and discretionary amendments must be submitted with the application to show that all amendments were timely made. Further, any amendments based on the current Cumulative List, as well as any discretionary amendments, that were made after the application is filed and before a letter is received from the IRS must be submitted to the Service. See Announcement 2008-23 for filing procedures for adopting employers of pre-approved plans.
What was the deadline for interim amendments required to comply with provisions of the final § 401(k) and (m) regulations published on December 29, 2004?
Interim amendments for the final § 401(k) and (m) regulations must have been adopted by the deadline under section 5.05 of Rev. Proc. 2007-44. The exact deadline depends on whether an amendment is discretionary or interim. Discretionary amendments must be adopted by the end of the plan year in which the plan amendment is effective, and amendments for designated disqualifying provisions and integrally related amendments (interim amendments) must be adopted by the end of the remedial amendment period described in section 2.05 of Rev. Proc. 2007-44. However, also see Notice 2005-95, which extends the date for some amendments and provides special rules for both the final § 401(k) and (m) regulations and designated Roth contributions.
Deadline for Amending for IRC Section 415 Final Regulations
What was the deadline for amending a plan to comply with the final regulations under §415?
The final regulations under §415 that were published in the Federal Register on April 5, 2007 are generally effective for limitation years beginning on or after July 1, 2007. As provided in Revenue Procedure 2007-44, an interim plan amendment to comply with the final regulations must generally be adopted by the later of the last day of the plan year that includes the effective date of the regulations and the due date (including extensions) of the employer’s income tax return for the tax year that includes the effective date of the regulations. The following three examples illustrate this requirement.
Example 1. Plan A’s plan year and limitation year are the calendar year. The tax year of Employer M, Plan A’s sponsor, is also the calendar year. The first limitation year of Plan A beginning on or after July 1, 2007 is the limitation year that begins January 1, 2008. Thus, for Plan A, the regulations are effective on January 1, 2008. The last day of Plan A’s plan year that includes January 1, 2008 is December 31, 2008. Employer M’s tax year that includes January 1, 2008 is the 2008 calendar year. The due date (including extensions) of Employer M’s income tax return for the 2008 tax year is September 15, 2009 (assuming Employer M requests an extension of time to file). The deadline for Employer M to amend Plan A to comply with the final regulations under §415 is therefore September 15, 2009, that is, the later of December 31, 2008 and September 15, 2009.
Example 2. The facts are the same as in Example 1, except Employer M’s tax year is April 1 to March 31. In this case, Employer M’s tax year that includes January 1, 2008 is the tax year ending March 31, 2008. The due date (including extensions) of Employer M’s income tax return for the tax year ending March 31, 2008 is December 15, 2008 (assuming Employer M requests an extension of time to file). The deadline for Employer M to amend Plan A to comply with the final regulations under §415 is therefore December 31, 2008, that is, the later of December 31, 2008 and December 15, 2008.
Example 3. The tax year of Employer N is February 1 to January 31. This is also the plan year of Plan B, which Employer N sponsors. Plan B’s limitation year is the calendar year. The first limitation year of Plan B beginning on or after July 1, 2007 is the limitation year that begins January 1, 2008. Thus, for Plan B, the regulations are effective on January 1, 2008. The last day of Plan B’s plan year that includes January 1, 2008 is January 31, 2008. Employer N’s tax year that includes January 1, 2008 is the tax year ending January 31, 2008. The due date (including extensions) of Employer N’s income tax return for the tax year ending January 31, 2008 is October 15, 2008 (assuming Employer N requests an extension of time to file). The deadline for Employer N to amend Plan B to comply with the final regulations under §415 is therefore October 15, 2008, that is, the later of January 31, 2008 and October 15, 2008.
Note, however, that §411(d)(6) of the Code generally prohibits the adoption of a plan amendment, including a plan amendment to comply with the final regulations under §415, if the amendment would reduce or eliminate (or be treated as reducing) accrued benefits. To avoid a violation of §411(d)(6), a plan might have to be amended to comply with the final regulations under §415 earlier than the time described in Rev. Proc. 2007-44.
Finally, the “Saturday, Sunday, or legal holiday rule” in §7503 of the Code may affect the determination of when a plan amendment to comply with the final regulations under §415 must be adopted. Section 7503 provides that when the last day prescribed under internal revenue laws for performing any act falls on a Saturday, Sunday, or legal holiday, the performance of the act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or legal holiday. Rev. Rul. 83-116, 1983-2 C.B. 264, provides that §7503 applies only to acts required to be performed in connection with the determination, collection or refund of taxes. As explained in Notice 89-8, 1989-1 C.B. 628, if the deadline for making plan amendments is determined by reference to the filing of any return, then, under the rules of §7503 and Rev. Rul. 83-116, if such deadline falls on a Saturday, Sunday, or legal holiday, the amendments will be considered as timely made if made on or before the next succeeding day that is not a Saturday, Sunday, or legal holiday. However, if the deadline for making plan amendments is determined by reference to the end of the plan year, then plan amendments must be made by that deadline regardless of whether it falls on a Saturday, Sunday, or legal holiday.
In example 1 above, the deadline for adopting a plan amendment to comply with the final §415 regulations is determined by reference to the due date of the employer’s tax return, September 15, 2009, which is a Tuesday. However, if September 15, 2009 were a Saturday, Sunday, or legal holiday, then the deadline for adopting a plan amendment to comply with the final regulations under §415 would be the next succeeding day which is not a Saturday, Sunday, or legal holiday. For example, if September 15 were a Saturday, the deadline for adopting the plan amendment would be September 17, 2009. Similarly, if, in example 3, October 15, 2008 were a Sunday, the deadline for adopting the plan amendment would be October 16, 2008.
In example 2, the deadline for adopting a plan amendment to comply with the final regulations under §415 is determined by reference to the end of the plan year, December 31, 2008, which is a Wednesday. However, even if December 31, 2008 were a Saturday, Sunday, or legal holiday, a plan amendment to comply with the final regulations under §415 would nevertheless have to be adopted by that date.