Internal Revenue Bulletin: 2004-40
October 4, 2004
Request for Comments on Revenue Procedure for the Staggered Remedial Amendment Period System
Table of Contents
- Program Changes
- Remedial Amendment Period
- Request for Comments
- Drafting Information
- A. APPENDIX
- Draft Revenue Procedure
- Rev. Proc.
- SECTION 1. PURPOSE
- SECTION 2. BACKGROUND
- SECTION 3. OVERVIEW
- PART I — INDIVIDUALLY DESIGNED PLANS
- SECTION 4. ESTABLISHMENT OF FIVE-YEAR REMEDIAL AMENDMENT CYCLES FOR INDIVIDUALLY DESIGNED PLANS
- SECTION 5. EXCEPTIONS TO THE GENERAL RULE FOR DETERMINING A PLAN’S FIVE-YEAR REMEDIAL AMENDMENT CYCLE
- SECTION 6. RULES FOR DETERMINING FIVE-YEAR REMEDIAL AMENDMENT CYCLE IN CASES OF MERGER OR ACQUISITION, CHANGE IN PLAN SPONSORSHIP, OR PLAN SPIN-OFF
- SECTION 7. APPLICATION OF § 401(b) TO ALL FUTURE CHANGES IN QUALIFICATION REQUIREMENTS OF THE INTERNAL REVENUE CODE
- SECTION 8. EXTENSION OF THE REMEDIAL AMENDMENT PERIOD UNDER § 401(b) TO THE END OF THE REMEDIAL AMENDMENT CYCLE
- SECTION 9. EXTENSION OF THE EGTRRA REMEDIAL AMENDMENT PERIOD/SCHEDULE OF NEXT FIVE-YEAR REMEDIAL AMENDMENT CYCLE
- SECTION 10. CUMULATIVE LIST OF CHANGES IN PLAN QUALIFICATION REQUIREMENTS
- SECTION 11. DETERMINATION LETTERS
- SECTION 12. TERMINATING PLANS
- SECTION 13. OPENING OF EGTRRA DETERMINATION LETTER PROGRAM FOR INDIVIDUALLY DESIGNED PLANS
- PART II — PRE-APPROVED PLANS
- SECTION 14. SIX-YEAR AMENDMENT/APPROVAL CYCLE FOR M&P AND VOLUME SUBMITTER PLANS
- SECTION 15. ELIGIBILITY FOR SIX-YEAR AMENDMENT/APPROVAL CYCLE
- SECTION 16. EFFECT ON OTHER DOCUMENTS
- SECTION 17. EFFECTIVE DATE
- SECTION 18. PAPERWORK REDUCTION ACT
- DRAFTING INFORMATION
This announcement includes as an Appendix a draft revenue procedure that contains the Service’s procedures for issuing determination letters under a staggered remedial amendment period system that establishes regular, five-year cycles under § 401(b) of the Internal Revenue Code (Code) for plan amendments and determination letter renewals for individually designed plans (that is, plans that have not been pre-approved) qualified under § 401(a). In addition, under this system, pre-approved plans (that is, master and prototype (M&P) and volume submitter plans) will generally have a regular, six-year remedial amendment cycle. The Service seeks public input before finalizing these procedures and invites interested persons to submit comments.
The Service has maintained an Employee Plans determination letter program for many years, essentially in its present form. Under this program, the Employee Plans (EP) component of Tax Exempt and Government Entities (TE/GE) issues letters of determination regarding the qualified status of retirement plans under § 401(a) and the tax-exempt status of related trusts under § 501(a). Determination letters provide assurance to plan sponsors, participants and other interested parties that the terms of employer-sponsored retirement plans satisfy the qualification requirements of the Code. Qualified plans offer significant tax advantages to employers and participants.
In recent years, the Service has undertaken a comprehensive review of its policies and procedures for issuing determination letters on the qualified status of retirement plans. The impetus for this review was a need for the Service to strike a more effective balance in the application of its limited resources among the EP determinations, examinations, voluntary compliance and customer education and outreach programs. The current determination letter program has been subject to significant periodic fluctuations in workload as a result of legislative changes. These fluctuations make resource planning and allocation difficult and may have an overall negative effect on the administration of the various EP programs. Thus, a goal of the review of the determination letter program has been to identify improvements to the program that will result in a more level determination letter workflow. While this review is still ongoing, the Service has already made a number of significant improvements to the determination letter program. See, for example, Announcement 2001-77, 2001-2 C.B. 83.
This draft revenue procedure would establish a system of staggered five-year remedial amendment cycles for individually designed plans and a system of six-year amendment/approval cycles for pre-approved plans. These systems create fixed, regular cycles for the adoption of remedial plan amendments under § 401(b) and the submission of determination, opinion, and advisory letter applications.
In the case of individually designed plans, the five-year remedial amendment cycles would be staggered. In other words, different plans would have different five-year cycles. In general, a plan’s five-year remedial amendment cycle would be determined with reference to the taxpayer identification number (TIN) of the employer that maintains the plan. Special rules are provided for plans maintained by more than one employer and plans maintained by multiple members of a controlled group or affiliated service group.
In the case of pre-approved plans, defined benefit plans would have a different six-year amendment/approval cycle schedule than defined contribution plans. The sponsor of a pre-approved document would be required to submit the plan for a new opinion or advisory letter according to the schedule set forth in the revenue procedure. An adopting employer that timely adopts the approved plan would be treated as having adopted the plan within the employer’s six-year remedial amendment cycle. The Service will announce the deadline for timely adoption after the pre-approved documents in a cycle have been reviewed. It is expected that employers will have generally two years in which to adopt the pre-approved plans.
This revenue procedure would provide that on February 1, 2006, the Service will begin to accept applications for determination letters for individually designed plans that take into account the requirements of Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107-16 (EGTRRA). This draft revenue procedure would also extend a plan’s EGTRRA remedial amendment period as provided in the chart found in section 9.01, which is the Extension of the EGTRRA Remedial Amendment Period/Schedule of Next Five-Year Remedial Amendment Cycle.
In the case of an individually designed plan, the end of the remedial amendment period for any disqualifying provision would be extended by this revenue procedure to the end of the five-year cycle in which the remedial amendment period would otherwise end.
In the case of a pre-approved plan, regular six-year amendment/approval cycles would be established. However defined contribution plans and defined benefit plans would have different six-year amendment/approval cycles. The schedule for the six-year amendment/approval cycles is found in section 14.01. Sponsors and practitioners would have until January 31 of the year that marks the end of the plan’s first year of the six-year remedial amendment cycle to submit these plans timely for opinion and advisory letters. Adopting employers would have generally two years in which to timely adopt the pre-approved plans. The Service will announce the actual deadline for timely adoption of pre-approved plans.
Interested persons are invited to comment on the draft revenue procedure, the issues addressed in this announcement, the staggered remedial amendment cycle, the six-year remedial amendment/approval cycle, or any other aspect of the pre-approved plan programs or the determination letter program.
Written comments should be submitted by January 3, 2005, to CC:PA:LPD:RU (Announcement 2004-71), Room 5203, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, D.C. 20044. Comments may be hand delivered between the hours of 8 a.m. and 5 p.m., Monday through Friday to CC:PA:LPD:RU (Announcement 2004-71), Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave. NW, Washington, D.C. Alternatively, comments may be submitted electronically via e-mail to the following address: Notice.Comments@irscounsel.treas.gov. All comments will be available for public inspection.
The principal author of this announcement is Dana A. Barry of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this announcement, please contact the Employee Plans’ taxpayer assistance telephone service at 1-877-829-5500 (a toll-free number) between the hours of 8:00 a.m. and 6:30 p.m. Eastern Time, Monday through Friday (a toll-free call). Ms. Barry may be reached at (202) 283-9888 (not a toll-free call).
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