Purpose: This IRM describes the procedures for reviewing Employee Plans (EP) Determination Letter (DL) applications for multiple employer plans.

Audience: EP Determinations and Quality Assurance (QA) staff

Policy Owner: Director, EP

Program Owner: EP

Program Goals: EP Determinations helps plan sponsors ensure their plans comply with the tax laws by issuing determination and opinion letters and protects the public interest by applying the tax law with integrity and fairness.

Use these terms when working with MEPs:

Multiple employer plans must comply with the qualification rules under IRC 401(a), such as eligibility, vesting, distribution rules, etc. However, some rules are applied differently. Certain qualification requirements are applied as if all employees of each participating employer are employed by a single employer. These include:

Other qualification requirements are applied to each participating employer as if that employer maintained a separate plan. These include:

Pay careful attention to IRC 415, limits on benefits/contributions and IRC 416, top-heavy requirements, when an employer participates in a MEP and also sponsors other plans. You must consider all plans in which an employer participates when applying IRC 415 limits and IRC 416 top-heavy requirements. The MEP should state that when a participating employer sponsors another plan, the IRC 415 and IRC 416 requirements include all plans of the participating employer.

For plan years beginning prior to January 1, 2021, under what is known as the" unified plan" or "one-bad-apple rule," the failure of any participating employer or the failure of the plan itself to satisfy an applicable qualification requirement, results in disqualification of the plan for all participating employers. See Treas. Reg. 1.413-2(a)(3)(iv).

The SECURE Act added IRC 413(e)(1), which, for plan years beginning after December 31, 2020, creates a statutory exception to the unified plan rule, for certain types of MEPs. A MEP is eligible for the exception to the unified plan rule if it is an IRC 413(c) defined contribution plan described in IRC 401(a), or consists of individual retirement accounts described in IRC 408, including by reason of IRC 408(c), provided the MEP is maintained by employers that have either a common interest other than having adopted the plan, or has a “pooled plan provider,” as defined in IRC 413(e)(3)(A). Such plans are called pooled employer plans (PEPs).

Proposed Treas. Regs., released on March 25, 2022, provide that for the relief to apply, plan documents must contain language that describes procedures to be followed to address a failure caused by a participating employer. These procedures include a description of notices that the IRC 413(e) plan administrator will send to the participating employer with a goal of correcting the failure; the actions the plan administrator will take if the employer does not remedy the failure or initiate a spinoff of its portion of the plan, and a statement that participants will become fully vested in their benefits if the employer does not correct the failure or initiate a spinoff.

IRC 413(e)(2)(A) provides that IRC 413(e)(1) will not apply unless the terms of the plan provide that, in the case of any employer in the plan failing to take actions described in IRC 413(e)(1),

IRC 413(e)(2)(A) also provides that IRC 413(e)(1) will not apply unless the terms of the plan provide that, in the case any employer in the plan failing to take actions described in IRC 413(e)(1), the employer (and not the plan or any other employer in the plan) will be liable for any liabilities with respect to the plan attributable to employees of that employer (or their beneficiaries), except to the extent provided by the Secretary.

If the participating employer does not take action by the final deadline (60 days after the final notice is provided) to correct the failure or initiate a spinoff, the plan administrator must:

Pursuant to IRC 413(e)(4)(B), until final Treasury Regulations are published, an employer or pooled plan provider may rely on a good faith, reasonable interpretation of the provisions of IRC 413(e) to which the final Treasury Regulations relate. Compliance with these proposed regulations is considered reliance on a good faith, reasonable interpretation of the provisions of IRC 413(e) to which the final Treasury Regulations relate.

A determination letter for a multiple employer plan issued under Rev. Proc. 2024-4 (revised annually), Section 14, will provide reliance for purposes of the requirements of IRC 413(c). However, pending issuance of final Treasury Regulations under IRC 413(e), a favorable determination letter for a multiple employer plan will not provide reliance for purposes of IRC 413(e). An applicant that has a determination letter application for a multiple employer plan pending with the Service as of January 3, 2022, may withdraw the pending application, receive a refund of the user fee relating to the application, and resubmit the application following the issuance of final Treasury Regulations under IRC 413(e). If the withdrawn application had been submitted for initial qualification of the plan, the resubmission of that application will not cause the application to fail to be considered as an application for initial qualification.

A plan sponsor of an individually-designed plan is permitted to submit a DL application using Form 5300, Application for Determination for Employee Benefit Plan at any time for:

A MEP can file for an initial qualification as either an individually-designed plan or use a pre-approved plan. In either instance, Form 5300 must be filed. See Rev. Proc. 2024-4, Sections 12.03 and 14.

In the case of a MEP, the controlling member may adopt a pre-approved plan but must still file the application using Form 5300, following the rules of Rev. Proc. 2024-4, Section 12.

The controlling member may submit an application based on a pre-approved plan for initial qualification, as outlined in Rev. Proc. 2016-37, Section 4.03(1), but only if the plan has never been issued a DL with respect to that plan. The application can be submitted at any time during the submission period for the applicable six-year remedial amendment cycle for a plan that:

The controlling member may submit an application regardless of whether the plan has received a DL with respect to that plan. The application can be submitted at any time during the submission period for the applicable six-year remedial amendment cycle for a pre-approved plan that:

A controlling member may submit an application for a DL using their name only. See Rev. Proc. 2024-4, Section 14.02.

If a participating employer (who’s not the controlling member) submits an application, close the case incomplete, issue a refund (if applicable), and issue a 1924 letter with caveat 10 with variable "Rev. Proc. 2024-4" .

An applicant requesting a letter in the name of the controlling member only submits a Form 5300, Application for Determination for Employee Benefit Plan, either including or omitting the design-based safe harbor questions. The user fee should be submitted in accordance with Rev. Proc. 2024-4. For current filing fees for multiple employer plans, see Appendix A, Section .07 (1)(f) and (g). Any other participating employer and any other employer who adopts the plan may rely on the favorable DL except for IRC 401(a)(4), IRC 401(a)(26), IRC 401(l), IRC 410(b), and IRC 414(s), and if the employer maintains or has ever maintained another plan, IRC 415 and IRC 416.

For applications filed with respect to nonstandardized plans, as described in Rev. Proc. 2024-4, Section 12.03, review the applicable Cumulative List (CL) that was used to review the underlying pre-approved plan.

For applications filed for a standardized plan that has been amended, as outlined in Rev. Proc. 2023-37, Section 13.05(1), the adopting employer will lose reliance on the opinion letter as of the effective date of the amendment but the plan will remain eligible for the cycle system (provided that the adopting employer adopts timely Interim Amendments) until the end of the cycle that includes the effective date. Also see Rev. Proc. 2024-4, Sections 12.03(1)(a) and 12.04(4).