Employee Plans Compliance Unit (EPCU) - Completed Projects - Project with Summary Reports - Master and Prototype (M&P) Plans
Master & Prototype Project Summary
The EPCU Master & Prototype (M&P) Project began in November of 2007 and ended in September of 2009. The project was designed to determine whether GUST M&P sponsors were meeting their obligations and providing the required levels of service to their adopting employers as outlined in Revenue Procedure 2000-20. Part of the project design involved contacting the sponsor of an M&P plan and all, or a sample, of their adopting employers.
The IRS estimates that at least 94% of all qualified plans are M&P plans and volume submitter plans (the two types of pre-approved plans). Pre-approved plans are marketed directly to adopting employers or to other benefits professionals (attorneys, accountants, actuaries, third party administrators, etc.) who then resell them to adopting employers.
A sponsor of an M&P plan has certain responsibilities to their adopting employers. These responsibilities are set forth in Revenue Procedure 2000-20. The sponsor of an M&P plan agrees to comply with these responsibilities as a condition for the issuance of a GUST opinion letter. In addition to record keeping, they have three key responsibilities critical to their adopting employers.
M&P plan sponsors must make reasonable and diligent efforts to ensure that adopting employers:
1) complete and sign new adoption agreements or signature pages when necessary (e.g., if the plan has been restated, if modifications are made to prior elections, or if new elections are selected);
2) are aware of and receive all plan documents and amendments (e.g., an approved copy of the plan, any subsequent amendments and the most recently issued opinion letter); and
3) timely amend their plan when necessary to retain approved status (e.g., if any provisions fail to meet the requirements of law, regulations, or other issuances and guidelines affecting qualification).
The project focused on GUST opinion letters because opinion letters for EGTRRA had not been issued. By contacting M&P GUST approved plan sponsors, the EPCU had a complete data set to work with including opinion letters, adoption agreements, and amendments for both plan sponsors and adopting employers. The timing of this project also allowed EP Rulings & Agreements (R&A) to address non-compliant sponsors during the EGTRRA approval process.
M&P Plan Sponsors Results
80% of all of the sponsors in the sample were found to be compliant. However, of these compliant sponsors, 27% should have notified Rulings & Agreements that their plans were abandoned. They either never had any adopting employers for the specified M&P plan (and did not keep their plan documents current) or their adopting employers had since terminated or switched over to other plans or sponsors. Some of the non-compliant issues addressed by the EPCU related to the lack of response to the compliance check and some advisements were issued involving the maintenance of the adopting employer list and providing notifications regarding changes in the sponsor’s entity. 42% of the sponsors in the EPCU project sample had adopting employers in the plan selected for the compliance check.
M&P Plan Adopting Employer Results
88% of the responses from the adopting employers showed both the adopting employer and the sponsor were compliant. A small percentage of adopting employers were referred for an examination due to a lack of response to the compliance check or other issues with their plan such as possible discrimination.