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Types of Pre-Approved Retirement Plans

Types Applicable to the Third Six-Year Cycles

The prior terminology of Master, Prototype, and Volume Submitter plans have been eliminated and replaced with the single term of Pre-Approved Plan. A pre-approved plan can either be of the standardized type or of the non-standardized type. In addition, the entities who offer a pre-approved plan are no longer referred to as either a sponsor or practitioner but simply as a provider. See section 3 of Revenue Procedure 2017-41.

The IRS issues an opinion letter to the pre-approved plan provider if the plan document meets all legal requirements. The provider then makes its plan available for employers to adopt. See section 4 of Revenue Procedure 2017-41.

Standardized Pre-Approved Plan

The provisions of this type of pre-approved plan must be safe harbor. This generally means the employer will have fewer choices over the design of the plan. The employer must not make any modifications to the plan and can rely on the opinion letter issued to the pre-approved plan as if it were its own determination letter. See sections 5.16 and 7 of Revenue Procedure 2017-41.

Non-Standardized Pre-Approved Plan

The provisions of this type of pre-approved plan do not have to be safe harbor. The employer is permitted to make minor modifications to the plan. The extent of an employer’s ability to rely on the opinion letter issued to the pre-approved plan as if it were its own determination letter will depend upon how many of the plan provisions are safe harbor and if the employer has made any minor modifications to the plan. For example, any minor modification made by the employer to the plan will result in a loss of all reliance on the opinion letter; however, assuming the modification is in fact minor, the employer can obtain reliance by filing for its own determination letter using the Form 5307. See sections 5.15 and 7 of Revenue Procedure 2017-41.

Pre-Approved Plan Format

The format of a pre-approved plan can either be an adoption agreement plan or a single document plan. An adoption agreement plan consists of a basic plan document and an adoption agreement. The basic plan document consists of all the non-elective provisions and thus cannot include any options or blanks for completion by the employer. The adoption agreement contains the options (and blanks) for completion by the employer and is also where the employer signs the plan. A single document plan does not use an adoption agreement, and its options and alternative paragraphs available for selection by the employer are contained throughout the single document. See section 4 of Revenue Procedure 2017-41.

The trust or custodial account document associated with either format must be a separate document. In other words, it must be in a document separate from the rest of the plan. The trust or custodial account document must also not be submitted to the IRS for pre-approval. For this reason, each pre-approved plan must contain a statement that the provisions of the plan override any conflicting provision contained in the trust or custodial account document used with the plan. See sections 4.10, 5.09, and 9.03 of Revenue Procedure 2017-41.

Mass Submitter

A “mass submitter” of a pre-approved plan is a U.S. business that submits opinion letter applications on behalf of at least 30 unaffiliated providers that have “word-for-word identical” plans to the mass submitter’s pre-approved plan. Mass submitters who have met the “30 provider” requirement can submit additional applications for providers with identical plans and providers 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 providers it has for the other plan(s). See section 4.04 of Revenue Procedure 2017-41.

Mass submitters usually get expedited treatment from the IRS, because of the high volume of providers 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.

The term “word-for-word identical plan” includes a “flexible” plan. A flexible plan allows the provider to select some options and still be a word-for-word identical plan. See section 10.03 of Revenue Procedure 2017-41.

Provider

A “provider” is a U.S. business that has at least 15 employer-clients that it reasonably expects to adopt the same pre-approved plan of the provider by the required deadline. A provider can request opinion letters for any number of pre-approved plans provided it has at least 30 employer-clients in the aggregate, each of which is reasonably expected to adopt at least one of the provider’s plans. A U.S. business which offers a pre-approved plan as a word-for-word identical adopter or minor modifier adopter of a plan of a mass submitter is not subject to the minimum number of adopting employers requirement with respect to such plan. See section 4.08 of Revenue Procedure 2017-41.

A provider 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.

Providers must make reasonable and diligent efforts to ensure that adopting employers of the plan have actually received and are aware of all plan amendments and that such employers complete and sign new plans when necessary. See sections 5.10 and 8.01 of Revenue Procedure 2017-41.

Adopting Employer

An adopting employer is an employer that adopts a pre-approved plan that is offered by a provider. An adopting employer must sign the pre-approved plan when it first adopts the plan and must sign a new plan for a restatement. In addition, the employer must complete a new dated signature page if it modifies any prior elections or makes new elections. See sections 4.01 and 5.10 of Revenue Procedure 2017-41.

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Types Applicable to the Second Six-Year Cycles

Pre-approved plans are either Master and Prototype (M&P) or Volume Submitter (VS). 

The IRS issues an opinion letter to an M&P plan sponsor if the plan document meets all legal requirements. The sponsor then makes its plan available for employers to adopt.

The IRS issues an advisory letter to a VS practitioner if the VS plan document meets all legal requirements. The practitioner then makes its plan available for employer to adopt.

Master and Prototype (M&P)

An M&P plan consists of:

  • a basic plan document containing non-elective provisions
  • an adoption agreement containing elective provisions that an adopting employer selects
  • a trust or custodial account (which may or may not be included in the basic plan document)

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.

An M&P may be standardized or non-standardized (see Revenue Procedure 2015-36, Sections 4.09 and 4.10). A standardized plan generally has more required provisions in the plan and the adopting employer can make fewer changes (Revenue Procedure 2015-36, Section 5.09).

  • Standardized
    A plan designed to satisfy the qualification requirements solely based on its terms. An employer who adopts a standardized pre-approved plan can rely on the opinion letter issued to the pre-approved plan sponsor as if it were its own determination letter.
     
  • Nonstandardized
    A plan that provides plan design choices and elective provisions that do not ensure compliance with the nondiscrimination requirements (see Revenue Procedure 2015-36, Section 19).

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 a word-for-word identical plan.

M&P sponsor

A “sponsor” is a U.S. business that has at least 15 employer-clients (per Revenue Procedure 2015-36, section 4.07) that it reasonably expects to adopt the sponsor’s basic lead plan document by the required deadline. A sponsor can request opinion letters for any number of basic plan documents and adoption agreements provided it has at least 30 employer-clients in the aggregate, each of which is reasonably expected to adopt at least one of the sponsor’s basic plan documents.

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

An adopting employer is an employer that adopts a master & prototype or volume submitter pre-approved plan. An adopting employer must sign the adoption agreement when it first adopts the plan and must complete and sign a new adoption agreement for any restated plan. 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 (VS)

A VS plan is a specimen plan (sample plan) of a VS practitioner that its employer-clients adopt on an identical or substantially identical basis. The IRS issues advisory letters to VS practitioners on the acceptability of the specimen plans’ form. The practitioner then makes its plan or plans available for employers to adopt. A VS plan consists of:

  • a specimen plan document that offers choices over plan terms
  • a trust or custodial account
  • may also have an adoption agreement containing elective provisions

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. A VS mass submitter will be treated as a VS mass submitter with respect to all of its specimen plans provided the 30 unaffiliated VS practitioner requirement is met with respect to at least one of its specimen plans. (per Revenue Procedure 2015-36, section 13.06)

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 15 employer-clients (per Revenue Procedure 2015-36, section 13.05) that it reasonably expects to timely adopt a plan that is substantially similar to the VS practitioner’s specimen plan.  A VS practitioner may submit more than one specimen plan for an advisory letter provided it represents to the IRS that it has at least 30 employer-clients in the aggregate, each of which is reasonably expected to adopt at least one of the practitioner’s specimen plans on a substantially similar basis.

VS adopting employer

The IRS announces the date by which employers must adopt approved restatements of VS plans for each 6-year cycle. 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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