June 8, 1989
TO: PENSION MEMBERS NO. 28-89
RE: IRS NOTICE CONCERNING MODEL CASH OR DEFERRED ARRANGEMENT
__________________________________________________________
In Notice 87-34, the IRS published a model amendment for
use by sponsors of master or prototype profit-sharing plans to
incorporate a cash or deferred arrangement (CODA) under section
401(k) of the Code. Notice 87-51 amended the model amendment's
hardship provisions and provided certain optional amendments.
(See Institute Memoranda to Pension Members Nos. 22-87 and 38-87,
dated May 14 and August 18, 1987, respectively.)
Attached is a copy of Notice 89-68, which provides a cut-
off date for adoption by sponsoring organizations of the model
CODA amendment. The notice announces that the IRS has decided to
discontinue the model CODA program, and will no longer give any
special priority or reliance to plans submitted pursuant to
Revenue Procedure 89-9 simply because the plan includes language
identical to the model CODA. In addition, no applications for
opinion letters on the model CODA will be accepted after October
31, 1989. Sponsoring organizations that have received opinion
letters concerning the model CODA may continue to market the CODA
until the IRS issues an opinion letter concerning a replacement
plan, provided that the replacement plan is submitted for IRS
review prior to November 1, 1989.
The notice also contains additional options under the model
CODA concerning hardship distributions, recharacterization, the
use of elective deferrals in the average contribution percentage
test, and the calculation of income or loss on excess amounts.
Sponsoring organizations that have already adopted the model CODA
may add any or all of the optional provisions on a word-for-word
basis and continue to rely on their opinion letter without
further application to the IRS.
We will keep you informed of further developments.
Kathy D. Ireland
Assistant General Counsel
Attachment