August 7, 1991
TO: PENSION MEMBERS NO. 29-91
RE: IRS ANNOUNCES OPINION LETTER PROGRAM FOR SARSEPS
__________________________________________________________
In response to the Institute's request, the Internal
Revenue Service announced that, effective August 5, 1991, it will
accept applications for opinion letters from sponsors of
prototype salary reduction SEPs ("SARSEPs"). At the urging of
the Institute, sponsors will be able to offer prototype SARSEPs
which are not automatically "top-heavy" and thus, will not
require minimum contributions on behalf of all eligible
employees.
Pursuant to Rev. Proc. 91-44, to request a favorable
opinion letter on a prototype SARSEP, a sponsor must submit a
document that incorporates one of the following procedures: the
Model Amendment, the Short Amendment or the Long Amendment.
1. Model Amendment
Mass submitters or sponsoring organizations that amend a
prototype SEP that has received a favorable opinion letter dated
July 18, 1984 or later may adopt the Model Amendment. The Model
Amendment, like IRS Form 5305A-SEP, the IRS model SARSEP plan
form, requires the plan to be considered "top-heavy." A copy of
the Model Amendment is included in Rev. Proc. 91-44.
Use of the Model Amendment requires use of a model "Notice
to Adopting Employer" and "Notice to Employees" which is also
included in Rev. Proc. 91-44.
2. Short Amendment
The Short Amendment may be used by sponsors of existing
prototype SEPs which have received favorable opinion letters on
their SEPs dated July 18, 1984 or later, and employers who have
adopted such SEPs. The Short Amendment also may be used by new
prototype SEP/SARSEP sponsors. A Short Amendment is written by
the sponsor and contains the information contained in each
provision of the Model Amendment. It may contain additional
information in the discretion of the sponsor. Short Amendment
users must use the model Notices to Adopting Employer and
Employees on a word for word basis.
3. Long Amendment
An existing or new prototype SEP may be amended through use
of a Long Amendment. The Long Amendment may be deemed top-heavy
or not deemed top-heavy. Long Amendments which are deemed top-
heavy, like the Short Amendment, must contain the information
contained in the Model Amendment and must also contain the
information contained in the model Notice to Adopting Employer
(concerning effective date, deductibility of contributions,
discrimination testing, top-heavy minimum contributions, etc.).
Long Amendments which are not deemed top-heavy do not need to
contain the top-heavy provisions contained in the Model
Amendment. Instead, they must contain all the necessary language
within the plan document to enable the SARSEP to meet the
applicable requirements if the SARSEP becomes top-heavy.
Long Amendments must also contain the name, address and
telephone number of the person or institution to which adopting
employers may direct inquiries concerning the SARSEP.
Instructions to sponsoring organizations desiring a written
opinion as to the acceptability of the form of their prototype
SARSEP are listed in Section 5 of Rev. Proc. 91-44. The revenue
procedure also contains a model salary deferral form.
A copy of Rev. Proc. 91-44 is attached. We will keep you
informed of developments.
W. Richard Mason
Assistant Counsel - Pension
Attachment