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February 8, 1989
TO: PENSION MEMBERS NO. 7-89
RE: IRS TO BEGIN REVIEW OF MASTER AND PROTOTYPE PLAN
AMENDMENTS
__________________________________________________________
Attached is a copy of Revenue Procedure 89-9, which
describes the procedures for IRS issuance of opinion letters
concerning the acceptability of master and prototype plans under
section 401(a) of the Internal Revenue Code, as amended by the
1986 Tax Reform Act and other recent legislation. The following
memorandum provides a general description of the revenue
procedure as well as an update on the Institute's prototype
plans.
The Revenue Procedure
As under prior revenue procedures, the IRS National Office
will review master and prototype plans submitted by sponsoring
organizations, including regulated investment companies and their
investment advisers and principal underwriters, as to the
acceptability of the form of a master or prototype plan under
section 401(a) of the Code. If the sponsoring organization
receives a favorable opinion letter concerning the acceptability
of the form of the plan, it may offer the plan to adopting
employers, who may rely upon the sponsoring organization's
opinion letter under certain circumstances. In the absence of
such circumstances, the adopting employer may seek a
determination letter concerning the qualification of its plan.
Continued and Interim Reliance
Generally, an employer that adopted a master or prototype
plan with a favorable TEFRA opinion letter before February 6,
1989 and either was entitled to rely on the opinion letter or
received a favorable determination letter, may continue to rely
on the opinion or determination letter for plan years beginning
after December 31, 1988 under the following circumstances: (1)
the employer must operate its plan in accordance with those
requirements that are effective for plan years beginning before
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1989 as of the effective dates of such requirements; (2) the
sponsoring organization must submit a replacement plan to the IRS
for review on or before October 31, 1989; and (3) the employer
must adopt the IRS-approved version of the replacement plan (and
request a determination letter if not entitled to rely on the
sponsoring organization's opinion letter) on or before the later
of (a) the last day of the twelfth calendar month beginning after
the date of the opinion letter, or (b) the end of the remedial
amendment period applicable to the employer's plan under section
401(b).
On the other hand, an employer that adopts such a master or
prototype plan on or after February 6, 1989 can rely upon the
applicable opinion or determination letter only if the following
conditions, in addition to those described above, are satisfied:
(1) in the case of a replacement plan, the sponsoring
organization submitted the plan to the IRS for review on or
before the earlier of (a) the date of the employer's adoption of
the plan, or (b) October 31, 1989; and (2) in the case of a
master or prototype or replacement plan that amends or restates a
plan of the employer, the employer is entitled to rely, at the
time of such adoption, on a favorable opinion or determination
letter issued with respect to the plan that is amended or
restated.
Mass Submitter Program
The experimental mass submitter program established by
Revenue Procedure 84-23 will be made permanent under the new
revenue procedure. This program permits entities that represent
at least ten sponsoring organizations that will sponsor a word-
for-word identical plan to seek opinion letters on behalf of the
sponsoring organizations and receive expedited processing. After
the initial submission, the mass submitter may submit additional
applications on behalf of sponsoring organizations that adopt
word-for-word identical plans or plans that contain minor
modifications from the mass submitter's plan.
Mass submitters now may submit "flexible plans" which
include optional provisions within the basic plan document. The
allowable optional provisions are limited to (1) investment
provisions, such as those permitting loans, investments in
insurance contracts or other funding media, or self-directed
investments; (2) administrative provisions, such as those
describing the allocation of responsibilities among fiduciaries,
the resignation or replacement of fiduciaries, claims procedures,
or recordkeeping requirements; and (3) cash or deferred
arrangements. A flexible plan adopted by a sponsoring
organization which differs from the mass submitter plan only in
that optional provisions have been deleted generally will be
treated as a word-for-word identical adoption rather than as a
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minor modification. Additional optional provisions may be added
by the mass submitter after a favorable opinion letter is issued.
Effective Dates
Effective February 6, 1989, the IRS will suspend review of
applications for opinion letters with respect to master and
prototype plans and will return any such applications received
after February 16. Applications from mass submitters will be
accepted in early April, but non-mass submitter applications will
not be accepted before July.
Institute Prototype Plans
The Institute intends to submit to the IRS in early April
replacement plans for its prototype paired defined contribution
plans and its prototype 401(k) plan that will update the plans to
comply with 1986 Tax Reform Act and other changes. The paired
defined contribution plans are available to Institute members at
no charge. The 401(k) plan involves a one-time charge of $1,000.
Utilization of the Institute's prototype plans saves
members the cost of plan drafting and IRS user fees. A non-mass
submitter must pay a user fee of $1,000 per adoption agreement,
while a sponsoring organization that adopts a mass submitter's
plan on a word-for-word identical basis pays only $50 per
adoption agreement.
In addition, as noted above, only mass submitter plans will
be reviewed during the first three months of the procedure.
Because applications from non-mass submitters will not be
accepted until July, sponsoring organizations that adopt a mass
submitter's plan generally will be able to offer employers an
approved plan earlier than those that do not participate in a
mass submitter program.
For further information on the Institute's prototype plans,
please contact the undersigned.
Kathy D. Ireland
Assistant General Counsel
Attachment