IRS guidance covers issuance of opinion/advisory letters, employer adoption deadline, opening of determination letter program for pre-approved DB plans

The IRS has released guidance on the issuance of opinion and advisory letters for pre-approved defined benefit (DB) plans. Also included are the deadline for employers to adopt these pre-approved plans, and the timing for the opening of the determination letter program for pre-approved DB plan adopters.

Background

Rev. Proc. 2016-37 provides that every pre-approved plan has a regular, six-year remedial amendment cycle and that master and prototype (M&P) sponsors and volume submitter (VS) practitioners may apply for new opinion or advisory letters once every six years. In addition, Rev. Proc. 2016-37 provides that when the review process for a cycle of pre-approved plans has neared completion, the IRS will publish an announcement supplying the date by which adopting employers must adopt the newly approved plans. This date is intended to provide adopting employers a window of approximately two years in which to adopt plans and, if they are otherwise eligible, apply for an individual determination letter.

Opinion/advisory letters

The IRS has announced that it intends to issue opinion and advisory letters for pre-approved DB plans that were restated for changes in plan qualification requirements listed in IRS Notice 2012-76, and that were filed with the IRS during the submission period for the second six-year remedial amendment cycle under Rev. Proc. 2007-44. The IRS expects to issue the opinion and advisory letters on March 30, 2018, or, in some cases, as soon as possible thereafter.
Under Rev. Proc. 2016-37, the second six-year remedial amendment cycle for pre-approved DB plans ends on January 31, 2019, unless the IRS revises these timing requirements and announces the revision in future guidance. Consistent with the revenue procedure, the IRS has announced the extension of the end of a pre-approved DB plan’s remedial amendment cycle with respect to the changes in plan qualification requirements included on the 2012 Cumulative List to April 30, 2020. The IRS states that an adopting employer whose DB plan is eligible for the six-year remedial amendment cycle system under section 19 of Rev. Proc. 2016-37, and who adopts, by April 30, 2020, an M&P or VS DB plan that was approved based on the 2012 Cumulative List, will be considered to have adopted the plan within the second six-year remedial amendment cycle.

Opening of individual determination letter program

An adopting employer of a pre-approved DB plan may apply for an individual determination letter (if otherwise eligible) during the period beginning May 1, 2018 and ending April 30, 2020, according to the IRS. See Rev. Proc. 2018-4) for additional information about determination letter applications for pre-approved plans.

Third six-year remedial amendment cycle

Section 16.01 of Rev. Proc. 2016-37 provides that the third six-year remedial amendment cycle for DB pre-approved plans begins on February 1, 2019. The IRS states that it will announce in future guidance a delayed starting date for this third six-year remedial amendment cycle for these plans.

Source: IRS Announcement 2018-05.
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