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Pre-Approved Plan Program Expanded

The IRS has updated guidance on master and prototype, and volume submitter, plan applications for opinion and advisory letters.

The IRS has highlighted the following changes as important in Revenue Procedure 2015-36:

  • extending the application deadline for pre-approved defined benefit plans from June 30 to Oct. 30, 2015;

  • opening the pre-approved plan program to cash balance plans for submission by Oct. 30, 2015; and

  • expanding the pre-approved plan program to employee stock ownership plans (ESOPs) during the defined contribution application period beginning Feb. 1, 2017.

Concurrent with the new revenue procedure, the IRS has also released sample language — listings of required modifications (LRMs) — for pre-approved cash balance plans and ESOPs.

The IRS notes that expanding the pre-approved plan program to cash balance plans and ESOPs promotes the agency’s ongoing objective of increasing the availability of pre-approved plans to small and mid-size employers.

Converting to Pre-Approved Plans

The IRS notes that employers currently maintaining individually designed plans that intend to adopt pre-approved cash balance plans or ESOPs (when available) should complete Form 8905, Certification of Intent To Adopt a Pre-approved Plan, before the end of their plan’s current five-year remedial amendment cycle. This form serves as a record of the employer’s intention to transition from an individually designed plan to a pre-approved plan. Additional information is available in the FAQs on Form 8905.

The IRS also notes that if an employer doesn’t know which particular pre-approved plan it ultimately will adopt, the employer does not need to complete Part II or the information in Part III, line 4, of Form 8905 (requiring identifying information on the pre-approved plan and certification by the M&P sponsor or VS practitioner). Instead, the IRS says a statement can be attached indicating that the employer intends to adopt a pre-approved cash balance plan or ESOP when the plan has received an opinion/advisory letter. The employer should keep a copy of the form and statement and attach them to any determination letter application (Form 5300, 5307 or 5310) they file.