IRS Updates Listing of Required Modifications Package for DC Plans

The IRS has updated its Listing of Required Modifications (LRM) and Information Package for defined contribution plans. It contains samples of plan provisions that satisfy certain Internal Revenue Code requirements and take into account changes in plan qualification requirements, regulations, revenue rulings and other guidance.

The IRS has provided a red-lined version that shows the changes it has made to the version it prepared in October 2011. The changes made since 2011 include the following.

Under Revenue Procedure (Rev. Proc.) 2017-41, a pre-approved plan can use either a single plan document or a basic plan document with an adoption agreement. This LRM reflects the basic plan document with an adoption agreement, but recognizes that a single plan document is also acceptable.

A notation that plan provisions are arranged in three parts. Part I contains provisions generally applicable to all plans, Part II contains provisions applicable to standardized plans and Part III contains those applicable to nonstandardized plans.

The new version notes that the provisions of Section 5.16 of Rev. Proc. 2017-41, which (1) identifies certain plan provisions in Part I, (2) are otherwise applicable to all Pre-approved Plans, and (3) must be used for standardized plans, are in:

• LRM 6 (requiring a standardized plan to use full compensation);

• LRMs 24, 25, 28 and 29 (all of which generally require a standardized plan to provide for a contribution allocation for each participant who either completes more than 500 hours of service during the plan year or is employed on the last day of the plan year);

• LRM 50 (a standardized plan must make all optional benefit forms currently available to non-highly compensated employees); and

• LRM 83 (a standardized plan must credit all service with predecessor employers or by granting credit for any prior service performed that meets the safe harbor contained in Treas. Reg. § 1.401(a)(4)-5(a)(3).)

Certain provisions of the LRMs may be modified for nonstandarized plans. These provisions are in:

• LRMs 7, 12 and 13 (sections that contain sample plan language that may be omitted in a nonstandardized plan that precludes participation by self-employed individuals); LRM 22 (a nonstandardized plan can utilize the one-year holdout rule of Internal Revenue Code Section 410(a)(5)(C)); and LRMs 24, 25, 28 and 29 (all of which provide that a nonstandardized plan can generally provide an option to require a participant to be employed on the last day of the plan year and/or complete up to 1,000 hours of service during the plan year as a condition to receive an employer contribution.)

• LRMs 24, 25, 28 and 29 (all of which provide that a nonstandardized plan can generally provide an option to require a participant to be employed on the last day of the plan year and/or complete up to 1,000 hours of service during the plan year as a condition to receive an employer contribution.)

A money purchase plan may be combined with a profit-sharing plan (with or without a qualified CODA) in the same pre-approved plan document. A nonstandardized plan that contains employee stock ownership plan (ESOP) provisions may also include a qualified CODA.