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ARA Comments on Revised Pre-Approved Plan Document Program

The American Retirement Association has submitted a comment letter to the IRS asking for clarification on certain provisions of the new procedures for the pre-approved plan document program, recommending further enhancements to it and requesting a five-month extension of the submission deadline for Cycle 3 DC pre-approved plans.

The June 26 comment letter is in response to the IRS’ request for additional comments on the revisions that Revenue Procedure (Rev. Proc.) 2017-41 made to the program in June 2017.

The ARA says that it “greatly appreciates the direction IRS has taken” in issuing Rev. Proc. 2017-41, which it says “greatly enhances the pre-approved plan document program.” The ARA carefully analyzed the guidance, and has requested clarifications and further enhancements to the program. In addition, the ARA says that it is “an urgent matter” that the Cycle 3 DC submission deadline be extended from Oct. 1, 2018 to March 1, 2019.


The ARA says that “while Rev. Proc. 2017-41 provides considerable detail on matters related to the program,” nonetheless it seeks clarifications on certain items. “These clarifications are important for document providers to properly draft documents and advise adopting employers,” says the letter. Specifically, the ARA requests clarification on the following aspects of the revised pre-approved plan document program.

The extent to which an adopting employer maintains reliance on an opinion letter. The ARA requests clarification regarding the impact on reliance where an employer modifies the language of a standardized and non-standardized pre-approved plan. The letter says that the ARA “understands that an adopting employer may submit, under certain circumstances, a Form 5307 requesting a determination letter in the event a modification is made to a pre-approved plan.” However, says the letter, the ARA would like confirmation that if an adopting employer modifies the pre-approved plan, that employer maintains reliance on provisions that are not impacted by the modification, regardless of whether a Form 5307 is submitted. The ARA also suggests that adopting employers be allowed to modify any provision of the plan that does not affect plan qualification, without affecting reliance.

The ability for document providers to provide “collapsible” and “flexible” documents. The ARA recommends that the IRS discontinue the requirement that the entire adoption agreement be attached to a collapsed plan. “This requirement is not consistent with the ability to shorten and make more understandable a plan document for adopting employers,” the ARA argues. It further recommends “that the concept of collapsibility be expanded to the basic plan document for provisions not applicable in order to help facilitate understanding and compliance with the plan document.” The ARA also seeks clarification on the “flexible plan” approach available to mass submitters.

The ability to remove 401(k) and money purchase plan features from the adoption agreement, if not selected by the adopting employer. The ARA says that Rev. Proc. 2017-41 “is clear that a mass submitter may include a self-contained 401(k) arrangement that a Provider may include or delete,” but is “silent on the ability to do the same for the money purchase feature of a plan.” The ARA considers this ability important because it makes the plan more understandable to an adopting employer and administrators operating the plan by excluding unnecessary provisions that may confuse adopting employers and complicate compliance. “Excluding unnecessary provisions also allows for a shorter and less costly approach to providing written plan documents,” the letter also argues.

Use of the same adoption agreement for an adopting employer to select both profit sharing and money purchase features. The ARA says that it would like clarification regarding whether an adopting employer that maintains or wishes to maintain both a profit sharing plan and a money purchase plan may use the same adoption agreement to adopt both types of plans. The ARA adds that it assumes that for purposes of the Internal Revenue Code and Title I, that if such an arrangement is allowed, it still would mean the employer maintains two separate plans.

The execution of interim amendments by mass submitters on behalf of providers. The ARA says that it would like clarification as to whether word-for-word adopters of a mass submitter plan must formally adopt all interim amendments that the mass submitter adopts on behalf of the word-for-word adopters.

Changes and Enhancements

The ARA recommends changes and enhancements to the revised pre-approved plan document program relating to the following.

Interim Amendments

The ARA “believes that the good faith interim amendment rules can be simpler and more efficient for all parties involved.” To achieve that, the ARA suggests the following changes:

1. Apply the amendment principles for individually designed plans (Rev. Proc. 2016-37) to pre-approved plans.

2. If the IRS decides not to apply the principles discussed in item #1, it should specifically allow the use of the IRS Operational Compliance List as a basis for good-faith interim amendments for pre-approved plans. Furthermore, the ARA suggests, the IRS should provide sufficient time for document providers and mass submitters to draft and adopt the appropriate interim amendments. “At a minimum,” says the comment letter, “document providers and mass submitters should have at least until the close of the calendar year following the issuance of the Operational Compliance List.”

3. If the IRS does not adopt the approaches recommended in items #1 or #2, “it should provide a list of items that the IRS deems necessary within each interim amendment,” the comment letter suggests. The ARA also recommends that IRS provide sufficient time for document providers and mass submitters to draft and adopt the appropriate interim amendments.

Trust/custodial Provisions

The ARA says that it generally accepts the pre-approved plan document program’s revisions regarding trust/custodial provisions. However, it also recommends that IRS do the following.

1. Permit pre-approved plan documents to contain generic trust/custodial language as a separate section within the basic plan document (and not necessarily in a document separate from the rest of the plan).

2. Provide guidance on acceptable trust/custodial provisions.

3. Clarify that the trustee signature may continue to be included in the pre-approved plan document.

Submission of Form 5307

The ARA says that it “strongly recommends that the IRS accept Form 5307 beyond the end of the applicable restatement period and up to the time that an employer may adopt a plan for the next restatement cycle,” an approach it says “will further enhance plan sponsors’ movement to pre-approved plans.”

Extension of the Deadline for Cycle 3 DC Submissions to March 1, 2019

The ARA “strongly recommends that the IRS extend the submission deadline for Cycle 3 plans and applications to March 1, 2019.” The comment letter notes that “the October 1, 2018 deadline is fast approaching, and with the timing and scope of the LRMs and the Revenue Procedure, and the lack of the updated submission form, additional time is needed to properly complete these submissions.” The letter says that “for these reasons, ARA requests that immediate consideration be given to providing a five-month extension.”