IRS Expands Pre-Approved Plans Program

Cash balance plans and ESOPs can now be submitted for an approval letter from the IRS.

In Revenue Procedure 2015-36, the Internal Revenue Service (IRS) expands its pre-approved plans program to include defined benefit plans with cash balance plan features and defined contribution plans with employee stock ownership plan (ESOP) features.

An entity wishing to submit a master and prototype (M&P) or volume submitter (VS) basic plan needs to represent to the IRS that it has at least 15 employer clients that will adopt the plan. If submitting two or more basic plan documents, the entity must represent to the IRS that it has at least 30 employer clients in the aggregate, each of which is expected to adopt at least one of the sponsor’s basic plan documents.

The Revenue Procedure sets forth additional provisions required by M&P ESOPs and cash balance plans, and modifies prior rules with regard to the eligibility of employees to participate in an ESOP.

Opinion letters will not be issued by the IRS for multiemployer plans, union plans, stock bonus plans other than ESOPs, ESOPs that are a combination of a stock bonus plan and a money purchase plan, and ESOPs that provide for the holding of preferred employer stock. Opinion letters also will not be issued for hybrid plans that contain certain features.

The IRS previously announced its expectation to modify Revenue Procedure 2011-49 to expand the preapproved program to include cash balance plans and ESOPs, and that tools would be available before June 30 to assist plan sponsors in drafting these plans.

Revenue Procedure 2015-36 also extends to October 30, 2015, the deadline for submitting on-cycle applications for opinion and advisory letters for pre-approved defined benefit plans for the plans’ second six-year remedial amendment cycle. Text of the Revenue Procedure is here.