>After reviewing comments on previous IRS releases about the future of program, in Announcement 2004-32, the IRS announced plans to implement a system of staggered remedial amendment periods for individually designed plans. The system will be implemented initially to stagger the expiration of individually designed plans’ remedial amendment periods for the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), so that plan sponsorswill not have to submit determination letter applications more frequently than once every five years.
The IRS plans on implementing the system when it opens the EGTRRA determination letter program.
Also on the horizon is theimplementation of a system of six-year amendment/approval cycles for preapproved plans: master and prototype (M&P), ” off-the-shelf” documents that employers obtain from plan sponsors such as banks, brokers, insurance companies, lawyers or consultantsand volume submitter (VS),more customized documents usually obtained from lawyers or consultants. This would begin with the submission of these plans for EGTRRA opinion and advisory letters, the IRS said.
Under this proposal, in the first yearall pre-approved defined contribution plans would be required to be updated and submitted for approval. The IRS would process these applications in years two and three. Adopting employers would then have a fixed date by which to adopt the approved plans.
Then in the third year, the cycle begins for all pre-approved defined benefit plans, which would be required to be updated and submitted. The IRS would process these applications in years four and five and adopting employers would have to adopt the approved plans by the end of year seven.
To bring the plan full circle, the cycle would begin again in year seven, starting with defined contribution plans. A copy of this announcement can be found at www.irs.gov/pub/irs-drop/a-04-32.pdf .
Revenue Procedure Draft
>In Announcement 2004-33, the IRS invites comments on a draft revenue procedure that contains the IRS’ procedures for issuing opinion and advisory letters as to the acceptability of M&P and VS plans. Of particular note for plan sponsors are the principal changes outlined by the IRS:
- The draft revenue procedure allows adopting employers of nonstandardized defined contribution M&P plans to adopt an allocation formula that is designed to be cross-tested for nondiscrimination on the basis of equivalent benefits.
- The draft revenue procedure permits, but does not require, VS plans to include a provision that allows the VS practitioner to amend the plan on behalf of adopting employers for changes in the Internal Revenue Code.
Additionally, the draft revenue procedure makes changes to simplify and streamline the two programs.
A copy of the release is available at www.irs.gov/pub/irs-drop/a-04-33.pdf.