IRS Streamlines Opinion Letter Requests for DC Plans

February 18, 2005 ( - Internal Revenue Service (IRS) officials have announced that the IRS is now accepting applications for opinion and advisory letters for certain defined contribution plans.

In a February 17 special editions of the IRS   Employee Plans Newsnewsletter, officials said the affected programs are pre-approved plans – Master & Prototype (M&P) and Volume Submitter (VS) plans – that take into account the requirements of EGTRRA, and other changes in qualification requirements and guidance. Plans have until January 31, 2006 to submit letter requests.

According to the newsletter, the IRS will review plan language for statutory changes and other guidance reflected on the 2004 Cumulative List. After the pre-approved documents have been reviewed, the IRS will announce the deadline for timely adoption by employers. The IRS officials said they will take applications for determination letters for individually designed plans beginning on February 1, 2006 and applications for letters for pre-approved defined benefit plans beginning on February 1, 2007.

The tax agency officials said they will soon issue another revenue procedure describing the new six-year remedial amendment cycle for pre-approved plans and the staggered five-year remedial amendment cycle for individually designed plans. So sponsors and practitioners of pre-approved plans will only have to submit applications for opinion or advisory letters once every six years even though amendments to the plans may be required before that time.

There are also new streamlined procedures for both VS and M&P plans. Before, the M&P and VS procedures for submitting applications for opinion and advisory letters were described separately. The IRS has consolidated some of the application procedures.

Change Highlights

According to the IRS, the highlights of the changes include:

  • simplifying the structure of the M&P program.For example, the M&P program now includes only two categories of plans – standardized and non-standardized. Non-standardized safe harbor plans and paired standardized plans are discontinued as separate categories.
  • simplifying procedures: Applications for opinion and advisory letters will now be sent to the same address in Cincinnati, Ohio and soon, will be submitted on the same forms. Also, the IRS will begin issuing interim emails for the convenience of sponsors, practitioners and mass submitters, before the letters are issued, stating that IRS review has been completed.
  • expanding the scope of the VS and M&P programs: More practitioners can qualify as VSpractitioners because the IRS has lowered the threshold, in some cases, for the number of employers/ clients that a VS practitioner must have (from 30 to 10) that are reasonably expected to adopt a money purchase pension plan. In addition, more types of plans can now qualify as VS plans, including certain plans with non safe-harbor hardship distributions under section 401(k) and defined benefit plans with employee contributions.
  • reliance and remedial amendment cycle changes for adopting employers: VS practitionersmay now amend the plan on behalf of adopting employers. Also, an adopting employer may now make certain changes to a plan without affecting its reliance, such as correcting typographical errors and cross-references and adopting certain model, sample or good faith amendments.

The agency said it is also revising forms to streamline the submission procedures. Forms 4461, 4461-A and 4461-B were used solely to request opinion letters for the various types of M&P plans. Due to the consolidation of some of the M&P and VS procedures and the need to standardize the submission process for the VS plans, the forms are being revised to accommodate advisory letter requests for VS plans as well as opinion letter requests for M&P plans. The IRS also intends to update Form 8717, relating to user fees, to apply to an opinion letter request.

In the meantime, VS practitioners and M&P sponsors who submit their pre-approved plans for approval should follow the existing procedures. In other words, VS practitioners should submit their VS specimen plans for approval using a cover letter and M&P sponsors should submit their M&P plans for approval using the current versions of the Form 4461 series. Until Form 8717 is revised, an M&P request should continue to include the applicable user fee with the submission.

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