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IRS Announces Issuance Date of Third Cycle Opinion Letters for Pre-Approved Plan Documents and Sets Related Deadlines

EBIA  

EBIA  

IRS Announcement 2020-7 (June 1, 2020)

Available at https://www.irs.gov/pub/irs-drop/a-20-07.pdf

The IRS has announced it will begin issuing opinion letters on June 30, 2020, for pre-approved defined contribution plans submitted during the on-cycle submission period for the third six-year remedial amendment cycle. (Under the IRS’s staggered remedial amendment system as modified by Rev. Proc. 2017-41, providers of pre-approved plan documents can apply for a new opinion letter every six years (see our Checkpoint article). On-cycle submissions for the third cycle were permitted from October 2, 2017, through December 31, 2018, and were required to meet the qualification requirements on the IRS’s 2017 Cumulative List (see our Checkpoint article).) Following issuance of the opinion letters, employers eligible for the six-year remedial amendment cycle will have until July 31, 2022, to adopt their provider’s newly approved plan document.

The announcement also states that beginning August 1, 2020, and ending July 31, 2022, the IRS will accept applications for individual determination letters from eligible employers that have adopted a pre-approved plan document. The rules for determining whether an adopting employer is eligible to apply for a determination are set out in Revenue Procedure 2020-4 (see our Checkpoint article).

EBIA Comment: Adopting employers of pre-approved plans and their advisors should carefully review their provider’s document to be certain that they understand its terms, and that the terms remain consistent with the employer’s expectations and the plan’s administration. While the announcement sets a window for employers to apply for individual determination letters, eligibility to make such submissions is limited, and may depend on factors such as the type of plan, the type and degree of modifications made to the pre-approved document, and whether the plan has previously received a favorable determination letter. For more information, see EBIA’s 401(k) Plans manual at Sections XXVII.G (“Extended Remedial Amendment Periods”), XXVII.K (“Adopting a Pre-Approved Plan”), and XXVII.L (“Pre-Approved Plan: Opinion Letter Program”).

Contributing Editors: EBIA Staff.

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