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IRS provides information regarding certain pre-approved defined contribution plans

· 5 minute read

· 5 minute read

In an Announcement (Ann. 2020-7, 2020-2 IRB), IRS has provided information regarding the issuance of opinion letters, a plan adoption deadline, and the opening of a determination letter program, with respect the third six-year cycle pre-approved defined contribution plans.

Background.   Rev Proc 2016-37, 2016-29 IRB 136, describes a staggered remedial amendment system for pre-approved plans that are qualified under Code Sec. 401(a). The revenue procedure provides separate six-year remedial amendment cycles for pre-approved defined benefit and pre-approved defined contribution plans.

Rev Proc 2017-41, 2017-29 IRB 92, sets forth the procedures for providers to obtain opinion letters for qualified pre-approved plans submitted with respect to the third (and subsequent) six-year remedial amendment cycles.

Rev Proc 2016-37 and Rev Proc 2017-41 provide that IRS will review plans that have been submitted during the applicable on-cycle submission period for a six-year remedial amendment cycle, taking into account the applicable Cumulative List of Changes in Plan Qualification Requirements that identifies changes in the qualification requirements of the Code. When the review process for a cycle of pre-approved plans has neared completion, IRS will announce the date by which an adopting employer must adopt a newly approved plan. Depending on the date the review process is completed, employers will have approximately two years to adopt the newly approved plans and, if eligible, to apply for an individual determination letter.

IRS provides information regarding third six-year cycle pre-approved defined contribution plans. IRS has now provided information on several subjects regarding the third six-year cycle pre-approved defined contribution plans.

IRS intends to issue opinion letters for pre-approved defined contribution plans that were restated for changes in plan qualification requirements listed in Notice 2017-37, 2017-29 IRB 89 and that were filed with IRS during the submission period for the third six-year remedial amendment cycle under Rev Proc 2016-37. The IRS expects to issue the letters on June 30, 2020, or, in some cases, as soon as possible thereafter.

The end of the third six-year remedial amendment cycle for pre-approved defined contribution plans is January 31, 2023. An adopting employer whose defined contribution plan is eligible for the six-year remedial amendment cycle and who adopts, by July 31, 2022, a newly approved plan, will be considered to have adopted the plan within the third six-year remedial amendment cycle.

An adopting employer of a pre-approved defined contribution plan may apply for an individual determination letter (if otherwise eligible) during the period beginning August 1, 2020, and ending July 31, 2022. IRS refers taxpayers to Rev Proc 2020-4, 2020-1 IRB 148, for additional information regarding determination letter application procedures.

Effective date. The Announcement is effective as of June 1, 2020.

To continue your research on the remedial amendment cycle, see FTC 2d/FIN ¶ H-8761 et seq.; United States Tax Reporter ¶ 4014.08.


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