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Milo Atlas: Hi. I am Milo Atlas.

Thanks for attending this webcast on the Pre-Approved Plans Opinion Letter Program.

Before we begin, I have a few announcements.

The information contained in this webcast is current as of today, October 18th, 2017, and should not be considered official guidance.

This webcast was recorded and is maintained in accordance with federal recordkeeping laws.

We are not offering a certificate of completion for watching this presentation, and it will, therefore, not be eligible to request continuing education credits.

If you have any questions after watching this presentation, you can e-mail them to

We´ll use your e-mails to help us determine future webcast topics and update the information on, but won´t be providing individual responses.

I would like to introduce myself.

I am Milo Atlas, one of the Pre-Approved Plans Coordinators for the IRS, Employee Plans.

My office is in Cincinnati, Ohio.

I have worked in the Pre-approved Plans Program for over 20 years, initially in the capacity of a full-time technician and as a coordinator for the past 10 years.

I am joined today by Angelo Noe.

Angelo Noe: Thanks, Milo.

Hi. I am Angelo Noe, and I am also a coordinator for the IRS, Employee Plans pre-approved plans program.

I am also located in the Cincinnati office.

I have worked with pre-approved plans for almost 20 years and served as a coordinator for the last 17 years.

I have also done some work in the determination letter function and the EP exam function.

Now, back to you, Milo.

Milo Atlas: Thanks, Angelo.

The IRS issued Revenue Procedure 2017-41 on June 30th, 2017, which contains various changes to the 401(a)

pre-approved plans program.

Let me first address the issue of why the IRS Employee Plans made changes to the Pre-approved Program.

Revenue Procedure 2016-37 eliminated the 5-year cycle system for determination letters for individually designed retirement plans.

In response to Revenue Procedure 2016-37, we received a lot of comments on changes to the Determination Letter Program and about the Pre-approved Plans Program from the practitioner community.

We received comments from a number of sources, some of which included the American Society of Pension Professionals -- ASPPA -- , the Advisory Committee on Tax-Exempt and Government Entities -- ACT -- and other members of the practitioner community.

The recurring element in these comments about the Pre-approved Plans Program was that it needed to be more flexible.

Revenue Procedure 2017-41 is designed to meet this need.

The changes covered in Revenue Procedure 2017-41 are effective for the third and subsequent cycles.

Keep in mind that the initial 1-year submission period for pre-approved defined contribution plans runs from October 2nd, 2017 to October 1st, 2018.

Some providers have already submitted their documents.

While our reviews will not begin until later in the process, we would appreciate you not waiting until the end of the submission period, as we have limited clerical staff to process the user fees and establish cases on our computer system.

So, we encourage you to not wait until the deadline, and instead, submit early if you can.

Many of you may be involved in pre-approved plan work as document providers or third-party administrators and are quite familiar with the terms "master," "prototype," and "volume submitter." These terms still validly depict submissions processed under the second cycle for defined contribution plans and defined benefit plans filed under the Pension Protection Act, PPA for short.

For the third cycle, however, these terms have been replaced with the umbrella term "pre-approved plan." There has also been a change to how we identify our approval letters.

For the second-cycle PPA filings, the approval letter for a master or prototype plan is called an "opinion letter," while the approval letter for a volume submitter is called an "advisory letter." For the third-cycle filings, however, all approval letters will be called "opinion letters." A pre-approved plan falls under one of two categories.

A standardized plan must be a safe-harbor plan.

This is not different from the second-cycle submissions.

The concept of standardized plans was retained so that employers can use a pure safe-harbor plan document.

For example, total compensation must be used for allocations in a defined-contribution plan, -- other than a cash or deferred arrangement or CODA portion -- , or benefits, in the case of a defined benefit plan.

Keep in mind that defined contribution employee stock ownership plans and defined benefit cash balance plans cannot be standardized plans, but they are permitted under a non-standardized plan.

A non-standardized plan essentially stands in the shoes of what the volume submitter plan accomplished in the second-cycle submissions.

From our experience from reviewing volume-submitter plans, we´ve noticed they typically contained safe-harbor and non-safe-harbor alternatives.

We would expect that most providers will include safe-harbor provisions as an option, as well as non-safe-harbor provisions based on the need to accommodate a wide variety of clients.

For example, a provider of a non-standardized plan will likely include a safe-harbor formula for allocations or benefits.

A pre-approved plan can be designed as an adoption agreement with a basic plan document or a single document, which some providers refer to as a "contract-style document." In the second-cycle filings, master and prototype plans were required to use an adoption-agreement format with a basic-plan document while volume submitter filings had a choice of using the adoption agreement or the single document approach.

Here, again, we listened to the practitioner community and allowed for this additional flexibility.

Note that our List of Required Modifications, commonly referred to as "LRMs" , which contain language that may be used for drafting a pre-approved plan, are designed with an adoption agreement format.

And while they contain suggested language, there is nothing hindering a provider from using a single document format and wrapping the various choices into a single document.

It´s more a matter of style preferred by the drafter.

And now, Angelo will continue.

Angelo Noe: Thank you, Milo.

I would now like to talk about the trust or custodial account agreement portion of a pre-approved plan.

Beginning with the third cycle, this must be a separate document.

In other words, it can no longer be embedded into the same document as the plan.

Additionally, it can no longer be submitted to the IRS for review and it cannot contain any provisions that conflict with those of the plan.

Every pre-approved plan must now contain a provision that the terms of the plan will govern in the event of any conflict between the terms of the plan and those of the trust.

You might want to look at provision number 81 of the revised October 2017 version of the defined contribution plan LRM.

So, what about employer modifications to a pre-approved plan?

How does that work?

The answer depends on whether we are talking about a standardized plan or a non-standardized plan.

Remember, as Milo explained earlier, there are only two types of pre-approved plans beginning with the third cycle and going forward.

There will only be standardized plans and non-standardized plans.

The standardized plan is like the old prototype plan, meaning the employer shouldn´t be making any changes to it.

The non-standardized plan is like the old volume submitter plan, meaning the employer can make minor changes to it.

Of course, generally, any change an employer makes to a non-standardized plan will cause the employer to lose all reliance on the opinion letter issued to the pre-approved plan.

To accommodate this situation, the IRS offers an employer the ability to file Form 5307 for the minor modifications and obtain its own determination letter for reliance.

Form 5307 must be filed during the announced 2-year employer restatement window for the particular defined contribution or defined benefit 6-year cycle.

Form 5307 filing will not be subject to the rule that it can only be filed for an initial plan or a terminating plan.

Let´s talk about standardized plans for a few minutes.

As I said earlier, an employer adopting a standardized plan shouldn´t be making any changes to it.

Assuming the employer has adopted the plan properly, the employer can rely on the opinion letter in the same way as a determination letter, that the form of its plan satisfies most of the qualification requirements, including Internal Revenue Code Sections 401(a)(4)

and 410(b).

One of the few areas in which an employer adopting a standardized plan can´t rely on the opinion letter is the situation where the employer maintains multiple plans covering some of the same participants.

In this situation, the employer won´t have reliance on the opinion letter, but the form of its plan satisfies the limits of Internal Revenue Code Section 415 and the top-heavy requirements of Internal Revenue Code Section 416.

To remedy this situation, the IRS allows the employer to file its standardized plan or a determination letter using Form 5307 to obtain reliance on the terms of its plan, explaining how the requirements of these two Internal Revenue Code sections will be satisfied between the multiple plans.

Again, Form 5307 must be filed during the applicable announced 2-year window.

I would now like to move on to some other changes Revenue Procedure 2017-41 made to the pre-approved plans program.

Beginning with the third cycle, a pre-approved plan may now be drafted for use as a non-electing church plan.

This must be a separate document.

In other words, adoption agreement and basic plan document, or a single document, and separate submission with applicable user fee, be drafted for use as an Employee Stock Ownership Plan (or ESOP) with a 401(k) feature.

Only a non-standardized plan can be drafted as an ESOP with or without a 401(k) feature, and if the ESOP is drafted with a 401(k) feature, an employer will not be permitted to adopt the 401(k) feature by itself, be drafted as a 401(k) plan with both safe-harbor and non-safe-harbor hardship distribution provisions.

Only a non-standardized plan can be drafted this way, and the non-safe-harbor hardship provisions must be subject to non-discriminatory and objective criteria, be drafted as a cash balance plan with the interest crediting rate being equal to the actual rate of return on plan assets.

Only a non-standardized plan can be drafted as a cash balance plan, and the actual rate of return interest crediting rate must be determined from the aggregate plan assets and not a subset of plan assets, be drafted with one adoption agreement or single document plan, including a money purchase plan along with a profit sharing and/or 401(k) plan.

Thus, where this is done, an employer could sign one document to establish two plans within the meaning of Internal Revenue Code Section 414(l), a money purchase plan and a profit sharing 401(k) plan which would also require the filing of two Form 5500 Series returns.

Before concluding this webcast, I would also like to point out a couple of miscellaneous changes to the Program made by the Revenue Procedure.

In the past, volume submitter plans were given the option to include a provider power to amend provision in them.

Beginning with the third cycle, all pre-approved plans, whether standardized or non-standardized, must include a provider power to amend provision in them.

Additionally, in the past, only master and prototype mass submitters could submit minor modifier applicants.

Beginning with the third cycle, all mass submitters can submit minor modifier applicants.

This concludes this webcast.

On the last slide of the PowerPoint for this webcast, we´ve included some useful links to pages on which discuss the Pre-approved Plans Program.

Thank you for watching this webcast.