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IRS Modifies Procedures for Issuing Opinion and Advisory Letters in Revenue Procedure 2015-36 and Issues LRMs for ESOPs and Cash Balance Plans
Practical Law Legal Update 5-616-3696 (Approx. 5 pages)
IRS Modifies Procedures for Issuing Opinion and Advisory Letters in Revenue Procedure 2015-36 and Issues LRMs for ESOPs and Cash Balance Plans
by Practical Law Employee Benefits & Executive Compensation
| Published on 10 Jun 2015 • USA (National/Federal) |
The Internal Revenue Service (IRS) issued Revenue Procedure 2015-36, setting forth the modified procedures for issuing opinion and advisory letters regarding the acceptability of the form of master and prototype (M&P) and volume submitter (VS) plans (together, pre-approved plans). The IRS also issued a listing of required modifications (LRMs) for employee stock ownership plans (ESOPs) and cash balance plans.
On June 8, 2015, the Internal Revenue Service (IRS) issued Revenue Procedure 2015-36, which modifies and supersedes Revenue Procedure 2011-49 (see Legal Update, IRS Establishes New Rules For Pre-approved Plans), updating the procedures for issuing opinion and advisory letters regarding the acceptability of the form of master and prototype (M&P) and volume submitter (VS) plans (together, pre-approved plans) (see Practice Note, Pre-approved Plans: Design Choices, Tax-qualification Rules and Best Practices: Master and Prototype (M&P) Plans and Volume Submitter (VS) Plans). This revenue procedure makes various changes to the program, including:
- Extending the deadline for submitting on-cycle applications for opinion and advisory letters for pre-approved defined benefit plans for a plan's second six-year remedial amendment cycle to October 30, 2015, which was previously scheduled to expire on June 30, 2015 (see Legal Update, IRS Announcement 2014-41 Extends Deadline to Submit Opinion and Advisory Letter Applications for Pre-approved Plans).
- Expanding the pre-approved plan program to include employee stock ownership plans (ESOPs) and cash balance plans, which were not included under Revenue Procedure 2011-49.
Revenue Procedure 2015-36 is effective June 8, 2015.
In addition, the IRS issued a new listing of required modifications (LRM) for ESOPs and a new LRM for cash balance plans, which contain sample plan provisions for pre-approved plans intending to satisfy the requirements under the Code.
Changes to Revenue Procedure 2011-49
- Reduces the number of employers necessary to qualify as a sponsor or VS practitioner from 30 to 15. It further provides that if a sponsor or VS practitioner is requesting an opinion or advisory letter for more than one basic plan document the sponsor or VS practitioner must represent that it has a total of at least 30 employer-clients that are each expected to adopt at least one of the sponsor's or VS practitioner's basic plan documents.
- Sets forth additional provisions required by M&P and VS ESOPs and cash balance plans.
- Allows sponsors to request opinion letters for ESOPs and cash balance plans and specifies when opinion letters will not be issued for ESOPs and cash balance plans.
- Allows VS practitioners to request advisory letters for ESOPs and cash balance plans and specifies when advisory letters will not be issued for ESOPs and cash balance plans.
- Eliminates the requirement that requests for opinion letters for defined benefit plans containing integrated and nonintegrated features must be submitted as separate filings.
- Allows VS plan submissions to contain up to ten related trusts for approval for each basic plan document without requiring an additional user fee.
In addition, Revenue Procedure 2015-36:
- Makes the qualification requirements for VS mass submitters consistent with those of M&P mass submitters.
- Modifies the scope of an employer's reliance on an opinion or advisory letter pursuant to the changes to the determination letter program in Announcement 2011-82 (see Legal Update, IRS Issues Announcement 2011-82 Outlining Changes to the Employee Plans Determination Letter Program).
- Extends the deadline to submit on-cycle applications for opinion and advisory letters for pre-approved defined benefit plans for a plan's second six-year remedial amendment cycle from June 30, 2015 to October 30, 2015.
Practical Implications
Sponsors, VS practitioners and employers should note the several important changes listed in Revenue Procedure 2015-36. In particular, interested parties should take note of the extension of the deadline to October 30, 2015 for submitting on-cycle applications for opinion and advisory letters for pre-approved defined benefit plans for the second six-year amendment cycle, which was otherwise scheduled to expire at the end of this month. In addition, the expansion of the pre-approved plan program to include cash balance plans and ESOPs should be welcome news to small and mid-size employers that sponsor these plans.