Major Changes to Qualified Retirement Plan Pre-Approved Document Program
The IRS released Revenue Procedure (Rev. Proc.) 2017-41 on June 30, 2017, describing its revamped pre-approved qualified retirement plan document program. It also provides the deadline for practitioners and financial organizations currently using pre‑approved defined
contribution documents to submit applications to the IRS for new opinion letters. The IRS has significantly simplified and liberalized its program in an ongoing effort to expand the use of pre‑approved plans.
The IRS also released Notice 2017-37 listing the retirement plan rule changes that may be included in the next pre-approved defined contribution plan documents restatement, referred to as the “Cycle Three” restatement.
The IRS was reviewing the retirement plan document approval process for a few years with a goal to simplify the procedures. It announced in 2016 that it was eliminating the determination letter program for individually-designed plan amendments and restatements, making it only available for initial qualification and plan termination. That became effective in 2017.
Now under Rev. Proc. 2017-41, the IRS, among other things, is combining the master and
prototype document program with the volume submitter program into one “opinion letter”
program, with both standardized and nonstandardized plan documents. By doing so, it is
eliminating the distinction between the master and prototype program and the volume submitter program. Ascensus’ ERISA experts have reviewed the new changes to the program and provide a summary of the significant changes in its June Washington Pulse.
The IRS created a six-year restatement cycle for pre-approved qualified retirement plan documents in 2005, as currently described in Rev. Proc. 2016-37. During these cycles, plan documents are rewritten for retirement plan rule changes, are reviewed and approved by the IRS for use by practitioners and financial organizations, and are restated and signed by employers. The latest pre‑approved plan six-year restatement cycle is best known as the PPA restatement, named for the Pension Protection Act of 2006.
The next six-year defined contribution cycle—Cycle Three—began on February 1, 2017, and is
scheduled to end on January 31, 2023. Procedures for Cycle Three would have required document drafters to update their plan documents and providers to have opinion letter applications prepared and submitted to the IRS by January 31, 2018. However, Rev. Proc. 2017-41 extends this deadline to October 1, 2018, to provide ample time for document drafters, practitioners, and financial organizations to react to the program changes.
Rev. Proc. 2017-41 is effective October 2, 2017, and provides welcome simplification and expansion to everyone involved with pre-approved plans. The Cycle Three delayed effective date provides document drafters (e.g., Ascensus) time to analyze and consider document design decisions. Once those decisions have been made, providers must work with their document drafters to prepare for the October 1, 2018, deadline.