Pension Protection Act Blog

In Announcement 2008-23, released on Friday, the IRS announced that:

1. The EGTRRA defined contribution prototype and volume submitter opinion/advisory letters will be issued March 31, 2008 for many plans. Some plans will have their opinion/advisory letters issued after March 31, 2008.

2. April 30, 2010, is the restatement deadline for plan sponsors using pre-approved defined contribution prototype and volume submitter plans to restate for EGTRRA.

3. May 1, 2008, is when the IRS will start accepting applications for individual determination letters submitted by plan sponsors using the new pre-approved EGTRRA defined contribution prototype and volume submitter plans.

4. Form 5307 is being revised to allow the form to be optically scanned. The new revised Form 5307 will be available soon. Applications filed on the current Form 5307, which was last revised in 2001, will continue to be accepted through Sept. 30, 2008.

The IRS also announced some important changes to when Form 5300 should be filed instead of Form 5307 by a plan using a prototype or volume submitter plan document, and which Cumulative List will be used to review a prototype or volume submitter plan document filed using Form 5300.

Generally, Form 5300 is used to file for an individual determination letter for an individually designed plan and Form 5307 is used to file for a determination letter for a plan using a pre-approved prototype or volume submitter plan document which has a valid opinion/advisory letter. In Announcement 2008-23, the IRS re-interates that an application for an individual determination letter on a pre-approved plan is to be filed on Form 5300 instead of Form 5307 where:

“1. the adopter of a prototype plan amends the basic plan document or adoption agreement, other than by choosing among options permitted under the plan or amending the plan in the manner described in sections 5.02 and 19.03 of Rev. Proc. 2005-16;

These are consistent with previous IRS guidance on the different standard applied when amending a pre-approved prototype compared to amending a volume submitter plan in a manner which makes the plan individually designed. The new information contained in Announcement 2008-23 on this point is that:

“Except as otherwise provided in this announcement, an application for an individual determination letter on a pre-approved plan that is filed on Form 5300 will be reviewed on the basis of the Cumulative List in effect when the application is filed. For example, a determination letter application filed on Form 5300 on May 1, 2008, will be reviewed on the basis of the 2007 Cumulative List (Notice 2007-94, 2007-51 I.R.B. 1179).”

Announcement 2008-23 then explains that “Except as otherwise provided in this announcement” applies only to a pre-approved plan filing for a determination letter using Form 5300 because the plan is a multiple employer volume submitter plan, or because the employer is requesting a determination regarding a partial termination, affiliated service group status or leased employees. A determination letter application filed on Form 5300 for these reasons will be reviewed on the basis of the 2004 Cumulative List.

A pre-approved prototype plan filing for a determination letter using Form 5300 because the plan was amended in a manner beyond choosing among options permitted under the plan will be reviewed on the basis of the Cumulative List in effect on the date the application is filed. A pre-approved volume submitter plan filing for a determination letter using Form 5300 because the adopter of the volume submitter plan made changes to the pre-approved plan that are “too extensive or complex or otherwise determined by the Service to be incompatible with the purposes of the volume submitter program”, will be reviewed on the basis of the Cumulative List in effect on the date the application is filed.

Announcement 2008-23 does not address what happens when such an amended prototype or volume submitter plan submits for an individual determination letter application using a plan document last updated for the 2004 Cumulative List, which is the Cumulative List in effect for the new EGTRRA defined contribution prototype and volume submitter plan documents about to be issued opinion/advisory letters by the IRS on March 31, 2008. The implication is that such a prototype or volume submitter plan filing for a determination letter application using a plan document last updated for the 2004 Cumulative List will be found to be deficient. I expect to see a more definitive statement from the IRS prior to the opening of the EGTRRA defined contribution determination letter program on May 1, 2008.

The other conclusion which can be drawn from this part of Announcement 2008-23 is that the IRS may have found a way to stop Form 5307 Roulette. Form 5307 Roulette is where an amended prototype or volume submitter plan is submitted to the IRS on Form 5307 even though the plan is a prototype which has been amended beyond the pre-approved options contained in the specimen plan, or the plan is a volume submitter plan which has been amended in a manner which is “too extensive or complex or otherwise determined by the Service to be incompatible with the purposes of the volume submitter program.” The theory behind Form 5307 Roulette is the plan sponsor bets that the IRS agent reviewing the application will let the determination letter application slide through, and will not request Form 5300 along with the higher user fee. Winning Form 5307 Roulette means the plan sponsor pays a $300 submission fee for Form 5307 instead of a $1,000 submission fee for Form 5300. In the past, losing at Form 5307 Roulette simply meant that the reviewing agent would request the additional fee and a completed copy of Form 5300. After Announcement 2008-23, losing at Form 5307 Roulette could mean that the reviewing agent requests the additional fee, a completed copy of Form 5300, and a copy of the plan document restated for the Cumulative List in effect when the determination letter application was submitted.

Technorati Tags: Pension Protection Act, PPA, IRS, Announcement 2008-23, Cumulative List, Rev. Proc. 2005-16, Form 5307, Form 5300, determination letter, ERISA

Tweet This