['Employee Benefits', 'Retirement Benefits']
['Pension Protection Act (PPA)', 'Multiple Employer Welfare Arrangements (MEWA)']
05/16/2022
Copyright 2024 J. J. Keller & Associate, Inc. For re-use options please contact copyright@jjkeller.com or call 800-558-5011.
...
Sponsors of individually designed plans will submit applications for determination letters once every five years, under a staggered system of 5-year cycles (Cycles A - E). Revenue Procedure 2007-44 clarifies, modifies and supersedes Revenue Procedure 2005-66, in which the Service established this system of remedial amendment cycles. The IRS considers certain plan qualification requirements in its review of applications, as provided on the applicable Cumulative List. The Cumulative List in Notice 2007-3 is for sponsors of Cycle B single employer individually designed plans and plan sponsors of multiple employer plans in Cycle B to use in drafting their plans for the submission period ending on January 31, 2008.
Revenue Procedure 2007-44, section 4, provides details on the plan qualification requirements the IRS will consider in its review of applications with respect to a particular Cumulative List. It clarifies that, except as otherwise provided on the applicable Cumulative List, the IRS will not consider in its review any
- guidance issued or statutes enacted after the October 1 preceding the date the applicable Cumulative List is issued
- qualification requirements that become effective in a calendar year after the calendar year in which the submission period begins
- statutes first effective in the year in which the submission period begins where there is no guidance
There are special rules for the review of amendments to reflect the Pension Protection Act of 2006 (PPA '06). A plan sponsor of an individually designed plan has the option to amend a plan to include applicable PPA'06 provisions (except that the plan may not include qualification requirements that become effective in a calendar year after the calendar year in which the submission period begins with respect to the applicable Cumulative List). Applications for determination letters must identify the PPA '06 provisions and the applicable plan provisions in a cover letter or in an attachment. However, except with respect to terminating plans, the IRS will not consider provisions of PPA '06 in its review of determination letters for individually designed plans and multiple employer plans using the 2006 and 2007 Cumulative Lists and a determination letter may not be relied on with respect to any plan provision identified as reflecting PPA '06. See section 4 of Revenue Procedure 2007-44 for details.
Effective as of July 9, 2007, Form 6406, Short Form Application for Determination for Minor Amendment of Employee Benefit Plan, may not be used to apply for a determination letter. An application submitted with this form will no longer be accepted by the Service. In addition, individually designed plans must be restated when they are submitted for determination letters. See sections 12.03 and 12.04 of Revenue Procedure 2007-44.
Applicable Cycle
Generally, the cycle that applies to a plan depends on the last digit of the sponsoring employer's identification number. The submission period for individually designed plans is towards the end of their cycle. For example, the first 5-year period for plans falling into Cycle B ends on January 31, 2008, and the initial submission period also ends on that date. If you sponsor an individually designed plan, a chart is available so you can determine your cycle.
The following exceptions apply in determining a plan's cycle:
- Multiple employer plans (Cycle B)
- Multiemployer plans (Cycle D)
- Governmental plans (including multiemployer and multiple employer plans that are governmental) (Cycle C)
- Plan maintained by multiple members of a controlled group or an affiliated service group (other than multiemployer, multiple or governmental plans), or certain jointly trusteed single employer plans use last digit of EIN on Form 5500 to determine cycle
In addition, certain employers (other than multiple, multiemployer, governmental or jointly trusteed plans) may choose alternative elections to determine the cycle when more than one plan is maintained.
- Controlled groups or affiliated service groups can elect Cycle A
- A parent/subsidiary controlled group can elect Cycle A or use last digit of the parent's EIN. For a parent with no EIN, the EIN of the highest level entity in the US can be substituted.
- A centralized organization of related groups can elect to use the EIN of the centralized organization to determine the cycle.
Revenue Procedure 2007-44 provides rules for making these alternative elections (sec. 10) and also explains how to determine a plan's cycle when the cycle changes as a result of an event such as a merger, acquisition, etc (sec. 11).
User Fees
User fees increased for determination letter submissions and other submissions postmarked on or after July 1, 2006. See the user fee schedule for 2007 for further information. Form 8717 has been revised to reflect the user fee schedule effective for opinion, advisory and determination letter applications.
Plan Amendments
Although individually designed plans must be submitted for determination letters once every five years, and the IRS will only consider changes as noted in the applicable Cumulative List in its review, the list of changes does not extend the deadline for plans to be amended for interim or discretionary amendments. See section 5 of Revenue Procedure 2007-44 for discussion of these rules, and special deadlines for governmental and tax-exempt employers. However, under section 1107 of PPA '06, a plan sponsor is permitted to delay adopting a plan amendment pursuant to statutory provisions under PPA '06 or pursuant to any regulation issued under PPA '06 until the last day of the first plan year beginning on or after January 1, 2009 (January 1, 2011 in the case of governmental plans). This amendment deadline applies to both interim and discretionary amendments that are made pursuant to PPA '06 or any regulation issued under PPA '06.
Off-Cycle Filing
Generally the IRS will not review an off-cycle application submitted in a particular year until all on-cycle plans have been reviewed and processed. However, some types of off-cycle applications are given the same priority as on-cycle applications, including:
- Terminating plans
- New plans whose next regular on-cycle submission period ends at least two years after the end of the off-cycle submission period
- Service requires a submission
- Urgent business need (granted only in limited cases where exceptional circumstances exist)
If an employer, sponsor or practitioner has made a determination with respect to a particular plan based on a reasonable and good faith interpretation of Rev. Proc. 2005-66 that the plan is not a Cycle A plan, and under Rev. Proc. 2007-44 the plan is a Cycle A plan that should have been submitted to the IRS by January 31, 2007, then the employer, sponsor or practitioner has six months from July 9, 2007 to submit the plan to the IRS as an on-cycle Cycle A plan. It will be reviewed using the annual Cumulative List based on the date of the determination letter application.
New Plans
Revenue Procedure 2007-44 provides details on the remedial amendment period that applies to new individually designed plans, including rules extending the remedial amendment period to the end of the next applicable cycle if the remedial amendment period would be cut short due to the cycle submission date. See sections 5.03 and 14.04.
For additional information on individually designed plans, see the Determination Letter Resource Guide (currently being updated).
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['Employee Benefits', 'Retirement Benefits']
['Pension Protection Act (PPA)', 'Multiple Employer Welfare Arrangements (MEWA)']
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Copyright 2024 J. J. Keller & Associate, Inc. For re-use options please contact copyright@jjkeller.com or call 800-558-5011.