IRS PROVIDES FOR NEW CATEGORY OF PROTOTYPE PENSION PLAN.

Rev. Proc. 93-10

SECTION 1. PURPOSE

01 This revenue procedure supplements the Service's procedures regarding master and prototype and regional prototype plans (collectively referred to in this procedure as prototype plans) in Rev. Proc. 89-9, 1989-1 C.B. 780, and Rev. Proc. 89-13, 1989-1 C.B. 801, respectively, to create a new category of prototype plan, the "nonstandardized safe harbor plan." This new category will enable employers to adopt prototype plans that retain the essential flexibility of nonstandardized plans but make it easier for employers to be sure that certain nondiscrimination requirements of the Internal Revenue Code are satisfied.

02 This revenue procedure also modifies Rev. Proc. 91-66, 1991-2 C.B. 870, so that employers who adopt nonstandardized safe harbor plans will be subject to simpler procedures when requesting determination letters.

SEC. 2. BACKGROUND

01 Rev. Proc. 89-9, as modified by Rev. Proc. 90-21, 1990-1 C.B. 499, Rev. Proc. 91-66, 1991-2 C.B. 870, Rev. Proc. 92-41, 1992-21 I.R.B. 23, and Rev. Proc. 93-9, 1993-2 I.R.B. 20, sets forth the procedures of the Service on the issuance of opinion letters regarding the acceptability of the form of master and prototype plans that have been amended for the Tax Reform Act of 1986 (TRA).

02 Rev. Proc. 89-13, as modified by Rev. Proc. 90-21, Rev. Proc. 91-66, Rev. Proc. 92-41, and Rev. Proc. 93-9, sets forth the procedures of the Service on the issuance of notification letters regarding the acceptability of the form of regional prototype plans.

03 Under Rev. Proc. 89-9 and Rev. Proc. 89-13, prototype plan sponsors may request opinion and notification letters for standardized plans and "nonstandardized" plans. Standardized plans must satisfy, in addition to the general requirements applicable to all prototype plans, other requirements, including the following: the plan must benefit all employees other than those excludable under section 410(a)(1) or (b)(3) of the Code; contributions or benefits under the plan must be based on total compensation within the meaning of section 414(s); and the plan must meet the uniformity requirements and one of the design based safe harbors described in final regulations under section 401(a)(4). Nonstandardized plans are not subject to these requirements (although nonstandardized target benefit plans must satisfy the target benefit safe harbor). However, they must at least offer adopting employers the option of electing provisions that will meet design based safe harbor requirements.

04 In accordance with regulations under section 401(a)(4) of the Code, a nonstandardized plan of an adopting employer who fails to elect plan provisions meeting the uniformity and design based safe harbor requirements must be periodically tested using employee demographic data to determine that the plan is not discriminatory with respect to the amount of contributions or benefits under the plan. This testing is waived if the plan satisfies uniformity and a design based safe harbor. (The plan may, however, have to be tested with respect to whether it is basing contributions or benefits on a nondiscriminatory definition of compensation, or for other reasons.) Moreover, at the present time, an adopter of a nonstandardized plan who requests a favorable determination letter that will provide reliance with respect to the requirements of section 401(a)(4) of the Code must, under Rev. Proc. 91-66, identify the specific design based safe harbor that the plan satisfies as well as the location of those plan provisions that meet the safe harbor.

SEC. 3. NONSTANDARDIZED SAFE HARBOR PLANS

01 In order to provide a means for employers to adopt nonstandardized prototype plans clearly recognizable as offering employers the assurance that they will not be subject to periodic nondiscrimination testing of the amounts of contributions or benefits, the Service will issue opinion and notification letters for nonstandardized safe harbor prototype plans, as they are described in this section. These letters will state that the plan is a nonstandardized safe harbor plan that meets the requirements of this section.

02 A plan is a nonstandardized safe harbor plan if, regardless of what elections the employer makes in the adoption agreement:

1 The plan will meet all the general requirements that apply to nonstandardized plans under Rev. Proc. 89-9 or Rev. Proc. 89-13 (each as modified), as applicable.

2 Under the plan, all benefits, rights, and features (other than those, if any, that have been prospectively eliminated) will be currently available to all employees under the plan.

3 In the case of a defined contribution plan, other than a target benefit plan or a plan subject to the exclusive tests in section 1.401(a)(4)-2(d) of the regulations (relating to section 401(k) and section 401(m) plans), the plan will satisfy the uniformity and safe harbor allocation formula requirements of section 1.401(a)(4)-2(b), without taking into account section 1.401(a)(4)- 2(b)(4) (relating to the safe harbor for uniform points plans).

4 In the case of a defined contribution plan that includes target benefit provisions, the plan will satisfy the uniformity and safe harbor requirements of section 1.401(a)(4)-8(b)(3(i) of the regulations as well as the additional rules in section 1.401(a)(4)- 8(b)(3)(ii) through (vi).

5 In the case of a defined benefit plan, the plan will satisfy the uniformity requirements in section 1.401(a)(4)-3(b)(2) of the regulations and one of the safe harbors in section 1.401(a)(4)- 3(b)(3), (4), (5), or (7).

03 A plan will not fail to be a nonstandardized safe harbor plan merely because the plan provides past service credit that fails to meet the safe harbor in section 1.401(a)(4)-5(a)(5) of the regulations, uses a definition of compensation for determining contributions or benefits that must be tested under section 1.414(s)- 1(d) of the regulations, or does not cover all nonexcludable employees.

SEC. 4. INSTRUCTIONS TO SPONSORS OF NONSTANDARDIZED SAFE HARBOR PLANS

01 In order to receive an opinion or notification letter that a nonstandardized plan meets the requirements of section 3 of this revenue procedure, the prototype sponsor must comply with all requirements of Rev. Proc. 89-9 or Rev. Proc. 89-13 relating to applications for nonstandardized plans but must write "Nonstandardized Safe Harbor plan" at the top margin of the form 4461 that is submitted with the application.

02 A prototype sponsor may sponsor a nonstandardized safe harbor plan by submitting a new basic plan document and adoption agreement, a new adoption agreement that relates to a previously approved basic plan document, or a previously approved adoption agreement amended to conform to the requirements of section 3 of this revenue procedure. Moreover, the same basic plan document may be used in conjunction with standardized, nonstandardized, and nonstandardized safe harbor plans. In any case, however, a plan will not be a nonstandardized safe harbor plan unless the terms of the plan (that is, the terms of the basic plan document and/or adoption agreement) are such as to preclude the possibility of the employer making elections that would cause the plan to fail to meet the requirements of section 3.

03 The user fee for an opinion or notification letter will not be applied in the case where a sponsor is amending a previously approved prototype plan only to the extent necessary to convert it into a nonstandardized safe harbor plan. In such a case, the sponsor should explain in a cover letter that the plan is being amended only to the extent necessary to meet the requirements of section 3 of this procedure and no user fee should be submitted with the application. The sponsor should also, in this case, write "No User Fee Per Rev. Proc. 93-10" on the top of the application form.

SEC. 5. INSTRUCTIONS TO EMPLOYERS APPLYING FOR DETERMINATION LETTERS FOR NONSTANDARDIZED SAFE HARBOR PLANS

01 At the present time, an employer who has adopted a nonstandardized plan must meet the eligibility requirements of section 3 of Rev. Proc. 91-66 in order to obtain a favorable determination letter that provides reliance with respect to the requirements of TRA, including the requirements of the final regulations under section 401(a)(4) of the Code. Also, an employer may obtain a TRA determination letter under Rev. Proc. 92-60, 1992-30 I.R.B. 30; however, unless the plan benefits only nonhighly compensated employees, the determination letter will not provide reliance with respect to the nondiscrimination requirements of the Code.

02 Until further notice, the procedures in Rev. Proc. 91-66 and Rev. Proc. 92-60 (as well as the Service's general determination letter procedures in Rev. Proc. 93-6, 1993-1 I.R.B. 135) will also apply to determination letter applications filed with respect to nonstandardized safe harbor plans. Thus, an employer will be able to obtain a favorable determination letter that provides reliance with respect to the requirements of the final regulations under section 401(a)(4) for a nonstandardized safe harbor plan that benefits any highly compensated employee only if the eligibility conditions of section 3 of Rev. Proc. 91-66 are met. However, in the case of an application under Rev. Proc. 91-66 relating to a nonstandardized safe harbor plan for which an opinion or notification letter has been issued to the sponsor under this revenue procedure, the application instructions in Rev. Proc. 91-66 are modified as provided in subsection .03, below.

03 In lieu of the certification and demonstrations required to be submitted under sections 5.02, 5.03, and 5.07 of Rev. Proc. 91-66, the following are to be submitted with an application relating to a nonstandardized safe harbor plan:

1 A designation and checklist (in the format of the Appendix to this revenue procedure -- Designation and Checklist for Nonstandardized Safe Harbor Plans) in which the applicant indicates the plan is a nonstandardized safe harbor plan as evidenced by a favorable opinion or notification letter and identifies the demonstrations required to be submitted with the application.

2 A demonstration that the plan satisfies the requirements of section 401(a)(26) of the Code, using a format like that in Demonstration 1 in Appendix A of Rev. Proc. 91-66.

3 If the plan uses a definition of compensation in determining contributions or benefits that is required to be tested for nondiscrimination under section 1.414(s)-1(d) of the regulations, a demonstration that the test is satisfied, using a format like that in Demonstration 3 in Appendix A of Rev. Proc. 91-66.

4 If the plan provides for past service credit that does not meet the requirements of the safe harbor in section 1.401(a)(4)- 5(a)(5) of the regulations, a demonstration that the plan does not grant past service credit with the effect of discriminating significantly in favor of highly compensated employees.

04 A favorable determination letter that is issued for a nonstandardized safe harbor plan under Rev. Proc. 91-66 as herein modified may be relied on to the extent described in section 4 of Rev. Proc. 91-66 except as follows:

1 The letter may not be relied on with regard to whether the plan meets the requirements of sections 401(a)(4) and 410(b) with respect to former employees.

2 The letter may not be relied on with regard to whether the plan is nondiscriminatory with respect to the current availability of benefits, rights, and features that have been prospectively eliminated.

SEC. 6. EXTENDED RELIANCE

The extended reliance provisions of section 17.03 of Rev. Proc. 89-13 and section 15.02 of Rev. Proc. 89-13 will also apply with respect to nonstandardized safe harbor plans that are submitted and approved under this revenue procedure if the following two additional requirements are met. First, the opinion or notification letter application under this procedure must be filed on or before September 30, 1993. Second, the application must employ a basic plan document that was submitted to the Service under TRA before April 1, 1991, and was approved.

SEC. 7. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 89-9 and Rev. Proc. 89-13 are supplemented. Rev. Proc. 91-66 is modified as provided in section 5.

SEC. 8. EFFECTIVE DATE

This revenue procedure is effective on February 1, 1993.

DRAFTING INFORMATION

The principal author of this revenue procedure is Susan Browning of the Employee Plans Technical and Actuarial Division. For further information regarding this revenue procedure, please contact the Employee Plans Technical and Actuarial Division's taxpayer assistance telephone service between the hours of 1:30 p.m. and 4 p.m. Eastern Time, Monday through Thursday by calling (202) 622-6074/6075/6076. (These telephone numbers are not toll-free numbers.)

APPENDIX DESIGNATION AND CHECKLIST FOR NONSTANDARDIZED SAFE HARBOR PLANS

By submitting this designation and checklist with your determination letter application, you are indicating that your plan is a nonstandardized safe harbor plan as described in section 3 of Rev. Proc. 93-10. The questions on this designation are designed to ensure that you submit a complete application.

     1. Have you included a copy of the opinion or notification