IRS OFFERS STREAMLINED METHOD FOR AMENDING QUALIFIED PLANS TO REFLECT FINAL REGULATIONS.

Rev. Proc. 92-41

SECTION 1. PURPOSE

This revenue procedure applies to sponsors of master and prototype (M & P), regional prototype and volume submitter specimen defined contribution plans which received favorable opinion, notification or advisory letters after January 1, 1990. It provides a simplified method to amend their plans to take advantage of the liberalized rules contained in the final regulations package under sections 401(k) and (m) of the Internal Revenue Code and the new definition of compensation under section 414(s) of the Code which is set out at section 1.415-2(d)(11)(i) of the Income Tax Regulations.

SEC. 2. BACKGROUND

01 Rev. Proc. 89-9, 1989-1 C.B. 780, permits sponsoring organizations (including mass submitters) to apply to the National Office of the Internal Revenue Service for opinion letters on M & P plans meeting the requirements of sections 401 and 403(a) of the Code as amended by the Tax Reform Act of 1986, Pub. L. 99-514, 1986-3 (Vol. 1) C.B. 1, and certain subsequent Code changes (collectively referred to as "TRA 86").

02 Rev. Proc. 89-13, 1989-1 C.B. 801, permits sponsors of regional prototype plans to apply to the key district office in the region containing the sponsor's principal place of business for a notification letter on whether the form of the plan satisfies sections 401 and 403(a) of the Code as amended by TRA 86. Mass submitters of regional prototypes apply to the National Office for a notification letter and then to key district offices on behalf of sponsors. In addition, sponsors are required to annually notify key district offices and employers of the status of their plans.

03 Announcement 89-107, 1989-36 I.R.B. 25, and Rev. Proc. 92-6, 1992-1 I.R.B. 105, permit sponsors of volume submitter specimen plans to apply to the key district office in which the sponsor qualifies under the program for an advisory letter on whether the form of the plan satisfies sections 401 and 403(a) of the Code as amended by TRA 86.

04 Rev. Proc. 90-17, 1990-1 C.B. 479, sets forth the user fees applicable to requests for opinion, notification and advisory letters.

05 Final regulations were issued in 1991 under sections 401(a)(30), 401(k), 401(m), 402(a), 402(g), 411, 414(s), 415, 416 and 4979 of the Code dealing with elective, employee, and matching contributions and compensation.

06 Plans which received letters under Rev. Proc. 89-9 or Rev. Proc. 89-13 or Announcement 89-107 prior to 1992 were approved based on standards which, in some respects, were modified by the final regulations described in the preceding subsection. In general, the final regulations allow for greater flexibility in drafting certain plan provisions. However, under the compensation regulations under section 414(s), the definition of compensation based on section 3121(a) of the Code (FICA) is no longer a safe harbor definition. A new safe harbor definition is provided, though, based on information required to be reported under sections 6041, 6051 and 6052 of the Code (6041/etc., compensation).

SEC. 3. OVERVIEW AND GENERAL INSTRUCTIONS

01 Generally, a sponsor wishing to amend a plan must comply with the instructions in Rev. Proc. 89-9, 89-13 or 92-6, as appropriate, and pay the user fee set forth in Rev. Proc. 90-17. Pursuant to this revenue procedure, sponsors may amend their plans for the subject matter listed in sections 4 and 5 and incur no user fee provided the requirements of these sections are met.

02 All identical adopters of M & P mass submitters' plans must adopt the plan as amended by the mass submitter and all regional prototype sponsors which utilize a plan of a regional prototype mass submitter must adopt the mass submitter's amended plan.

03 A new opinion, notification or advisory letter will be issued for plans amended in accordance with section 5, but not for the model compensation amendment described in section 4.01. Notice of any amendment must be provided by an adopting employer to interested parties in accordance with Part II of Rev. Proc. 92-6.

SEC. 4. MODEL COMPENSATION AMENDMENT

01 Sponsors who want to replace their current FICA definition of compensation with 6041/etc., compensation or to add the new definition as an additional option must adopt on a word-for-word basis the language in the appendix to this revenue procedure. No application to the Service is required, but M & P and regional prototype sponsors must inform all adopting employers of the change to their plans and copies of the amended plan must be sent to the Key District Directors in accordance with Rev. Procs. 89-9 and 89-13. Sponsors of volume submitter specimen plans must also send a copy of their amended plans to the appropriate Key District Directors. Volume submitter sponsors may only offer the amended specimen plan prospectively. Therefore, if an employer adopted a volume submitter's specimen plan prior to this amendment of the specimen plan and subsequently wishes to utilize the amended version of the specimen plan, a new determination letter application would have to be filed on its behalf under the regular volume submitter adopter filing procedures in order to obtain reliance that the plan, as amended, is qualified.

02 If a sponsor wants to use language different from that contained in the appendix, then application must be made to the Service under section 5 of this revenue procedure.

SEC. 5. LIMITED AMENDMENT PROCEDURE

01 An M & P sponsor or mass submitter must apply to the National Office of the Internal Revenue Service for an opinion or notification letter for amendments described in .05, below. Any such application will be handled on an expedited basis.

011 A sponsor of a regional prototype plan must apply the key district which issued the plan's notification letter. Only the first page of Form 4461 (for just the lead case, if an M & P mass submitter), with "User fee waiver -- Rev. Proc. 92-41" printed clearly on the top, should be submitted.

012 A mass submitter of a regional prototype plan amended in accordance with this section must also apply to the appropriate key district offices for notification letters on behalf of all regional prototype sponsors that utilize the amended plan. Such application should be made using Form 4461-B with "User fee waiver -- Rev. Proc. 92-41" clearly printed on the top for those sponsors which paid the user fee on the original plan and with a copy of the notification letter enclosed.

013 A sponsor of a volume submitter specimen plan must apply to the key district office (or offices) that issued the original advisory letter(s), a copy of which must be enclosed with the submission together with a cover letter that has "User fee waiver -- Rev. Proc. 92-41" printed clearly on the top. Such application should be addressed to the attention of the Volume Submitter Coordinator identified in the advisory letter.

02 A sponsor can amend for some or all of the items in .05, below, but all changes to the plan must be clearly indicated in a cover letter and in the plan, e.g., by underlining. (If convenient, only changed pages need be submitted, rather than the restated plan.) All applicants must certify that no changes other than those described in this section have been made. In addition, mass submitters must certify that all identical adopters and regional prototype sponsors that utilize the mass submitter's plan will adopt the plan as amended.

03 M & P and regional prototype sponsors must inform all adopting employers of the change to their plans and copies of the amended plan must be sent to the Key District Directors in accordance with Rev. Procs. 89-9 and 89-13. Sponsors of volume submitter plans must also send a copy of their amended plans to the appropriate Key District Directors. Sponsors of volume submitter plans may offer their amended specimen plan on only a prospective basis (see section 4.01).

04 All M & P, regional prototype and volume submitter plans submitted pursuant to this revenue procedure must be received by November 23, 1992. Plans submitted under this revenue procedure with amendments that go beyond those described in this section will be returned to the sponsor.

05 The amendments described in this section consist of the addition of provisions to:

(1) Add section 6041/etc., compensation, as defined in section 1.415-2(d)(11)(i) of the regulations, for any purposes under the plan. (However, see the instructions in section 4 of this revenue procedure where model language described in the appendix is used.)

(2) Modify safe harbor hardship criteria set forth at section 1.401(k)-1(d)(2)(iv) of the regulations.

(3) Permit elective deferrals which constitute excess annual additions to be distributed to the employee and not counted in the nondiscrimination test of section 401(k) of the Code. See section 1.415-6(b)(6)(iv) of the regulations.

(4) Calculate income or loss on excess amounts under the simplified method described at sections 1.401(k)-1(f)(4)(ii), 1.401(m)-1(e)(3)(ii) and 1.402(g)-1(e)(5) of the regulations.

(5) Allow excess elective deferrals that arise solely by taking into account elective deferrals of one employer to be distributed by such employer pursuant to a deemed notification process to avoid plan disqualification pursuant to sections 1.401(a)-30(a) and 1.402(g)- 1(e) of the regulations.

(6) Allow family aggregation rules for purposes of the nondiscrimination tests under sections 401(k) and (m) of the Code and for allocating excess amounts to be determined under the rules at sections 1.401(k)-1(f)(5)(ii), 1.401(k)-1(g)(1)(ii)(C), 1.401(m)-1(e)(2)(iii) and 1.401(m)-1(f)(1)(ii)(C) of the regulations.

(7) Determine compensation for the period in which the employee is an eligible employee for purposes of the nondiscrimination tests described in sections 401(k) and 401(m) of the Code. See sections 1.401(k)-1(g)(2) and 1.401(m)-1(f)(2) of the regulations.

(8) Allow matching contributions (including qualified matching contributions) to be forfeited and disregarded in performing the nondiscrimination test under section 401(m) of the Code if the contributions to which they relate are excess deferrals, excess contributions or excess aggregate contributions. See section 1.401(m)-1(b)(4)(ii) of the regulations.

06 Sample language for the foregoing amendments is contained in a Listing of Required Modifications which can be obtained by calling Dianne Briggs on (202) 566-3675 (not a toll-free number).

SEC. 6. RELIANCE

M & P and regional prototype plans which are amended in accordance with sections 4 or 5 of this revenue procedure will not lose their otherwise applicable extended reliance period provided by Rev. Proc. 89-9 or 89-13. Also, employers entitled to rely on an opinion or notification letter or on a determination letter will not lose reliance on such letters merely because of these amendments.

SEC. 7. EFFECT ON OTHER DOCUMENTS

Rev. Procs. 89-9, 89-13 and 90-17 are modified.

SEC. 8. DRAFTING INFORMATION

The principal author of this revenue procedure is Roger Kuehnle of the Employee Plans Technical and Actuarial Division. For further information regarding this revenue procedure, contact the Employee Plans Technical and Actuarial Division's telephone assistance service between 1:30 and 4:00 p.m., Eastern Time, Monday through Thursday on (202) 566-6783/4 or Mr. Kuehnle at (202) 566-4707. (None of these numbers is toll-free.)

APPENDIX

Model Compensation Amendment

This amendment replaces the definition of compensation at section ____________ of the plan, effective from the plan year which includes ____________, with the following:

[Sponsor: If this amendment is intended to replace the plan's FICA definition of compensation, insert in the first blank the section or sections where the FICA definition of compensation is located and in the second blank, the date on which this amendment is adopted. If this amendment is intended to make 6041/etc., compensation an additional definition of compensation under the plan, omit the above paragraph.]

Compensation is defined as wages within the meaning of section 3401(a) of the Code and all other payments of compensation to the employee by the employer (in the course of the employer's trade or business) for which the employer is required to furnish the employee a written statement under sections 6041(d), 6051(a)(3) and 6052 of the Code, determined without regard to any rules under section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed.