Rev. Proc. 89-13

Rev. Proc. 89-13

                          Table of Contents

This revenue procedure sets forth the procedures of the Internal Revenue Service for issuing notification letters relating to the qualification, as to form, of certain regional prototype defined contribution plans and defined benefit plans, and provides guidance with respect to the issuance of determination letters to employers adopting such plans as to whether the plans as adopted qualify under sections 401 and 403(a) of the Internal Revenue Code and as to whether any related trusts or custodial accounts are exempt under section 501(a).

SEC. 2. BACKGROUND AND GENERAL INFORMATION

01 Rev. Proc. 83-36, 1983-1 C.B. 763, as modified by Rev. Proc. 87-40, 1987-2 C.B. 514, sets forth the general procedures of the Service relating to the issuance of rulings, determination letters, opinion letters, and notification letters on employee plans and exempt organization matters.

02 Rev. Proc. 80-30, 1980-1 C.B. 685, sets forth general procedures for the issuance of determination letters by key district directors on the qualification of pension, profit-sharing, stock bonus, and annuity plans involving sections 401 and 403(a) of the Code, and the status for exemption of any related trusts or custodial accounts under section 501(a).

03 Rev. Proc. 84-86, 1984-2 C.B. 787, sets forth procedures whereby certain "sponsors" may submit "uniform plans" to key district directors for approval as to form.

04 Rev. Proc. 88-42, 1988-35 I.R.B. 27, sets forth procedures of the Service relating to the issuance of determination letters and notification letters that consider provisions of the Tax Reform Act of 1986 (TRA 86), Pub. L. 99-514, 1986-3 (Vol. 1) C.B. 1, the Omnibus Budget Reconciliation Act of 1986 (OBRA 86), Pub. L. 99-509, and the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), Pub. L. 100-203, that are effective for plan years beginning before 1989.

05 Rev. Proc. 89-9, 1989-6 I.R.B. __, updates Rev. Proc. 84-23, 1984-1 C.B. 457, to set forth the current procedures of the Service pertaining to the issuance of opinion letters relating to master or prototype (M & P) pension, annuity and profit-sharing plans involving sections 401(a) and 403(a) of the Code as amended by TRA 86, OBRA 86, OBRA 87, and the Technical and Miscellaneous Revenue Act of 1988 (TAMRA), Pub. L. 100-647, and to the status for exemption of related trusts or custodial accounts under section 501(a).

06 Rev. Proc. 89-4, 1989-3 I.R.B. 18, sets forth procedures relating to the payment of user fees for requests to the Service for rulings, opinion letters, determination letters, and similar requests.

07 TRA 86 substantially altered the requirements that a plan must meet in order to be qualified under section 401(a) of the Code. Many of the TRA 86 qualification changes are effective for plan years beginning after December 31, 1986. Other TRA 86 qualification requirements are not effective until plan years beginning after December 31, 1988. OBRA 86 and OBRA 87 also altered the requirements that a plan must meet in order to be qualified. The qualification requirements under OBRA 86 and OBRA 87 are generally effective for plan years beginning after December 31, 1987. TAMRA contains technical corrections to TRA 86, OBRA 86, and OBRA 87, as well as other changes affecting qualified plans.

08 Section 1140 of TRA 86 provides that a qualified plan must be amended retroactively, not later than the end of the first plan year beginning on or after January 1, 1989, to comply with the requirements of TRA 86. Section 1.401(b)-1 of the Income Tax Regulations extends until the end of the remedial amendment period described therein the time by which plans must be amended to comply with provisions of TRA 86 that are effective before the first day of the first plan year beginning after December 31, 1989, provided certain conditions are satisfied. In general, the remedial amendment period described in section 1.401(b)-1 of the regulations also applies in the case of amendments necessary to conform to the requirements of OBRA 86, OBRA 87, and other changes to the qualification requirements described in section 5.11. The Service has issued substantive guidelines, including those cited later in this procedure, for conforming plans to the TRA 86, OBRA 86, and OBRA 87 requirements.

SEC. 3. OVERVIEW

01 IN GENERAL. This revenue procedure replaces the uniform plans procedure set forth in Rev. Proc. 84-86 with a regional prototype program which eliminates many of the restrictions that applied to uniform plans. For example, notification letters were not issued under Rev. Proc. 84-86 with respect to plans containing a cash or deferred arrangement but will be issued with respect to such plans under this revenue procedure; also, while uniform plans had to provide that the vesting requirements applicable to top-heavy plans described in section 416 of the Code applied at all times regardless of whether the plan was top-heavy, that requirement does not apply to regional prototype plans under this revenue procedure (other than standardized regional prototype plans described in section 4.11). In addition, this revenue procedure enables adopters of regional prototype plans to retain their prototype status and reliance subsequent to changes in law, provided certain requirements are met.

02 EFFECT ON SPONSORS OF UNIFORM PLANS. Sponsors of uniform plans will meet the definition of regional prototype plan sponsor if they satisfy the requirement of this revenue procedure as to the number of expected adopters; if they do not have a sufficient number of expected adopters, they will be able to meet the definition by adopting a mass submitter regional prototype plan as defined in section 4.04 below.

03 FEATURES OF THE REGIONAL PROTOTYPE PROGRAM. The principal features of the regional prototype program are:

(1) Greater flexibility in the elections available to adopting employers;

(2) Reciprocity (see section 5.04), so that a regional prototype plan approved in one region of the Service will be automatically accepted in other regions;

(3) A mass submitter program (see section 9), under which the National Office of the Service may approve plane of mass submitters and such plans may then be adopted by regional prototype plan sponsors;

(4) Provision for standardized regional prototype plans (see section 4.11 and section 11), with respect to which adopting employers generally do not need to request a determination letter in order to obtain reliance as to the qualified status of the plan as adopted, and paired standardized defined contribution regional prototype plans;

(5) A sponsor registration program (see section 14) that provides continued reliance to adopting employers in the event amendments are needed because of subsequent changes in plan qualification requirements; and

(6) Modification of the user fee schedule set forth in section 6.03 of Rev. Proc. 89-4 by adding new subcategories and related fees (see section 17).

04 MULTIPLE PLANS. Under this revenue procedure, combinations of certain categories of plans are not permitted. See section 10.01. However, the sponsor may use one basic plan document for a combination of several defined contribution plane and one basic plan document for a combination of several defined benefit plans. The only differences will be in the adoption agreements and, if applicable, the trust or custodial account documents. See sections 4.09, 4.10, and 4.13 for definitions of "adoption agreement," "basic plan document'" and "trust or custodial account document," respectively. A sponsor, for example, may use one basic plan document for a money purchase plan (other than a target benefit plan), a target benefit plan, and a profit-sharing plan. Similarly, a sponsor may use one basic plan document for several defined benefit plans (for example, an integrated standardized plan, a non-integrated standardized plan, an integrated non-standardized plan, and a non-integrated non- standardized plan). See section 4.11 for the definition of "standardized form plan." A separate adoption agreement and completed application form must be submitted with respect to each defined benefit plan and each defined contribution plan. Paired plans (as defined in section 4.12) must share one basic plan document and must be submitted simultaneously.

05 SPECIAL REQUIREMENTS FOR REGIONAL PROTOTYPE PLANS.

(1) Because of the nature of the regional prototype program, this revenue procedure requires that special provisions be included in every regional prototype plan. Section 6 includes some of these requirements. Thus, for example, regional prototype plans must include language permitting the sponsor to amend the plan. Furthermore, provisions must be included to ensure compliance with section 411(a)(10) and (d)(6) of the Code, such as in the event an adopting employer amends the plan by revising the options selected in the adoption agreement. The plan language is required in order that the employer's plan may remain in the regional prototype program and still satisfy the requirements of section 411(a)(10) and (d)(6).

(2) Under this revenue procedure, the Service will approve regional prototype plans that include a qualified cash or deferred arrangement (CODA) under section 401(k) of the Code. Section 7 sets forth some of the required provisions that must be included in such plans as well as optional provisions that may be included.

(3) The Service will not issue notification letters with respect to certain types of plans. Thus, for example, the Service will not issue a notification letter with respect to ESOPs or with respect to plans (other than plans that include a qualified CODA) that provide for contributions which are subject to the special nondiscrimination requirements of section 401(m).

(4) Regional prototype plans may be adopted by an employer that has other plans covering the same employees. Such plans must be aggregated for purposes of section 415 of the Code. Aggregation may also be required under section 416 of the Code. It is impossible for sponsors of regional prototype plans to include form language that properly aggregates such regional prototype plan with any other plan of an adopting employer. Therefore, provision is made to enable adopting employers to add additional language to a regional prototype plan.

06 PROVISIONS RELATING TO TRA 86.

(1) Generally, no applications for approval of regional prototype plans may be submitted prior to July 14, 1989. However, mass submitter (as defined in section 4.05) may submit applications to the National Office of the Service beginning April 17, 1989.

(2) This revenue procedure provides a period of extended reliance in the case of any regional prototype plan which is submitted in accordance with the requirements of this procedure by October 31, 1989 and is subsequently approved by the Service. An employer who adopts such a plan and is otherwise entitled to reliance under this procedure or under Rev. Proc. 80-30 may rely on the favorable notification letter issued under this procedure (or on a determination letter, if required) until the earlier of the date established for plan amendment by subsequent legislation or the last day of the last plan year beginning before January 1, 1995.

(3) This revenue procedure also provides a method for an employer to extend its remedial amendment period in the event such an extension is necessary because a regional prototype sponsor has not received a favorable notification letter by the time the employer is required to amend its plan to comply with TRA 86.

SEC. 4. DEFINITIONS

01 REGIONAL PROTOTYPE PLAN. A "regional prototype plan" is a defined contribution plan or a defined benefit plan that is made available by a regional "sponsor," as defined in section 4.02 below, for adoption by employers. A regional prototype plan consists of an "adoption agreement," as defined in section 4.09 below, a "basic plan document," as defined in section 4.10, and, except in the case where the basic plan document incorporates a trust or custodial account agreement the provisions of which are applicable to all adopting employers, a "trust or custodial account document," as defined in section 4.13.

02 SPONSOR. The term "sponsor," for purposes of this revenue procedure, means a firm (other than a sponsoring organization as defined in section 3.07 of Rev. Proc. 89-9) which: (1) has an established place of business in the United States where it is accessible during every business day, and (2) either has at least 30 clients that have their principal place of business within the jurisdiction of not more than two regions of the Service and are expected to adopt the sponsor's regional prototype plan, or has at least three clients that are expected to adopt a "mass submitter regional prototype plan," as defined in section 4.04 below, with respect to which a favorable notification letter has been issued to its sponsor. A sponsor may submit any number of adoption agreements so long as each will be adopted by at least 10 clients and the total number of adopting clients is at least 30. The Service reserves the right at any time to request from the sponsor a list of the clients that the sponsor asserts are expected to adopt the plan, including their business addresses and employer identification numbers.

03 FIRM. As used in the definition of "sponsor" above, "firm" means a partnership or corporation at least one of whose members or employees is authorized to practice before the Internal Revenue Service with respect to employee plans matters, or an individual who is so authorized.

04 MASS SUBMITTER REGIONAL PROTOTYPE PLAN. A "mass submitter regional proto type plan" is a defined contribution plan or a defined benefit plan that is made available to sponsors by a "mass submitter," as defined in section 4.05 below, and that would otherwise meet all of the requirements applicable to regional prototype plans under this revenue procedure.

05 MASS SUBMITTER. A "mass submitter," for purposes of this revenue procedure, is any person, whether or not such person is a sponsor within the meaning of section 4.02 above, which can establish that, if it receives a favorable notification letter with respect to a regional prototype plan it has submitted to the Service, there are at least 50 unaffiliated sponsors that will adopt the plan on a word- for-word identical basis. To establish that this criterion is satisfied, the mass submitter must submit to the Service a list of the sponsors that, to the best of the mass submitter's knowledge, are unaffiliated. In general, corporations that are members of a controlled group under section 414(b) of the Code, and partnerships, proprietorships, etc. which are under common control under section 414(c) will be considered affiliated for this purpose. However, without regard to whether section 414(b) or section 414(c) applies, persons such as the following will be considered to be affiliated: each partner or associate of a law firm, accounting firm, or actuarial consulting firm, with such firm, and all branch offices of the firm. Each adoption agreement will be considered a separate plan with respect to which the numerical requirement must be separately satisfied.

06 NOTIFICATION LETTER. A "notification letter," for purposes of this revenue procedure, is a letter issued by the Service to a sponsor or to a mass submitter informing the sponsor or mass submitter that the sponsor's or mass submitter's plan is acceptable as to form.

07 DEFINED CONTRIBUTION PLAN. "Defined contribution plan" means a plan described in section 414(i) of the Code.

08 DEFINED BENEFIT PLAN. "Defined benefit plan" means a plan described in section 414(j) of the Code.

09 ADOPTION AGREEMENT. For purposes of this revenue procedure, with respect to an adopting employer, an "adoption agreement" is the portion of a regional prototype plan that contains all of the options that may be selected by such adopting employer. (Also, see section 4.13, below.)

10 BASIC PLAN DOCUMENT. A "basic plan document," for purposes of this revenue procedure, is the portion of a regional prototype plan that contains all of the nonelective provisions applicable to all adopting employers. No options (including blanks to be completed) may be provided in the basic plan document. The same basic plan document may be used for both standardized (including paired) and nonstandardized regional prototype plans (see subsections .11 and .12 below). Such plans may differ only by the different adoption agreements and, if applicable, different trust or custodial account agreements (see section 4.13).

11 STANDARDIZED REGIONAL PROTOTYPE PLAN. A "standardized regional prototype plan," for purposes of this revenue procedure, is a regional prototype plan that meets the following requirements:

(1) The provisions governing eligibility and participation are such that the plan by its terms must cover all employees described in section 6.01(10) (regardless of whether any employer is treated as operating separate lines of business under section 414(r)) except those that may be excluded under section 410(a)(1) or (b)(3) of the Code. For example, a plan providing full and immediate vesting may exclude employees who do not have at least two years of service. However, the adoption agreement may provide options as to whether some or all of the employees described in section 410(a)(1) and (b)(3) are to be excluded.

(2) The eligibility requirements under the plan are not more favorable for highly compensated employees (as defined in section 414(q) of the Code) than for other employees.

(3) The vesting schedule in the plan provides vesting at a rate at least as favorable for every year as would be required by the schedules set forth in section 416(b)(1)(A) or (B) of the Code if the plan was top-heavy for every year after 1983.

(4) Except for contributions made under a qualified cash or deferred arrangement (CODA) as defined in section 401(k) of the Code and the regulations (including proposed) thereunder, the contributions (including forfeitures) provided under the plan (if a defined contribution plan other than a target benefit plan) or the benefits (if a defined benefit plan or a target benefit plan that complies with Rev. Rul. 76-464, 1976-2 C.B. 115) are a uniform percentage of total compensation within the meaning of section 414(s) of the Code, excluding compensation in excess of the limitation under section 401(a)(17). A plan will not be treated as failing to meet this requirement merely because it involves integration with Social Security benefits or contributions provided (a) the form of the plan meets the permitted disparity limitations of section 401(1), or (b) the plan is a defined benefit plan with a final pay limitation that satisfies the requirements of section 401(a)(5)(D). This paragraph does not preclude a sponsor from submitting a defined benefit plan or a target benefit plan that uses a unit benefit formula based on years of service. (See section 7 of this revenue procedure for rules governing contributions made under a CODA.)

12 PAIRED REGIONAL PROTOTYPE PLANS. "Paired regional prototype plans," for purposes of this revenue procedure, are a combination of two or more defined contribution standardized regional prototype plans (for example, a money purchase pension plan and a profit- sharing plan), so designed that if any single plan, or combination of plans, is adopted by an employer, each plan by itself, or the plans together, will meet the nondiscrimination rules set forth in section 401(a)(4) of the Code, the contribution limitations set forth in section 415, and the top-heavy provisions set forth in section 416. In addition, paired regional prototype plans must meet the following requirements:

(1) Regional prototype plans can only be paired with plans of the same sponsor.

(2) Only one of the paired plans that an employer adopts may provide for disparity in contributions that is permitted under section 401(1).

(3) If the paired plans do not provide duplication of minimum contributions, then each plan must provide, in any year in which it is top-heavy, the top-heavy minimum contribution for all participants in the plan who do not participate in the other paired plan(s) and must also state which of the paired plans will provide the top-heavy minimum contribution for participants who also participate in one or more of the other paired plans.

(4) All of the provisions necessary to coordinate the plans (other than the reliance statement required under section 6.01(9)) must be set forth in the basic plan document and not in the adoption agreement.

13 TRUST OR CUSTODIAL ACCOUNT DOCUMENT. (NOTE: THIS DEFINITION IS INAPPLICABLE IF THE BASIC PLAN DOCUMENT INCLUDES A TRUST OR CUSTODIAL ACCOUNT AGREEMENT THE PROVISIONS OF WHICH APPLY TO ALL ADOPTING EMPLOYERS.) A "trust or custodial account document," for purposes of this revenue procedure, is the portion of a regional prototype plan that contains the trust agreement or custodial account agreement and includes provisions covering such matters as the powers and duties of trustees, investment authority, and the kinds of investments that may be made. Except as provided in section 6.01(5) and below, all provisions of the trust or custodial account document must be applicable to all adopting employers and no options (including blanks to be completed) may be provided in the trust or custodial account document. A sponsor or mass submitter may provide up to five separate trust or custodial account documents that are intended for use with any single basic plan document. Thus, for example, several employers that adopt a sponsor's standardized regional prototype plan may have plans with different trust or custodial account documents. In addition, a sponsor or mass submitter may provide a trust or custodial account document, designated for use only by adopters of nonstandardized plans, which provides for blanks to be completed with respect to administrative provisions of the trust or custodial account agreement. Any trust or custodial account document (including one to be used by adopters of standardized regional prototype plans) may provide for blanks to be completed that merely enable the adopting employer to specify the names of the plan, employer, trustee or custodian, plan administrator and other fiduciaries, the trust year, and the name of any pooled trust in which the plan's trust will participate.

SEC. 5. NOTIFICATION LETTERS

01 SCOPE OF NOTIFICATION LETTERS. Except as provided in section 11, a notification letter does not constitute a ruling or determination as to either the qualification of the plan as adopted by a particular employer, or the exempt status of its related trust or custodial account.

02 MATTERS NOT COVERED BY NOTIFICATION LETTERS. Notification letters will not be issued for:

(1) Any plan under which the rules of section 401(a), 410 or 411 of the Code are applied by treating the employees of more than one employer as employed by a single employer, and any plan which has been negotiated pursuant to a collective bargaining agreement and submitted to the Service as a plan maintained pursuant to a collective bargaining agreement. For this purpose, the term "one employer" includes all employers aggregated under section 414(b), (c), (m) or (o). This does not preclude a regional prototype plan, by its terms, from covering employees of the employer who are included in a unit covered by a collectively bargained agreement or the adoption of a regional prototype plan pursuant to such agreement as a single employer plan which covers only employees of the employer. However, the Service will not issue a notification letter with respect to a regional prototype plan if any provision therein would cause a plan that is not described in section 413(b) of the Code to fail to be qualified. Furthermore, a notification letter may not be relied on with respect to whether a plan satisfies any requirement that is applicable to a plan described in section 413(b) but inapplicable to other plans;

(2) Stock bonus plans;

(3) Employee stock ownership plans;

(4) Pooled fund arrangements contemplated by Rev. Rul. 81-100, 1981-1 C.B 326;

(5) Annuity contracts under section 403(b) of the Code;

(6) Master and prototype plans (see Rev. Proc. 89-9, 1989-6 I.R.B.).

(7) Defined contribution plans (except target benefit plans) under which the test for prohibited discrimination under section 401(a)(4) of the Code is made by reference to benefits rather than contributions;

(8) Plans that involve integration with social security benefits or contributions, other than plans that, in form, meet the permitted disparity limitations of section 401(1) or that satisfy the requirements of section 401(a)(5)(D);

(9) Plans described in section 414(k) of the Code (relating to a defined benefit plan that provides a benefit derived from employer contributions that is based partly on the balance of the separate account of a participant);

(10) Defined contribution plans (other than any CODA portion of such a plan) that allocate contributions or forfeitures to the account of any participant in any manner other than on the basis of total compensation within the meaning of section 414(s);

(11) Target benefit and defined benefit plans that provide benefits on the basis of compensation where compensation is not defined as total compensation within the meaning of section 414(s);

(12) Governmental plans described in section 414(d) of the Code;

(13) Church plans described in section 414(e) of the Code that have not made the election provided by section 410(d);

(14) Plans (other than plans including a qualified CODA under section 401(k)) that permit contributions subject to the special nondiscrimination requirements of section 401(m). However, this does not prohibit mandatory employee contributions in a defined benefit plan. In the case of a plan which includes a qualified CODA, such plan may provide for after-tax employee contributions and matching contributions in addition to elective deferrals;

(15) Plans which contain, or may contain, a multi-tiered benefit structure (other than an integrated benefit formula). Thus, a plan may not provide different benefit formulas for different employees, such as two percent of compensation for salaried employees and one percent for hourly employees;

(16) Any plan under which the section 415 limitations are incorporated by reference; and

(17) Any plan under which the ADP test under section 401(k)(3) or the ACP test under section 401(m)(2) is incorporated by reference. (However, also see section 10.04(12).)

03 NOTIFICATION LETTER NUMBERS. The office issuing a notification letter will assign a number to each approved plan. This number will identify the Service's issuing office and provide a means of identifying the plan. All correspondence with the Service regarding a regional prototype plan must refer to the plan's latest notification letter number.

04 RECIPROCITY. A favorable notification letter issued by a key district director with respect to a regional prototype plan will be accepted throughout the particular region of the Service and any other region within whose jurisdiction clients of the sponsor have their principal place of business. A notification letter issued by the National Office with respect to a mass submitter's regional prototype plan will be accepted throughout each region of the Service.

05 NONTRANSFERABILITY OF NOTIFICATION LETTERS. A notification letter issued to a sponsor is not transferable to any other person. For this purpose, the sponsor is the person that has made the agreement described in section 14.05.

SEC. 6. REQUIREMENTS THAT APPLY TO EVERY REGIONAL PROTOTYPE PLAN

01 REQUIRED PROVISIONS. A regional prototype plan must include all of the provisions described in this subsection. The adoption agreement may not permit the employer to override any of such provisions.

(1) SPONSOR AMENDMENTS. Regional prototype plans must provide a procedure for sponsor amendment, so that changes in the Code, regulations, revenue rulings, and other guidelines published by the Internal Revenue Service, or corrections of prior approved plans, may be applied to all employers that have adopted the plan.

(2) EMPLOYER AMENDMENTS. Except for amendments permitted under paragraph (4) and (5) below, an employer that amends any provision of an approved regional prototype plan, including its adoption agreement (other than to change the choice of options, if the plan permits or contemplates such a change), or an employer that chooses to discontinue participation in a plan as amended by its sponsor and does not substitute another approved regional prototype plan or an approved master or prototype plan is considered to have adopted an individually designed plan. An employer that amends a regional prototype plan because of a waiver of the minimum funding requirement under section 412(d) of the Code will also be considered to have an individually designed plan. The procedure stated in Rev. Proc. 80-30, relating to the issuance of determination letters for individually designed plans, will then apply to the plan as adopted by the employer.

(3) ANTI-CUTBACK PROVISIONS. The plan must specifically provide for the protection of section 411(a)(10) and (d)(6) of the Code in the event that the employer amends the plan in any manner such as by revising the options selected in the adoption agreement or by adopting a new regional prototype plan. A regional prototype sponsor may not amend its plan in a manner that could result in the elimination of a benefit protected under section 411(d)(6) with respect to the plan of any adopting employer, unless permitted to do so under regulation sections 1.401(a)-4 and 1.411(d)-4. In addition, a regional prototype plan that does not contain vesting for all years which is at least as favorable to participants as that provided in section 416(b) of the Code, must specifically provide that any vesting which occurs while the plan is top-heavy will not be cut back if the plan ceases to be top-heavy.)

(4) ADOPTING EMPLOYER MODIFICATION TO SATISFY SECTIONS 415 AND 416. Regional prototype plans must provide that the plan provisions may be amended by overriding plan language completed by the employer in the adoption agreement, where such language is necessary to satisfy section 415 or 416 of the Code because of the required aggregation of multiple plans under those sections. In the event of such an amendment, the adopting employer must obtain a determination letter in order to continue reliance on the plan's qualified status. Generally, a space should be provided in the adoption agreement to enable the employer to add such language as necessary to satisfy sections 415 and 416. In addition, a space must be provided in the adoption agreement for the employer to specify the interest rate and mortality tables used for purposes of establishing the present value of accrued benefits in order to compute the top-heavy ratio under section 416. Such a space must be included in both defined contribution plans and defined benefit plans.

(5) ADOPTING EMPLOYER MODIFICATION OF TRUST OR CUSTODIAL ACCOUNT DOCUMENT. An employer that has adopted a regional prototype plan other than a standardized plan (or paired plans) will not be considered to have an individually designed plan merely because the employer amends administrative provisions of the trust or custodial account document (such as provisions relating to investments and the duties of trustees), so long as the amended provisions are not in conflict with any other provision of the plan and do not cause the plan to fail to qualify under section 401(a) of the Code. For this purpose, an amendment includes modification of the language of the trust or custodial account document and the addition of overriding language. An employer that has adopted a standardized regional prototype plan may amend the trust or custodial account document provided such amendment merely involves the specification of the names of the plan, employer, trustee or custodian, plan administrator and other fiduciaries, the trust year, or the name of any pooled trust in which the plan's trust will participate.

(6)DEFINED CONTRIBUTION SECTION 415 AGGREGATION. Plan language must be incorporated that aggregates all defined contribution regional prototype plans to satisfy section 415(c) and (f) of the Code. Sample language may be obtained by writing to the Internal Revenue Service, Employee Plans Technical and Actuarial Division, Washington, D.C. 20224, Attention: E:EP:Q.

(7) TOP-HEAVY REQUIREMENTS. Except to the extent described in section 4.12, relating to paired plans, each plan must provide that all the additional requirements applicable to top-heavy plans (described in section 416 of the Code) apply at all times, or must provide that such requirements apply automatically if the plan is top-heavy regardless of how the adoption agreement is completed. In any case where the latter option is chosen, all the requirements for determining whether the plan is top-heavy must be included in the plan. See section 1.416-1 of the Income Tax Regulations.

(8) ADDITIONAL TOP-HEAVY MINIMUMS TO SATISFY SECTION 415(e). Each plan must provide automatically or by optional provisions the additional minimums described in section 416(h)(2)(A) of the Code.

(9) PROVISION IN ADOPTION AGREEMENT ON EXTENT OF RELIANCE. In order to avoid unnecessary confusion as to the effect of a notification letter, sponsors must include in the adoption agreement of all regional prototype plans (other than standardized and paired regional prototype plans), in close proximity to the signature blank, a statement that adopting employers may not rely on the notification letter with respect to the qualification of that plan and must apply to the appropriate key district office for a determination letter in order to obtain reliance. Standardized and paired regional prototype plans must also include a similar statement in the adoption agreement, that the adopting employer may not rely on the notification letter and should apply for a determination letter if the employer maintains or later adopts another plan in addition to the standardized plan or paired plans. In the case of a standardized defined benefit plan, this statement must also advise the adopting employer that the notification letter may be relied on with respect to whether the plan meets the minimum participation requirements of section 401(a)(26) of the Code only if the plan satisfies one of the safe-harbors provided in regulations under section 401(a)(26) with respect to its prior benefit structure or is deemed to satisfy section 401(a)(26) under such regulations. However, in connection with the initial adoption or amendment by an employer of a standardized defined benefit plan, such employer may request a determination letter if the employer wishes to have reliance as to whether its plan satisfies section 401(a)(26) with respect to its prior benefit structure. For purposes of this paragraph, a plan that is properly replaced by the adoption of a standardized plan of the same type (for example, both are profit-sharing plans) is not considered another plan. The adoption agreement must state that it is to be used with one and only one specific basic plan document.

(10) DEFINITION OF "EMPLOYEE": SECTION 414(b), (c), (m), (n) AND (o). Each plan must include a definition of employee as any employee of the employer maintaining the plan or of any other employer aggregated under section 414(b), (c), (m) or (o) of the Code and the regulations thereunder. The definition of employee shall also include any individual deemed under section 414(n) or under regulations under section 414(o) to be an employee of any employer described in the previous sentence.

(11) DEFINITION OF "SERVICE": SECTION 414(b), (c), (m), (n), AND (o). Each plan must specifically credit all service with any employer aggregated under section 414(b), (c), (m) or (o) of the Code and the regulations thereunder as service with the employer maintaining the plan. In addition, in the case of an individual deemed under section 414(n) or under the regulations under section 414(o) to be the employee of any employer described in the preceding sentence, service with such employer must be credited to such individual.

02 OTHER REQUIREMENTS. In addition to the requirements listed in section 10.04 and any other substantive requirements, regional prototype plans must comply with the requirements of all revenue rulings, notices, legislation, and regulations including:

(1) Final regulations under the Retirement Equity Act of 1984 (REA), Pub. L. 98-397, 1984-2 C.B. 433;

(2) Final regulations under sections 401(a)(4) and 411(d)(6) of the Code, on limitations on availability of benefits;

(3) If the plan includes a cash or deferred arrangement, final regulations under section 401(k) of the Code; and

(4) If the plan is an integrated defined benefit plan, Rev. Rul. 86-74, 1986-1 C.B. 205 (modifications to guidelines for social security integration under Rev. Rul. 71-446) with respect to plan years beginning after the relevant effective data specified in section 6 of the revenue ruling and before January 1, 1989.

SEC. 7. SPECIAL REQUIREMENTS FOR REGIONAL PROTOTYPE PLANS THAT INCLUDE A CASH OR DEFERRED ARRANGEMENT

01 REQUIRED PROVISIONS. In order to receive a favorable notification letter, a regional prototype plan that includes a CODA must be a profit-sharing plan and must include provisions that comply with the following list:

(1) The CODA must include a mechanism whereby an eligible employee may make a cash or deferred election with respect to employer contributions, within the meaning of section 401(k);

(2) The minimum number of years of service required for participation in the CODA cannot exceed 1;

(3) Separate accounts must be maintained for each participant's --

(a) elective deferrals, as described in section 402(g)(3)(A);

(b) qualified nonelective contributions, as described in section 401(m)(4)(C), and qualified matching contributions used to satisfy the test provided in section 401(k)(3);

(c) matching contributions, as described in section 401(m)(4)(A), that are not used to satisfy the test provided in section 401(k)(3); and

(d) employee contributions.

(4) Elective deferrals, employee contributions, qualified nonelective contributions, and qualified matching contributions must be nonforfeitable at all times;

(5) Amounts attributable to elective deferrals, other than excess deferrals, and qualified nonelective contributions and qualified matching contributions used to satisfy the actual deferral percentage test under section 401(k)(3) may not be withdrawn prior to one of the events specified in section 401(k)(2)(B);

(6) If the plan provides for hardship distributions, then for plan years beginning after December 31, 1988, amounts attributable to qualified nonelective contributions and qualified matching contributions may not be distributed merely on account of hardship. Also, income allocated to elective deferrals after December 31, 1988 may not be distributed on account of hardship.

(7) If the plan provides for hardship distributions of amounts attributable to elective deferrals, then, for the purpose of determining the existence of an immediate and heavy financial need and the amount necessary to meet that need, the plan must adopt the safe-harbor standards set forth in sections 1.401(k)-1(d)(2)(ii)(B) and (iii)(B) of the regulations.

(8) The CODA provisions may not be integrated with social security;

(9) Elective deferrals under the plan may not exceed $7,000 (or such greater amount as subsequently determined in accordance with increases provided under section 415(d)) for any taxable year;

(10) A mechanism must be provided by which a participant may notify the plan administrator of an allocation of excess elective deferrals, upon which notice such excess elective deferrals, and the applicable earnings, will be distributed to the participant by April 15 of the year following the calendar year of deferral;

(11) The actual deferral percentage (ADP) test set forth in section 401(k)(3) of the Code must be contained in the plan;

(12) Definitions of "highly compensated employee" and "family member," as described in section 414(q) of the Code, and "compensation," as described in section 414(s), must be contained in the plan;

(13) The method or methods by which the plan may correct contributions in excess of those allowed under the ADP test must be described in the plan. The plan must provide that the employer will maintain records to demonstrate compliance with the nondiscrimination requirements of section 401(k), including the extent to which qualified nonelective contributions and qualified matching contributions are taken into account;

(14) The plan must contain an explanation of the 10% excise tax which section 4979 of the Code imposes on employers that have not, within 2 1/2 months following the end of the plan year, distributed contributions in excess of the amount allowed by the ADP test (see paragraph (8) above), or have not recharacterized such contributions;

(15) A mechanism must be provided to assure the proper ordering of tests described in section 401(m)(6)(D) of the Code and the regulations thereunder;

(16) The plan must contain provisions to satisfy the top-heavy requirements set forth in section 416; beginning January 1, 1989, plans may not include elective deferrals or matching contributions as employer contributions for the purpose of satisfying the minimum contribution requirement; and

(17) The plan must provide that if contributions subject to section 401(m) are made pursuant to the plan containing the CODA or any other plan maintained by the same employer, such employer must designate the method of correction to be used and the plan to be corrected if a multiple use of the alternative limitation (within the meaning of section 401(m)(9) of the Code) occurs.

02 OPTIONAL PROVISIONS. Regional prototype plans that include a CODA may also provide for some or all of the following items:

(1) Matching contributions or employee contributions. If such contributions are made, the plan must contain --

(a) The average contribution percentage (ACP) nondiscrimination test described in section 401(m)(2) of the Code;

(b) A description of the method or methods by which the plan will correct contributions made in excess of the section 401(m)(2) limits;

(c) A provision that the employer will maintain records to demonstrate compliance with the nondiscrimination requirements under section 401(m), including the extent to which qualified nonelective contributions and elective contributions are taken into account; and

(d) An explanation of the 10% excise tax imposed by section 4979 of the Code upon employers that have not corrected contributions in excess of amount allowed by the ACP test within 2 1/2 months following the end of the plan year.

(2) Qualified nonelective contributions (QNECs);

(3) Recharacterization of excess contributions as voluntary employee contributions subject to section 401(m);

(4) Use of QNECs to satisfy the ADP test;

(5) Use of qualified matching contributions to satisfy the test set forth in section 401(k); and

(6) Distribution of amounts attributable to elective contributions on account of participant hardship (but see sections 7.016 and 7.017).

03 ADDITIONAL REQUIREMENTS FOR STANDARDIZED REGIONAL PROTOTYPE PLANS.

(1) A standardized regional prototype plan that includes a CODA must, in addition to satisfying the requirements listed in section 7.01 above, provide a minimum qualified nonelective contribution of 3% of compensation.

(2) The requirement that contributions be a uniform percentage of each participant's compensation does not apply to elective deferrals, QNECs or matching contributions (if any) under the CODA. However, all other requirements of sections 7 and 11 of this revenue procedure apply to a standardized regional prototype plan that contains a CODA.

SEC. 8. INSTRUCTIONS TO SPONSORS REQUESTING NOTIFICATION LETTERS WITH RESPECT TO NONMASS SUBMITTER REGIONAL PROTOTYPE PLANS

01 APPLICABILITY OF THIS SECTION. The instructions in this section apply to regional sponsors that have at least 30 clients, located in not more than two regions of the Service, that are expected to adopt a regional prototype plan which is not a mass submitter plan. Regional sponsors that have the requisite number of such clients (and thus do not need to adopt a mass submitter's plan in order to qualify as sponsors under this revenue procedure) may nevertheless choose to adopt a mass submitter's regional prototype plan and make it available for adoption by their clients. In that case, the instructions contained in section 9 below are applicable, relating to notification letter applications by mass submitters and sponsors whose clients will adopt a mass submitter regional prototype plan.

02 KEY DISTRICT OFFICE ISSUES NOTIFICATION LETTERS. The key district director will, upon a request by a plan sponsor that meets the requirements of this revenue procedure, issue a notification letter as to the acceptability of the form of the sponsor's plan and any related trust or custodial account under sections 401(a), 403(a) or 501(a).

03 REQUEST FOR NOTIFICATION LETTER. A sponsor's request for a notification letter under this revenue procedure must be submitted to the key district office within the region of the Service where the sponsor has its principal place of business. Such requests should be sent to the same address as that set forth in section 6.06(5) of Rev. Proc. 89-4, with reference to requests for notification letters submitted pursuant to Rev. Proc. 84-86. Sponsors may not file separate notification letter requests in more than one region. The request must include the application form, adoption agreement, basic plan document and trust or custodial account document(s), the written agreement relating to registration of regional prototype plans described in section 14.05, and a statement that the sponsor has not filed in any other region. Upon receipt of the notification letter, the sponsor must furnish a copy of the plan and notification letter to the key district office in each other region where the sponsor has clients that will adopt the plan.

04 FORMS FOR REQUESTING NOTIFICATION LETTERS. A request for a notification letter as to the acceptability of a regional prototype plan should be submitted on Form 4461, Application for Approval of Master or Prototype Defined Contribution Plan, or Form 4461-A, Application for Approval of Master or Prototype Defined Benefit Plan, whichever is appropriate. The "Regional Prototype Plan" box on the form should be checked. Such requests must include a copy of the plan (the adoption agreement and basic plan document) and the trust or custodial account document(s). A sponsor's request for a notification letter must be accompanied by a covering letter requesting application of this revenue procedure and containing a representation that the sponsor can reasonably expect the submitted regional prototype plan (basic plan document) to be adopted by at least 30 employers (and each submitted adoption agreement to be adopted by no fewer than 10 employers) whose principal place of business is located within not more than two regions of the Service.

SEC. 9. INSTRUCTIONS TO MASS SUBMITTERS AND SPONSORS UTILIZING MASS SUBMITTER PLANS

01 APPLICABILITY OF THIS SECTION. The instructions in this section apply to mass submitters of regional prototype plans and to sponsors that have any clients that are expected to adopt a mass submitter regional prototype plan.

02 NATIONAL OFFICE ISSUES NOTIFICATION LETTER TO MASS SUBMITTER. The National Office will, upon a request by a mass submitter as defined in section 4.05, issue a notification letter as to the acceptability of the form of the mass submitter's regional prototype plan and the form of any related trust or custodial account under sections 401(a), 403(a) or 501(a) of the Code.

03 REQUIREMENTS FOR MASS SUBMITTER'S NOTIFICATION LETTER REQUEST. A mass submitter's request for a notification letter as to the acceptability of its regional prototype plan is to be submitted on Form 4461 or Form 4461-A, whichever is appropriate. The phrase "Mass Submitter Regional Prototype Plan" must be printed in bold letters in the upper right-hand corner of the first page of the application. The application form must be accompanied by a covering letter in which the mass submitter certifies that at least 50 sponsors are expected to sponsor the identical plan and which lists the names and addresses of such sponsors. For this purpose and as used throughout this revenue procedure, "identical" means the plan is word-for-word identical to another plan except for differences in the names of employers, sponsors, and trustees or custodians, and permitted differences in the trust or custodial account document(s). The request must include a copy of the plan (the adoption agreement and basic plan document) and the trust or custodial account document(s), and should be filed with the Internal Revenue Service, Assistant Commissioner (Employee Plans and Exempt Organizations), Attention: E:EP:Q, P.O. Box 14073, Ben Franklin Station, Washington, D.C. 20224.

04 SEPARATE NOTIFICATION LETTERS REQUIRED FOR SPONSORS UTILIZING MASS SUBMITTER REGIONAL PROTOTYPE PLANS. A sponsor that has adopted a mass submitter's regional prototype plan and intends to make it available to employers must obtain a notification letter from the key district office where the sponsor has its principal place of business. (A mass submitter which is also a sponsor must also apply for a notification letter from the key district office in order to make its plan available directly to adopting employers.) The sponsor's request for a notification letter must be filed by the mass submitter on behalf of the sponsor. Upon receiving the notification letter from the key district office, the sponsor must furnish a copy of the plan and notification latter to the key district office in each other region of the Service where the sponsor has clients that will adopt the plan. Because notification letter applications filed in the key district offices with respect to mass submitter plans will not require technical review, such applications will receive priority processing.

05 REQUIREMENTS FOR SPONSOR'S REQUEST FOR NOTIFICATION LETTER RELATING TO MASS SUBMITTER'S REGIONAL PROTOTYPE PLAN. A request for a notification letter filed by a mass submitter on behalf of a sponsor that has adopted the mass submitter's regional prototype plan must contain a declaration by the mass submitter that the sponsor has adopted a particular word-for-word identical regional prototype plan of the mass submitter. The plan must be identified by the letter serial number and date of the notification letter issued by the National Office to the mass submitter with respect to the plan, and a copy of the plan and trust or custodial account document(s) must be submitted. (However, also see section 15.03.). The mass submitter on behalf of the sponsor must complete Part I of Form 4461 or Part I of Form 4461-A, whichever is appropriate. In addition, the request must include the written agreement (signed by the sponsor) relating to the registration of regional prototype plans described in section 14.05.

SEC. 10. INSTRUCTIONS THAT APPLY TO ALL MASS SUBMITTERS AND SPONSORS OF REGIONAL PROTOTYPE PLANS

01 REQUESTS INVOLVING DIFFERENT CATEGORIES OF PLANS. A plan will not be acceptable as a regional prototype plan if it combines features of plans in different categories, such as those of a profit- sharing plan, a money purchase pension plan (other than target benefit), a target benefit plan, a non-integrated defined benefit plan, or an integrated defined benefit plan. However, separate defined contribution plans may have the same basic plan document. Similarly, separate integrated and nonintegrated defined benefit plans may have the same basic plan document.

02 MULTIPLE PLANS SUBMITTED BY ONE SPONSOR. A sponsor of a regional prototype plan may receive separate notification letters for more than one defined contribution plan and more than one defined benefit plan. (See section 4.02 regarding the minimum number of clients which must adopt each plan in the event such plan is not identical to a mass submitter plan.) However, a separate application must be filed for each plan. The sponsor must assign a three-digit number to each plan, which may not be changed or used for any other plan of the sponsor. The three-digit number assigned to each plan should start with 001, and each additional plan should be numbered in sequence.

03 ADDITIONAL INFORMATION MAY BE REQUESTED. The Service may, at its discretion, require any additional information that it considers necessary.

04 INADEQUATE SUBMISSIONS. The Service will return, without further processing, plans that are not in substantial compliance with the qualification requirements, or plans that are so deficient they cannot be reviewed in a reasonable amount of time. A plan may be considered not to be in substantial compliance if, for example, it omits or otherwise fails to comply with any of the requirements set forth below, or merely incorporates those requirements by reference to the applicable Code section. The Service will not consider these plans until after they are revised, and they will be treated as new requests as of the date they are resubmitted. The following are some examples of qualification requirements the omission of which may cause a plan to be regarded as not being in substantial compliance:

(1) Section 401(a)(9) of the Code, as amended by section 1121 of TRA 86, relating to required distributions from qualified plans (see section 1.401(a)(9)-1 and 2 of the proposed regulations).

(2) Section 401(a)(11) of the Code, as amended by section 1898 of TRA 86, and section 417 of the Code, as amended by sections 1139 and 1898 of TRA 86, and the regulations thereunder, relating to minimum survivor annuity requirements.

(3) Section 415 of the Code, as amended by sections 1108, 1114, 1852, 1875, and 1898 of TRA 86, relating to contribution and benefit limits for qualified plans (see Notice 87-21, 1987-1 C.B. 458).

(4) Section 416 of the Code, as amended by sections 1106, 1118, and 1852 of TRA 86, containing special rules for top-heavy plans.

(5) If the plan provides for disparity in contributions or benefits, section 401(1) of the Code, as amended by section 1111 of TRA 86, relating to nondiscriminatory coordination with Social Security benefits (see sections 1.401(1)-1 through 1.401(1)-4 of the proposed regulations).

(6) Section 414(m) of the Code, as amended by section 1114 of TRA 86, relating to employees of affiliated service groups.

(7) Section 414(n) of the Code, as amended by sections 1146 and 1151 of TRA, 86, relating to leased employees.

(8) Section 414(o) of the Code, as amended by section 1146 of TRA 86, and the regulations thereunder.

(9) Section 401(c) and (d) of the Code, unless the plan precludes participation by self-employed individuals.

(10) Section 411(a)(2), as amended by section 1113 of TRA 86, and the temporary regulations thereunder, relating to vesting of employer contributions.

(11) If the plan contains a CODA, section 401(k) of the Code, as amended by sections 1116 and 1879(g) of TRA 86, and the regulations thereunder (see section 1.401(k)-1 of the final and proposed regulations).

(12) If the plan permits, or permitted in any plan year beginning after 1986, employee or matching contributions (other than mandatory contributions under a defined benefit plan), section 401(m) of the Code, as added by section 1117(a) of TRA 86, relating to the nondiscrimination test for employee and matching contributions (see section 1.401(m)-1 and 2 of the proposed regulations, and also see section 5.02(14) above as to which plans may permit such contributions). Since a regional prototype plan may be adopted as an amendment to a plan which permitted employee or matching contributions in a plan year beginning after December 31, 1986, all regional prototype plans must contain language which satisfies the requirements of section 401(m). However, if a regional prototype plan (other than one with a CODA that provides for employee or matching contributions) precludes such contributions after its adoption by an employer, this requirement may be satisfied by incorporating the rules of section 401(m) by reference.

(13) section 410(a) of the Code, as amended by section 1113 of TRA 86 and section 9203 of OBRA 86, relating to minimum participation standards (see section 1.410(a)-4A of the proposed regulations).

(14) Sections 411(b)(1)(H) and 411(b)(2) of the Code, as added by section 9202 of OBRA 86, relating to accruals and allocations after a specified age (see section 1.411(b)-2 of the proposed regulations).

(15) If the plan is a contributor defined benefit plan, section 411(c)(2) of the Code, as amended by section 9346(b) of OBRA 87, relating to an employee's accrued benefit derived from employee contributions.

(16) Section 401(a)(17) of the Code, as added by section 1106. of TRA 86, relating to the limitation on annual compensation that may be taken into account.

(17) Section 401(a)(26) of the Code, as added by section 1112 of TRA 86, relating to additional participation requirements (see the proposed regulations under section 401(a)(26)).

05 MATERIAL THAT SPONSOR MUST FURNISH TO ADOPTING EMPLOYERS. A sponsor must furnish each adopting employer with a copy of the approved plan (including the trust or custodial account document) and notification letter.

06 FAILURE TO IDENTIFY QUESTIONABLE ISSUES MAY CAUSE DELAY. If the plan document submitted with the request for a notification letter contains a provision that gives rise to an issue for which contrary published authorities exist, failure to disclose and distinguish significant contrary authorities may result in requests for additional information, which will delay action on the request. (See section 7.06 of Rev. Proc. 83-36.)

07 SAMPLE LANGUAGE. A Listing of Required Modifications (LRM) containing sample language to be used in drafting regional prototype plans is available from the Employee Plans Technical & Actuarial Division of the Internal Revenue Service. Such language is not automatically required in regional prototype plans but should be used as a guide in drafting such plans. An LRM may be obtained by writing to the Internal Revenue Service, Employee Plans Technical & Actuarial Division, Washington, D.C. 20224, Attention E:EP:Q. To expedite the review of their plans, sponsors are encouraged to use LRM language and to identify where such language is being used in their plan documents.

SEC. 11. EMPLOYER RELIANCE; STANDARDIZED REGIONAL PROTOTYPE PLANS

01 RELIANCE. An employer adopting a standardized regional prototype plan may rely on its sponsor's notification letter, except as provided in subsections 02 and 03 below, if the following conditions are satisfied:

(1) The employer has followed the terms of the plan, and the coverage and contributions or benefits under the plan are not more favorable for highly compensated employees (as defined in section 414(q) of the Code) than for other employees;

(2) The employer has properly notified all interested parties of the adoption of the plan in accordance with rules similar to those set forth in section 8 of Rev. Proc. 80-30; and

(3) The employer has not received, within 120 days after the data the plan was adopted, notice from the Service that the plan will not be treated as qualified pursuant to this subsection. (In this regard, see section 4.14 of Rev. Proc. 80-30.)

02 NONRELIANCE BY EMPLOYER MAINTAINING MORE THAN ONE PLAN. Except in the case of a combination of paired regional prototype plans, if an employer maintains at any time, or has maintained at any time, any other plan, including a regional prototype plan, that was qualified or determined to be qualified covering some of the same participants, the employer may not rely on a notification letter issued with respect to a standardized regional prototype plan but, in order to have reliance that the plan is qualified under section 401(a) of the Code, must obtain a favorable determination letter. However, if the plan is qualified under section 401(a) of the Code, an employer may rely on a notification letter issued with respect to a standardized regional prototype plan without obtaining a determination letter if the only other plan maintained by that employer was a plan that was replaced by the standardized regional prototype plan for which reliance is sought. Both such plans must be of the same type (for example, both money purchase plans) in order for such reliance to be available.

03 RELIANCE BY EMPLOYER ADOPTING A STANDARDIZED DEFINED BENEFIT PLAN. An employer that has adopted a standardized defined benefit regional prototype plan may rely on a notification letter only if the plan satisfies one of the safe-harbors provided in regulations under section 401(a)(26) with respect to its prior benefit structure or is deemed to satisfy section 401(a)(26) under such regulations. However, in connection with the initial adoption or amendment by an employer of a standardized defined benefit plan, such employer may request a determination letter if the employer wishes to have reliance as to whether its plan satisfies section 401(a)(26) with respect to its prior benefit structure.

SEC. 12. DETERMINATION LETTERS AND INSTRUCTIONS TO ADOPTING EMPLOYERS

01 DETERMINATION LETTERS IN GENERAL. Except as provided in section 11, the issuance of a favorable notification letter does not imply that employers adopting the sponsor's plan have a qualified plan. In order to have reliance, such employers must obtain a favorable determination letter from the appropriate key district office. They should file a request in accordance with Rev. Proc. 80- 30.

02 SUBMISSION OF DETERMINATION LETTER REQUESTS. An employer requesting a determination letter with respect to its adoption of a sponsor's regional prototype plan should file Form 5307, Short Form Application for Determination for Employee Benefit Plan. The application should be submitted to the key district director for the district in which the employer's principal place of business is located, as specified in section 6.06(5) of Rev. Proc. 89-4. The employer must include a copy of the notification letter that the sponsor received and a certification by the sponsor that the notification letter has not been withdrawn and is still in effect with respect to the plan being submitted. (However, also see section 15.03.) The submission must include an adoption agreement showing which elections the employer is making with respect to the elective provisions contained in the plan as well as a copy of the employer's trust or custodial account document.

SEC. 13. MAINTENANCE OF APPROVED STATUS

01 REVOCATION OF NOTIFICATION LETTER BY THE SERVICE. A notification letter found to be in error or not in accord with the current views of the Service may be revoked. However, except in rare or unusual circumstances, such revocation will not be applied retroactively if the conditions set forth in section 14.05 of Rev. Proc. 83-36 are met. For this purpose, such notification letters will be given the same effect as rulings. Revocation may be effected by a notice to the sponsor of the plan to whom such letter was originally issued, or by regulation, revenue ruling or other statement published in the Internal Revenue Bulletin. The sponsor should then notify each adopting employer of the revocation.

02 SUBSEQUENT REQUIRED AMENDMENTS. Approved regional prototype plans must be amended by the sponsor and, if necessary, the employer, to retain their approved status if any provisions therein fail to meet the requirements of law, regulations, or other issuances and guidelines affecting qualification that become effective subsequent to the issuance of a notification letter. See section 14 and section 15.02 below regarding the time by which such amendments must be adopted and other requirements relating to the amendment of regional prototype plans.

SEC. 14. REGISTRATION/RELIANCE

01 GENERAL DESCRIPTION OF THIS SECTION. The provisions of this section enable employers that have adopted approved regional prototype plans to continue to rely on favorable notification or determination letters subsequent to changes in law that affect plan qualification, provided certain conditions are satisfied. Among these conditions are requirements, set forth in subsection 05, that adoptions of regional prototype plans be registered with key district offices and that sponsors provide certain notices to adopting employers and key district offices. The key district offices will not issue a notification letter with respect to a regional prototype plan unless the sponsor has agreed to comply with these registration and notice requirements. If a sponsor subsequently fails to comply with these requirements, employers that have adopted the sponsor's regional prototype plan will be considered to have individually designed plans and will not be entitled to the reliance described in this section. A sponsor is not prohibited from including the substance of these requirements in its regional prototype plan.

02 EMPLOYER RELIANCE. An employer that has received a favorable determination letter with respect to a regional prototype plan, or is entitled to rely on a notification letter pursuant to section 11, may not continue to rely on such determination letter or notification letter subsequent to the effective date with respect to its plan of a change in the Code or regulations or the publication by the Service of revenue rulings or other guidelines affecting the plan's qualified status unless the requirements of subsections 04 and 05 below are satisfied.

03 ISSUANCE OF DETERMINATION LETTERS DURING INTERIM PERIOD. Where an employer adopts an approved regional prototype plan subsequent to a change in law affecting plan qualification, key district offices will not, during the period described in subsection 04(1) below, refuse to issue a determination letter with respect to the plan unless the plan should not previously have been approved as to form because of an existing defect. However, the employer will not be entitled to rely on such determination letter or on a notification letter (if section 11 applies) unless the requirements of subsections 04 and 05 are satisfied.

04 REQUIREMENTS FOR RELIANCE. An employer will be entitled to the reliance described in subsections 01 and 02 only if the following requirements are satisfied:

(1) On or before the end of the 12-month period beginning with the earliest date on which the change in the qualification requirements becomes effective with respect to any plan (or such other date described in subsection 06 or section 15.02 or provided by notice in the Internal Revenue Bulletin), the sponsor amends the regional prototype plan and requests a notification letter with respect to such amendment.

(2) In the case of a mass submitter's regional prototype plan, this requirement will be satisfied it, by the end of the period described in paragraph (1), the mass submitter amends its regional prototype plan, requests a notification letter from the National Office with respect to such amendment, and, on behalf of each adopting sponsor, submits to the appropriate key district office an application for a notification letter along with a copy of the mass submitter's amendment and a covering letter certifying that the amendment has been submitted to the National Office for approval and that the sponsor intends to submit the approved amendment to the appropriate key district office within 60 days following the issuance of a notification letter by the National Office.

(3) The sponsor furnishes each adopting employer with a copy of the approved amendment and the key district office's notification letter within 60 days following the issuance of such notification letter.

(4) With regard to any adopting employer's plan, the amendment is effective as of the date the change in the qualification requirements became effective with respect to the plan. (In this regard, see subsection .07 and section 15.02 below.)

(5) If the amendment changes any provision of the adoption agreement or requires changes to any employer elections in the adoption agreement (or in the trust or custodial account document), the employer executes a new adoption agreement (and, if necessary, amends or modifies the trust or custodial account document) by the later of the end of the sixth calendar month beginning after issuance of this new notification letter or this end of any applicable remedial amendment period provided by regulations under section 401(b) of the Code.

(6) Except as provided in section 11, this employer requests a determination letter by the later of the two dates described in the preceding paragraph. Such a determination letter request may be made on Form 5307 and must include a copy of the new notification letter.

(7) To the extent that the employer's plan has not operationally complied with the change in the qualification requirements during the entire period for which the change has been effective with respect to the plan, the employer retroactively corrects such noncompliance (for example, through restoration of benefits) by the last day of the first plan year beginning after the latest of (a) the plan year in which the change first became effective with respect to the plan, (b) the plan year in which the new notification letter was issued, or (c) the plan year in which a new determination letter was issued.

(8) The sponsor complies with the registration requirements of subsection .05.

05 REGISTRATION REQUIREMENTS. A sponsor complies with the requirements of this subsection if, as part of its initial notification letter request, it agrees in writing, and subsequently abides by its agreement, to:

(1) Notify the key district office on each anniversary of the date of issuance of the initial notification letter as to whether the sponsor has made any changes to the plan and whether the sponsor intends to continue to make the plan available for adoption by employers;

(2) Provide the key district office on each such anniversary date with (a) cumulative lists of the names, business addresses and taxpayer identification numbers of all employers (both in and outside the region): (i) that adopted the plan and are currently maintaining it (if the sponsor is continuing its sponsorship of the plan with respect to those employers), and (ii) that previously adopted the plan (if the sponsor has discontinued its sponsorship of the plan with respect to those employers during the prior 12-month period), and (b) a certification that it is in current compliance with the notification requirements in paragraphs (3) and (4) below.

(3) Notify each employer that had adopted the plan, but with respect to whom the sponsor has discontinued its sponsorship of the plan, by certified mail as soon as possible after such discontinuance (but not later than 60 days thereafter) that the employer's plan will be treated as an individually designed plan if the employer is continuing to maintain it and has not replaced it with another regional prototype plan (see Item 1 of the Appendix for a pattern notice that may be used);

(4) Notify each adopting employer annually, in writing, as to whether the sponsor continues to be a sponsor, whether any amendments have been made to the regional prototype plan, and, if amendments have been made, the requirements the employer must satisfy in order to be entitled to reliance (see pattern notice in Item 2 of the Appendix);

(5) Notify both the key district office and all adopting employers at the earliest possible date if the sponsor intends to discontinues its sponsorship of the regional prototypes plan (see pattern notices in Item 3 of the Appendix); and

(6) Furnish to the key district office upon request, copies of the notifications described in paragraphs (3), (4) and (5).

06 AMENDMENTS FOLLOWING PUBLICATION OF REVENUE RULINGS, ETC. If an approved regional prototype plan is required to be amended to retain its approved status as a result of publication by the Service of a revenue ruling, notice or similar statement in the Internal Revenue Bulletin I.R.B.), then, unless section 15.02 is applicable or unless specifically stated otherwise in the revenue ruling, etc., for purposes of subsection .04 above, the time by which the sponsor must amend its regional prototype plan to conform to the requirements of the revenue ruling, etc. and request a new notification letter shall be the end of the one-year period after its publication in the I.R.B., and with respect to any adopting employer's plan the effective date of such amendment shall be the first day of the first plan year beginning within such one-year period.

SEC. 15. SPECIAL PROVISIONS RELATING TO TRA 86

01 DELAYED SUBMISSIONS. Except with respect to applications that are filed with the National Office of the Service for notification letters relating to mass submitter regional prototype plans, applications for notification letters submitted under this revenue procedure will not be accepted prior to July 14, 1989. Applications filed with the National Office relating to mass submitter regional prototype plans will not be accepted prior to April 17, 1989.

02 EXTENDED RELIANCE. A sponsor which submits a regional prototype plan that has been amended in accordance with the requirements specified in sections 6 and 10 of this revenue procedure (and all other requirements that are in effect on the date the application is submitted) on or before October 31, 1989, and receives a favorable notification letter under this procedure, will not be required to amend its plan for subsequent regulations under TRA 86, OBRA 86, OBRA 87, or for revenue rulings, revenue procedures or other Service releases issued after the date of the application, before the earlier of December 31, 1994 or the date the plan is otherwise required to be amended by subsequent legislation. Solely for purposes of this subsection, a regional prototype plan which is submitted to the Service after October 31, 1989 as a word-for-word identical adoption of a mass submitter plan that has been amended in accordance with the requirements specified in sections 6 and 10 of this revenue procedure (and all other requirements in effect on the date of the mass submitter's application) and that has been submitted to the Service on or before October 31, 1989, will be deemed to have been submitted to the Service on the date of the mass submitter's application. Any employer that adopts a plan described above, and is otherwise entitled to reliance, may continue to rely on the determination letter (or notification letter, if applicable) until the earlier of the last day of the last plan year commencing before January 1, 1995 or the date established for plan amendment by any subsequent legislation. In unusual circumstances, the Service may require regional prototype plans to be amended for, or operationally comply with, qualification requirements issued by the Service after a request for a notification letter or determination letter is submitted but prior to the end of this extended reliance period. The Service will require this action only in cases where it is necessary to correct a fundamental error or omission that is likely to affect participants' rights or tax revenues in a significant number of plans. Any rule or regulation remedying an omission or correcting an error will generally be made effective prospectively for plans which have met the requirements for extended reliance. However, the Service reserves the right to make such a rule or regulation applicable to such plan during the entire extended reliance period. Upon termination of an employer's regional prototype plan prior to the end of the extended reliance period, the plan must be amended retroactively to the effective date of any intervening change with respect to which operational compliance was required in order to correct a fundamental error or omission. This extended reliance period will not prevent the Service from requiring a plan to be amended to correct any defect in the plan which was not discovered upon prior review by the Service.

03 PROCEDURE FOR EXTENSION OF REMEDIAL AMENDMENT PERIOD PENDING ISSUANCE OF NOTIFICATION LETTER. In the event that an employer establishing a new plan or amending an existing plan to comply with TRA 86 by adopting a regional prototype plan cannot file a determination letter request under this procedure prior to the expiration of its remedial amendment period under section 1.401(b)-1 of the regulations solely because the sponsor of the regional prototype plan has not as of such time received a favorable notification letter, then the end of such remedial amendment period under section 1.401(b)-1(c)(2) of the regulations shall be deemed to be the date on which the employer actually files a determination letter request under this procedure provided all of the following conditions are satisfied:

(1) In the case where the employer is adopting a nonmass submitter regional prototype plan, the sponsor's application for a notification letter was submitted to the Service on or before October 31, 1989, and was still pending with the Service as of the date 30 days preceding the date the employer's remedial amendment period would expire without regard to this section. In the case where the employer is adopting a mass submitter regional prototype plan, the mass submitter's application was submitted to the Service on or before October 31, 1989, the sponsor's name was included on the mass submitter's list described in section 9.03 (or on a follow-up list submitted on or before October 31, 1989), and (a) the mass submitter's application was still pending with the National Office on the date 60 days preceding the end of the remedial amendment period, or (b) the sponsor's application was pending with the key district office on the date 30 days preceding the end of the remedial amendment period.

(2) The employer and the sponsor execute a written certification in the form set forth in Item 4 of the Appendix. Such written certification must be executed by both the employer and the sponsor by no later than the date on which the employer's remedial amendment period would expire without regard to this section.

(3) The employer files an application for a determination letter with respect to its adoption of the sponsor's approved regional prototype plan in accordance with this procedure by no later than the 60th day following the date of the favorable notification letter issued to the sponsor and attaches to its application the certification described in subsection .03(2), above. In the case of an employer not otherwise required to file a request for a determination letter pursuant to section 11, such employer may, under the circumstances described in subsection .03(1), above, extend its remedial amendment period until the 60th day after the date a favorable notification letter is issued to the sponsor provided the certification described above is timely executed and retained by the employer as evidence of extension of the remedial amendment period and the employer adopts the sponsor's approved regional prototype plan by no later than the 60th day after the date of the favorable notification letter. Sponsors and employers should note that nothing contained herein permits a plan to be made retroactively effective for a taxable year prior to the taxable year of the employer in which the plan was first adopted by the employer.

SEC. 16. WITHDRAWAL OF REQUESTS

01 NOTIFICATION AND EFFECT. A sponsor may withdraw its request for a notification letter at any time prior to the issuance of such letter by giving written notice of such withdrawal to the office in which the request is pending.

02 SERVICE RETAINS INFORMATION. Even though a request is withdrawn, the Service will retain all correspondence and documents associated with the request and will not return them to the sponsor of the plan.

SEC. 17. USER FEES

Pursuant to section 10511 of OBRA 87, the following user fees have been established with respect to the notification letters and determination letters provided for in this revenue procedure:

     Mass submission of regional prototype plan, per

01 Rev. proc. 84-86 is superseded.

02 Rev. Proc. 89-4 is modified by establishing the new subcategories and related fees described in section 17 above.

SEC. 19. EFFECTIVE DATE

This revenue procedure is effective February 13, 1989, the date of its publication in the Internal Revenue Bulletin.

DRAFTING INFORMATION

The principal author of this revenue procedure is John H. Turner, of the Employee Plans Technical and Actuarial Division. For further information regarding this revenue procedure, please contact the Employee Plans Technical and Actuarial taxpayer assistance telephone service between the hours of 1:30 p.m. and 4:00 p.m. Eastern Time, Monday through Friday, on (202) 566-6783/6784 (not a toll-free call). Mr. Turner's telephone number is (202) 566-3148 (also not a toll-free call).

APPENDIX

1. PATTERN NOTICE THAT MAY BE USED TO NOTIFY EMPLOYER THAT ITS PLAN WILL BE TREATED AS AN INDIVIDUALLY DESIGNED PLAN

NOTICE

To: (Name of Employer)

On (date plan was adopted) you adopted the (name of plan) regional prototype plan. As of (date of discontinuance), we have discontinued our sponsorship of the plan as adopted by you. The purpose of this notice is to advise you that if you are continuing to maintain the plan and have not replaced it with another approved regional prototype plan or an approved master or prototype plan, the plan will be treated by the Internal Revenue Service as an individually designed plan. As a consequence, if it becomes necessary to amend the plan because of a change in the law or because of regulations or other guidelines issued by the Service, you will not be entitled to continue to rely on any determination letter you received from the Service as to the regional prototype plan's qualified status (or, in the case of a standardized plan, on the notification letter we received). In order to continue such reliance, you must obtain a favorable determination letter as to the qualified status of the individually designed plan.

(signature) date)

2. PATTERN NOTICE THAT MAY BE USED TO NOTIFY EMPLOYER ANNUALLY AS TO WHETHER SPONSOR CONTINUES TO BE A SPONSOR, WHETHER ANY AMENDMENTS HAVE BEEN MADE, AND, IF AMENDMENTS HAVE BEEN MADE, WHAT REQUIREMENTS MUST BE SATISFIED FOR RELIANCE

NOTICE

To: (Name of Employer)

On (date of adoption) you adopted the (name of plan) regional prototype plan sponsored by us. The purpose of this notice is to advise you that, as of December 31, 19 -- , we are continuing our sponsorship of the plan and that [the plan has not been amended in the year ending on that date.]/[the plan has been amended as follows in the year ending on that date: (describe amendment)). The requirements that you must satisfy in order to be able to continue to rely on any favorable determination letter you received from the Internal Revenue Service as to the plan's qualified status (or, in the case of a standardized plan, on the notification letter issued to us) are set forth in section 14.04 of Rev. proc. 89-13, 1989-7 I.R.B.

(signature) (date)

3. PATTERN NOTICES THAT MAY BE USED TO NOTIFY KEY DISTRICT OFFICE AND ALL ADOPTING EMPLOYERS THAT SPONSOR INTENDS TO DISCONTINUE SPONSORSHIP OF PLAN

NOTICE

To: Chief, EP/EO Division

_________ Key District

This is to inform you, in accordance with section 14.05(5) of Rev. Proc. 89-13, 1989-7 I.R.B. , that we intend to discontinue our sponsorship of the regional prototype plan as of ____, 19__. The plan was approved by you on ____, 19__, by notification letter number _____.

(signature) (date)

NOTICE

To: (Name of Employer)

This is to inform you that, as of ___, 19__, we intend to discontinue our sponsorship of the (name of plan) regional prototype plan, which you adopted on (date of adoption). If you continue to maintain the plan and do not adopt another approved regional prototype plan or an approved master or prototype plan to replace it, the plan will be treated by the Internal Revenue Service as an individually designed plan. In that case, if it becomes necessary to amend the plan because of a change in the law or because of regulations or other guidelines issued by the Service, you must obtain a favorable determination letter from the appropriate key district office in order to have continued reliance as to the plan's qualified status.

(signature) (date)

4. CERTIFICATION TO EXTEND REMEDIAL AMENDMENT PERIOD IN ACCORDANCE WITH SECTION 15.03

(To be completed by employer)

I, (name of signatory) , hereby certify under penalty of perjury that (name of adopting employer if different from name of signatory/ I) intend(s) to adopt the regional prototype plan sponsored by (name of sponsor) once it has been approved by the Internal Revenue Service, and that I make this certification on the date set forth below for the purpose of extending the remedial amendment period under section 1.401(b)-1 of the Income Tax Regulations.

(Signature / Title) (Date signed)

(Signature / Title) (Date signed)