SERVICE ISSUES SPECIAL PROCEDURES FOR TAXPAYERS TO OBTAIN DETERMINATION LETTERS FOR ON-GOING DEFINED CONTRIBUTION PLANS.

Rev. Proc. 90-20

SECTION 1. PURPOSE

This revenue procedure sets forth special procedures of the Internal Revenue Service pertaining to the issuance of determination letters on the qualified status of certain ongoing pension, profit-sharing, and annuity plans under sections 401 and 403(a) of the Internal Revenue Code, as amended by 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, the Omnibus Budget Reconciliation Act of 1987 (OBRA '87), Pub. L. 100-203, the Technical and Miscellaneous Revenue Act of 1988 (TAMRA), Pub. L. 100-647, and the Omnibus Budget Reconciliation Act of 1989 (OBRA '89), Pub. L. 101-239, and pertaining to the status of any related trusts or custodial accounts under section 501(a). These special procedures are in addition to the Service's general determination letter procedures under Rev. Proc. 80-30, 1980-1 C.B. 685.

SEC. 2. OVERVIEW

This revenue procedure provides that on or after April 30, 1990, certain ongoing defined contribution plans may file for determination letters that include consideration of the changes made by TRA '86, OBRA '86, OBRA '87, TAMRA, and OBRA '89 (collectively, "TRA"). Section 3 lists and provides a brief summary of other revenue procedures and notices relating to the determination letter program. Section 4 describes the types of plans that may be submitted for these determination letters and provides general guidance for employers with other types of plans. Section 5 provides general application instructions. Section 6 provides special application rules for applicants who want a determination on Internal Revenue Code section 401(a)(26) minimum participation requirements. Sections 7 and 8 provide special rules for adopters of master or prototype, regional prototype, and volume submitter plans, and for multiple employer plans. Finally, section 9 makes corresponding modifications to other revenue procedures on the determination letter program. The Service will extend this determination letter program beyond plans described in section 4 as soon as possible after the issuance of necessary guidance, particularly regarding the nondiscrimination requirements of section 401(a)(4).

SEC. 3. BACKGROUND AND GENERAL INFORMATION

01 Rev. Proc. 80-30 sets forth the general procedures of the Service relating to the issuance of determination letters on the qualification of pension, profit-sharing, stock bonus, and annuity plans, including determination letters involving the termination of such plans.

02 Notice 86-13, 1986-2 C.B. 377, provides that, until further notice, determination letter requests concerning qualification of pension, profit-sharing, stock bonus, and annuity plans will not be reviewed for qualification requirements changed by TRA '86, other than certain retroactive technical corrections.

03 Rev. Proc. 88-42, 1988-2 C.B. 613, sets forth special procedures pertaining to the issuance of determination and notification letters regarding the qualified status of plans that contain provisions of TRA '86, 0OBRA '86, and OBRA '87 that are effective for plan years beginning before January 1, 1989. Under Rev. Proc. 88-42, plan sponsors that submit an application for a determination letter on or after September 12, 1988 may request that the determination letter reflect consideration of the qualification requirements as they are in effect for plan years beginning before 1989.

04 Notice 87-57, 1987-2 C.B. 368, and Rev. Proc. 88-9, 1988-1 C.B. 634, set forth special procedures pertaining to the issuance of determination letters on the qualification of pension, profit- sharing, stock bonus, and annuity plans that will be terminated prior to the delayed amendment date provided in section 1140 of TRA '86. In order to receive a favorable determination letter upon termination, Notice 87-57 and Rev. Proc. 88-9 require a qualified plan terminating prior to the delayed amendment date of section 1140 to be amended to reflect the law in effect at the time of termination.

05 Rev. Proc. 89-9, 1989-1 C.B. 780, sets forth the procedures of the Service pertaining to the issuance of opinion letters for master and prototype (M&P) pension, profit-sharing, and annuity plans under sections 401 and 403(a) of the Code as amended by TRA '86, OBRA '86, OBRA '87, and TAMRA.

06 Rev. Proc. 89-13, 1989-1 C.B. 801, sets forth the procedures of the Service pertaining to the issuance of notification letters for regional prototype defined contribution and defined benefit plans.

07 Announcement 89-107, 1989-36 I.R.B. 25, provides information pertaining to the approval of volume submitter specimen pension and profit-sharing plans under TRA '86.

08 Rev. Proc. 89-65, 1989-50 I.R.B. 8, extends the remedial amendment period under section 401(b) of the Code within which a plan must be amended to comply with the requirements of TRA '86, OBRA '86, OBRA '87, and TAMRA until the end of a plan's 1991 plan year. In addition, Rev. Proc. 89-65 provides that the Service will begin accepting applications for determination letters in early 1990 (concurrent with the issuance of the revised Form 5300 (which will combine current Forms 5300 and 5301), Form 5303, and Form 5307).

09 Announcement 89-154, 1989-50 I.R.B. 16, provides that the Service will begin issuing opinion, notification, and advisory letters regarding the acceptability of M&P, regional prototype and volume submitter specimen defined contribution plans (other than target benefit plans) under TRA on January 4, 1990.

10 Rev. Proc. 90-17, 1990-12 I.R.B. 13, sets forth procedures relating to the payment of user fees for requests to the Service for rulings, determination letters, and similar requests.

SEC. 4. APPLICABILITY OF PROCEDURE

01 If requested by the applicant in accordance with section 5, an application fob determination of the qualified status of an ongoing plan described in subsection .02 that is filed with the Service on or after April 30, 1990 will be reviewed by the Service for compliance with the requirements of TRA, including those requirements that are first effective for plan years beginning on or after January 1, 1989.

02 A plan is described in this subsection if (i) it is an adoption of a pre-approved plan (i.e., an M&P, regional prototype, or volume submitter plan that has received a favorable opinion, notification, or advisory letter on or after January 4, 1990) or an individually designed plan and (ii) if all of the following requirements are met by the plan or the employer(s) maintaining the plan:

(1) the plan is a defined contribution plan (other than a target benefit plan, a stock bonus plan, an ESOP, or a plan under which the test for prohibited discrimination under section 401(a)(4) of the Code is made by reference to benefits rather than contributions);

(2) the employer is not using the average benefit percentage test under section 410(b)(2) of the Code to demonstrate that the minimum coverage requirements are met by the plan or any other plan with which it would have to be aggregated under section 1.410(b)-7(e) of the proposed regulations;

(3) the employer is not applying the line of business exception under section 410(b)(5) for purposes of determining whether the minimum coverage requirements are met;

(4) if the plan provides for disparity in contributions that favors highly compensated employees, the disparity satisfies the requirements of section 401(1), the proposed regulations thereunder, and Notice 89-70, 1989-1 C.B. 730; and

(5) the plan does not rely on any other plan to satisfy the minimum coverage requirements of section 410(b) or the nondiscrimination requirements of section 401(a)(4).

03 Any application relating to an ongoing plan described above that is submitted prior to April 30, 1990 will be reviewed in accordance with the procedures contained in Rev. Proc. 88-42 or Notice 86-13, as applicable, unless the applicant chooses to withdraw the application. Regardless of whether the earlier application has been withdrawn, the applicant must file a new application in accordance with this revenue procedure to receive a determination letter that considers all requirements of TRA. The Service will not refund any user fee paid with the earlier application, but the applicant may be entitled to relief from imposition of a user fee on the new application under section 5.06.

04 Until further notice, determination letter applications for ongoing plans that are not described above will continue to be reviewed and processed in accordance with Notice 86-13 or Rev. Proc. 88-42, as applicable. These applications must be filed on the most recent version of the applicable form with a revision date prior to January, 1990.

05 Because of the extension of the remedial amendment period provided in Rev. Proc. 89-65, no ongoing qualified plan is required to be amended for TRA until the end of the first plan year beginning after December 31, 1990. Therefore, sponsors of plans not described above who have not yet submitted determination letter applications should consider delaying the submission of these applications until they can be reviewed for compliance with all requirements of TRA.

06 This revenue procedure does not apply to determination letter requests involving terminating plans. The Service will continue to accept applications for these plans in accordance with Notice 87-57 and Rev. Proc. 88-9.

SEC. 5. GENERAL INSTRUCTION TO SPONSORS

01 The instructions in this section apply in all cases in which an applicant seeks a determination of the qualified status of an ongoing plan described in section 4.02 that considers all requirements of TRA.

02 The applicant must include with its application a certification (separate from any cover letter submitted with the application) in which the applicant or the applicant's representative certifies that the requirements set forth in section 4.02 are met by the plan or the employer maintaining the plan. In the case of a plan that is not a single employer plan, the applicant or representative must certify that the requirements are met by the plan and each participating employer.

03 If the plan has received a favorable determination letter in the past, the application must also include a copy of the latest determination letter, if available. If the letter is not available, an explanation must be included in a cover letter.

04 The application form that is used to request a determination letter under this revenue procedure must have a revision date of January, 1990, or later, ("new form"). An application that is not submitted under this revenue procedure (i.e. an application submitted pursuant to Notice 86-13 or Rev. Proc. 88-42) must be filed on the most recent version of the form with a revision date before January, 1990. The following new forms are required to be filed for applications for determination letters under this revenue procedure regardless of whether the application relates to the initial qualification or amendment of a plan:

 Individually Designed Plan              Form 5300, Application

05 In general, applications filed under this revenue procedure must include a Form 5302, Employee Census, revised January, 1990, or later. However, a Form 5302 need not be filed for a collectively bargained plan that does not cover any employees who are not included in the collective bargaining unit or any employees of the representative labor union or the plan.

06 Applications filed under this revenue procedure must include the appropriate user fee determined under Rev. Proc. 90-17, and should include Form 8717, User Fee for Employee Plan Determination Letter Requests. However, a user fee will not be required for an application relating to an ongoing plan described in section 4.02 that is filed under this revenue procedure if the applicant has previously paid a user fee for a determination letter application involving the same plan and one of the following conditions is met:

1. The prior application was filed before April 9, 1990 and was still pending with the Service on that date.

2. The prior application was filed on or after April 9, 1990 but was not filed on a new form in accordance with this procedure.

In order to avoid the imposition of an additional user fee on the new application, the applicant must certify that a user fee was previously paid and that one of the above conditions has been met by printing "Application Eligible for Waiver of User Fee Under Rev. Proc. 90-*" in bold letters on the top of the first page of the new application form.

07 Requests for determination letters for ongoing plans that are submitted on or after April 30, 1990 on the proper new form but are not accompanied by the certification required by section 5.02 will be returned without further review. In this case, the applicant will have the opportunity to perfect the application.

08 In the case of an initial submission under this revenue procedure for a plan other than an M&P or regional prototype plan, the application must include a copy of the restated plan. Pages of amendments, in lieu of the restated plan, will not be accepted. The effective dates for required amendments must be clearly identified.

SEC. 6. SPECIAL RULES THAT APPLY TO DETERMINATIONS INVOLVING MINIMUM PARTICIPATION REQUIREMENTS

Section 401(a)(26) of the Code and the proposed regulations thereunder generally require a plan that benefits active employees to benefit at least the lesser of 50 active employees or 40 percent of all nonexcludable active employees of the employer. A determination letter issued under this revenue procedure will not consider whether the plan meets this requirement unless the applicant requests consideration of this issue on the application form. To receive a determination that the plan meets this requirement, the applicant must also submit information with the application that demonstrates compliance with the section 401(a)(26) minimum participation test for active employees. For example, there must be a demonstration that the plan and separate benefit structures in the plan, if any, comply with section 401(a)(26). This may be done either by showing that 50 active employees or 40 percent of the employer's active employees benefit under the plan or separate benefit structure, or by showing that the plan or benefit structure satisfies one of the applicable exceptions or special rules. For purposes of identifying current benefit structures under the plan, the applicant may use the transition rule for current benefit structures provided in the proposed regulations. The transition rule may be used for plan years beginning before the later of (i) January 1, 1992, or (ii) 60 days after the final regulations under section 401(a)(26) are published in the Federal Register, as long as the application for the determination letter is filed by the last day of such plan year.

SEC. 7. SPECIAL RULES FOR M&P, REGIONAL PROTOTYPE, AND VOLUME SUBMITTER PLANS

01 In general, an employer that adopts a standardized M&P or regional prototype plan need not request a determination letter as to the qualified status of the plan. However, if the employer has, at any time, maintained another plan in addition to the standardized plan or adopts another plan, other than another standardized plan of the same sponsor that is designed to satisfy Code sections 401(a) (4), 415, and 416 when adopted in conjunction with the employer's plan (i.e., a paired plan), then the employer must file an application for a determination letter under section 5 in order to be entitled to reliance that the plan complies with the requirements of section 415 of the Code.

02 All applications for determination letters submitted by M&P or regional prototype plan adopters must be accompanied by a copy of the adoption agreement. In addition, an application involving a regional prototype plan that uses separate trust or custodial account documents must include copies of these documents.

03 All applications for determination letters submitted by adopters of Service approved volume submitter plans must be accompanied by a copy of the plan and trust instrument and by a written representation, made by the volume submitter, that explains how the plan and trust instrument differ from the approved specimen plan, specifying the location, nature and effect of each difference. The extent to which the plan and trust instrument may differ from the approved specimen plan is governed by the procedures of the appropriate Key District Office.

04 All applications submitted by adopters of M&P, regional prototype, or volume submitter plans must also be accompanied by a copy of the opinion, notification, or advisory letter issued to the plan.

SEC. 8. SPECIAL RULES FOR MULTIPLE EMPLOYER PLANS

01 The instructions contained in this section apply to applications filed for plans described in section 413(c) of the Code.

02 An application filed for a multiple employer plan must include a completed Form 5300 for the plan, filed on behalf of one employer, and a separate Form 5300 completed through line 12 for each other employer maintaining the plan. In addition, a completed Form 5302 must be filed for each employer maintaining the plan.

03 Certain multiple employer plans have in the past received Service approval as M&P plans. These plans may continue to use an adoption agreement format if the application includes a completed adoption agreement for each employer maintaining the plan. Regardless of whether an adoption agreement format continues to be used for the plan, the rules of section 1.414(l)-1 of the regulations apply in determining whether the plan is a single plan for which only one determination letter will be issued and which requires only one user fee.

04 The complete application, including all Forms 5300 and 5302 (and, if applicable, adoption agreements) for employers maintaining the plan as of the date of the application, must be filed as one package submission in the key district office where the association maintaining the plan, the trustees, or the plan administrators have their principal place of business. The application must be directed to the attention of the key district office volume submitter coordinator.

05 Multiple employer plan applicants that previously received Service approval as M&P plans and intend to continue use of an adoption agreement format are encouraged to request preliminary approval of the provisions of the plan, including the permitted adoption agreement elections, prior to making the submission described above. Preliminary approval may be requested by making a specific request to the volume submitter coordinator for the key district where the complete application will be filed, and attaching a copy of the plan and trust instrument, including a blank adoption agreement, and a copy of the latest opinion letter. The request should not include an application form or user fee. The key district will notify the applicant in writing if preliminary approval is granted, and the complete application may then be filed. Employers will not be entitled to rely on the preliminary approval as to the qualified status of the plan. If the applicant requests preliminary approval of the plan on or before the date that is 6 months after proposed regulations under section 401(a)(4) are published in the Federal Register, the Service will treat the TRA '86 section 401(b) remedial amendment period for the plan as not expiring earlier than the date that is twelve months after the date of the key district's preliminary approval.

06 The Service will mail a copy of the determination letter issued for the plan to each employer maintaining the plan.

07 If other employers become participating employers under the plan after a favorable determination letter has been issued, the employers may not continue to rely on the letter. However, an applicant may request a determination that the addition of new participating employers to the plan does not adversely affect qualified status by filing a completed Form 5300 for the plan, in the name of the controlling member on the Form 5300 previously filed, and a supplemental Form 5300 and Form 5302 (and, if applicable, adoption agreement) for each new participating employer. The Service will send copies of this determination letter only to the applicant and the new participating employers.

SEC. 9. EFFECT ON OTHER DOCUMENTS

01 Rev. Proc. 88-42 is superseded for determination letter applications regarding plans described in section 4.02 of this revenue procedure that are filed under this revenue procedure on or after April 30, 1990.

02 Section 4.02 of Rev. Proc. 80-30 is modified to provide that the special instructions in this revenue procedure will apply to any determination letter application filed with the Service on or after April 30, 1990.

03 Sections 4.05 of Rev. Proc. 80-30, 4.04 of Rev. Proc. 85-43, and 12.02 of Rev. Proc. 89-13 are modified to provide that an employer that has adopted a master or prototype, regional prototype, or volume submitter plan and wants a determination as to its status as a member of an affiliated service group or as to whether it is the recipient of services of leased employees must file Form 5300, rather than Form 5307.

SEC. 10. EFFECTIVE DATE

This revenue procedure is effective on April 9, 1990.

DRAFTING INFORMATION

The principal author of this revenue procedure is Charles D. Lockwood of the Employee Plans Technical and Actuarial Division. For further information regarding this revenue ruling, please contact the Employee Plans Technical and Actuarial Division's taxpayer assistance telephone service or Mr. Lockwood between the hours of 1:30 p.m. and 4 p.m. Eastern Time, Monday through Thursday by calling (202) 566- 6783/6784 or (202) 343-0729, respectively. (These telephone numbers are not toll-free numbers).