SECTION 3. OVERVIEW OF THE

REVENUE PROCEDURE

.01 In General - The Service believes that it is no longer necessary or practical for it to maintain separate prototype plan approval programs for the institutional sponsoring organizations, such as banks and insurance companies, that were eligible to sponsor M&P plans under Rev. Proc. 89–9, and the practitioner sponsors that were eligible to sponsor regional prototype plans under Rev. Proc. 89–13. Therefore, this revenue procedure revises and combines Rev. Proc. 89–9, Rev. Proc. 89–13, and Rev. Proc. 93–10 to establish a unified program that will be available to both institutional and practitioner sponsors that seek approval of master or prototype plans. Under this unified procedure, sponsors may request opinion letters that take into account all the requirements of GUST, including the requirements of SBJPA that are effective in plan years beginning on or after January 1, 1999.

.02 Organization of Revenue Procedure - This revenue procedure generally is patterned after and follows the organization of Rev. Proc. 89–9.

.03 Modifications to Rev. Proc. 89–9 and Rev. Proc. 89–13 Incorporated – Since Rev. Proc. 89–9 and Rev. Proc. 89–13 were published, they have been modified several times. Among the significant modifications were changes to the requirements for standardized plans that were needed to reflect the regulations under §§ 401(a)(4) and 410(b). In general, this revenue procedure incorporates these modifications.

.04 Unified Program - Under Rev. Proc. 89–9 and Rev. Proc. 89–13, different requirements applied to M&P plans and regional prototype plans. Under the unified program in this revenue procedure, one set of requirements and procedures will apply to all sponsors. In general, this revenue procedure provides that any options that were available to sponsors or employers under either Rev. Proc. 89–9 or Rev. Proc. 89–13 will now be available to all sponsors or employers under the new program. For example,

under Rev. Proc. 89–9, M&P plan sponsors were allowed to sponsor paired defined benefit and defined contribution plans, while under Rev. Proc. 89–13, regional prototype plan sponsors could sponsor paired defined contribution plans but not defined benefit plans that were paired with a defined contribution plan. Under this revenue procedure, all sponsors may sponsor paired defined benefit and defined contribution plans.

.05 Retention of M&P Terminology Because sponsors will continue to be eligible to sponsor both master plans and prototype plans, plans that may be sponsored under this revenue procedure are referred to as M&P plans. Where appropriate, references in this revenue procedure to M&P plans include plans that were regional prototype plans under Rev. Proc. 89–13. Likewise, where appropriate, references in this revenue procedure to opinion letters include notification letters that were issued under Rev. Proc. 89–13.

.06 New Sponsor Definition - Under Rev. Proc. 89–9, sponsoring organization was defined to include banks, insurance companies, and certain other institutions or associations. Rev. Proc. 89–9, as modified by Rev. Proc. 90–21, also included restrictions and additional requirements regarding the types of M&P plans that could be sponsored by trade or professional associations. Under Rev. Proc. 89–13, sponsor was defined as any person with an established place of business in the United States which could establish that at least 30 employers would adopt its approved regional prototype plan. In general, this revenue procedure defines sponsor using the definition in Rev. Proc. 89–13. Any person that would be eligible to sponsor a plan under Rev. Proc. 89–9 or Rev. Proc. 89–13 will be eligible to sponsor plans under this revenue procedure, provided at least 30 employers are reasonably expected to adopt a basic plan document of the sponsor within the 12month period following its approval. In addition, any person with an established place of business in the United States may sponsor an M&P plan as a word-for-word identical adopter or minor modifier adopter of an M&P plan of a mass submitter, regardless of the number of employers that are expected to adopt the plan. As a result of this new sponsor definition, the restrictions and additional re

quirements that formerly applied to M&P plans sponsored by trade or professional associations have been eliminated.

.07 Sponsor Responsibilities - This revenue procedure provides that by filing an application for an opinion letter, or by having an application filed on its behalf by a mass submitter, a sponsor agrees to comply with the requirements that apply to sponsors under the procedure. For example, under this procedure, sponsors must make reasonable and diligent efforts to ensure that adopting employers amend their plans when necessary. Failure to comply with these requirements may result in the loss of eligibility to sponsor M&P plans and the revocation of opinion letters that have been issued to the sponsor. This revenue procedure simplifies the record keeping requirements that applied to regional prototype plan sponsors under Rev. Proc. 89–13 and applies these simplified requirements to all sponsors. Under this revenue procedure, every sponsor will be required to maintain or have maintained on its behalf, and to provide to the Service when requested, a list of the employers that have adopted its plan, but sponsors will not have to provide the annual notices that were required by Rev. Proc. 89–13. Finally, this revenue procedure provides that in cases where a sponsor reasonably concludes that an employer’s M&P plan may no longer be a qualified plan and the sponsor does not or cannot submit a request to correct the qualification failure under the Service’s Employee Plans Compliance Resolution System (EPCRS), it is incumbent on the sponsor to notify the employer that the plan may no longer be qualified, advise the employer that adverse tax consequences may result from loss of the plan’s qualified status, and inform the employer about the availability of EPCRS.

.08 New Mass Submitter Definition Both Rev. Proc. 89–9 and Rev. Proc. 89–13 provided procedures for simplified processing and expedited approval of mass submitter plans. Under Rev. Proc. 89–9, a mass submitter was defined as any person that submitted applications on behalf of at least 10 sponsoring organizations that were adopting the identical plan. Under Rev. Proc. 89–13, a mass submitter was defined as any person that could establish that at least 50 unaffiliated sponsors would adopt the identical plan.

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In general, this revenue procedure requires that at least 30 unaffiliated adopting sponsors adopt a basic plan document of the mass submitter, but it also provides a grandfather rule so that any person that received an opinion letter as a mass submitter under Rev. Proc. 89–9 will generally qualify as a mass submitter under this revenue procedure.

.09 Changes to General M&P Plan Requirements - This revenue procedure makes several changes and clarifications to the requirements that apply to all M&P plans. Significant among these are the following:

1 Rev. Proc. 89–9 and Rev. Proc. 89–13 prohibited the issuance of opinion and notification letters for plans that contain or may contain multi-tiered benefit structures. This prohibition has been reformulated as a general requirement that the allocation or benefit formula in a nonstandardized M&P plan must satisfy the following uniformity requirements of the regulations under § 401(a)(4) pertaining to safe harbor plans. In the case of a nonstandardized defined contribution plan, the allocation formula must be a uniform allocation formula, within the meaning of § 1.401(a)(4)–2(b)(2) of the regulations, or a uniform points allocation formula, within the meaning of § 1.401(a)(4)–2(b)(3)(i)(A). In the case of a nonstandardized defined benefit plan, the benefit formula must satisfy each of the uniformity requirements of § 1.401(a)(4)–3(b)(2). In addition, each nonstandardized plan must give the employer the option to select total compensation as the compensation to be used in determining allocations or benefits and each nonstandardized defined benefit plan must automatically or by option allow the adopting employer to satisfy one of the design-based safe harbors described in § 1.401(a)(4)–3(b)(3), (4), and (5). (Of course, standardized plans and nonstandardized safe harbor plans continue to be required to satisfy design-based safe harbors described in the regulations under § 401(a)(4).) Thus, for example, an M&P plan, other than a uniform points defined contribution plan, may provide for disparity in the rates of employer contributions allocated to participants’ accounts provided the plan satisfies § 401(l) in form. Exceptions to the uniformity requirements are provided for Davis-Bacon

plans, plans that would fail to satisfy the requirement only because of the plans’ top-heavy provisions, and plans that have continued to apply certain limitations under the Code that were repealed by GUST.

2 The procedure allows plans that include provisions designed to satisfy the safe harbor requirements of § 401(k)(12) to provide that the safe harbor matching or nonelective contribution requirement will be satisfied in another plan. However, this option is not available in standardized plans, other than paired defined contribution plans whose terms satisfy the requirements of Notice 98–52, 1998–46 I.R.B. 16, as modified by Notice 2000–3, 2000–4 I.R.B. 413. 3 The procedure clarifies the circumstances under which an adopting employer of an M&P plan must sign a new adoption agreement and provides that this requirement may be satisfied by an electronic signature.

.10 Changes to Standardized Plan Requirements and Employer Reliance - This revenue procedure makes several changes and clarifications with respect to employer reliance and to the requirements that apply to standardized plans. Significant among these are the following:

1 The procedure provides an exception from the requirement that a standardized plan benefit all nonexcludable employees of the employer. This exception will allow the employer to avail itself of the rule in § 410(b)(6)(C), relating to the minimum coverage requirements for a plan in the transition period following a merger, acquisition, or similar transaction;

2 The procedure provides that an employer may rely on an opinion letter for a standardized defined contribution plan even though the employer has maintained another defined contribution plan(s) covering some of the same participants, provided certain conditions are met; and

3 The procedure provides that an employer may rely on an opinion letter for a standardized defined contribution plan that is first effective on or after the effective date of the repeal of § 415(e) even though the employer has maintained a defined benefit plan(s) covering some of the same participants, provided the defined benefit plan(s) has been terminated prior to the effective date of the standardized defined contribution plan.

.11 Provisions Related to GUST - Several provisions in this revenue procedure relate specifically to the restatement of plans for GUST. They provide that:

1 Sponsors may submit requests for opinion letters that take into account all of the requirements of GUST beginning May 8, 2000. Prior to that time, the Service will not accept requests for opinion letters. However, mass submitters and national sponsors may request opinion letters that take into account all of the requirements of GUST beginning April 7, 2000. The Service will begin issuing advisory letters for volume submitter specimen plans which take into account all of the requirements of GUST beginning March 8, 2000;

2 In general, all M&P adoption agreements must contain elective provisions (with or without default provisions) that will allow adopting employers to conform the terms of their M&P plans to the manner in which the employers’ plans were operated during the transition period between the earliest effective date under GUST and when the employers adopt their GUST-restated plans. These elective provisions may be contained in a separate “snap-off” section of the adoption agreement. The M&P plan sponsor may remove this snap-off section from the adoption agreements it provides to adopting employers that are not using the M&P plan to retroactively restate a plan for GUST;

3 In general, M&P plans must be restated for GUST and employers must sign new adoption agreements, in part so that they may conform their adoption agreement choices to the operation of their plans during the GUST transition period;

4 An M&P plan, including a standardized plan, may give an employer the option to elect to continue to apply the family aggregation rules of § 401(a)(17)(A) and § 414(q)(6) (both as in effect for plan years beginning before January 1, 1997) in plan years beginning after December 31, 1996, to the extent such election conforms to the plan’s operation. Likewise, an M&P plan, including a standardized plan, may give an employer the option to elect to continue to apply the combined plan limit of § 415(e) (as in effect for limitation years beginning before January 1, 2000) in limitation years beginning after December 31, 1999, to the extent such

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election conforms to the plan’s operation. An M&P plan may not allow an employer to elect to continue to apply the preGUST family aggregation rules or the combined plan limit of § 415(e) in years beginning on or after the date the employer adopts its GUST-restated plan. An employer that makes either of these elections in a standardized plan will not be able to rely on the opinion letter without a determination letter with respect to the qualification of its plan for the years to which the election applies; and

5 An opinion letter will not be issued for an M&P plan that permits, in any plan year beginning on or after the date the employer adopts its GUST-restated plan, the use of a testing method (that is, prior year or current year) with respect to the ACP test under the plan that is different than the testing method with respect to the ADP test under the plan. This restriction does not apply with respect to plan years beginning before the date the employer adopts its GUST-restated plan.

.12 Remedial Amendment Period This revenue procedure includes a procedure for extending the remedial amendment period for a plan so that employers will have sufficient time after the Service issues an opinion letter to adopt the approved M&P plan, provided the M&P plan is submitted for an opinion letter under this procedure by December 31, 2000. This procedure also applies to volume submitter specimen plans that are submitted by December 31, 2000, for advisory letters that take into account all of the requirements of GUST.

.13 Other Changes - This revenue procedure provides for reduced user fees for applications for advisory letters for volume submitter specimen plans in cases where at least 30 word-for-word identical specimen plans will be submitted.