SECTION 5. PROVISIONS

REQUIRED IN EVERY M&P PLAN

.01 Sponsor Amendments - M&P plans must provide a procedure for sponsor amendment, so that changes in the Code, regulations, revenue rulings, other statements published by the Internal Revenue Service, or corrections of prior approved plans may be applied to all employers who have adopted the plan. Sponsors must make reasonable and dilligent efforts to ensure that adopting employers of the sponsor’s M&P plan have actually received and are aware of all plan amendments and that such employers complete and sign new adoption agreements when necessary. See section 5.14. Failure to comply with this requirement 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.

.02 Employer Amendments - An employer that amends any provision of an approved M&P 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 M&P plan is considered to have adopted an individually designed plan. However, this rule does not apply in the case of amendments permitted under section 5.07 and 5.11 and model amendments published by the Service which specifically provide that their adoption by an adopter of an M&P plan will not cause such plan to be treated as individually designed. An employer that amends an M&P plan because of a waiver of the minimum funding requirement under § 412(d) will also be considered to have an individually designed plan. The procedures stated in Rev. Proc. 2000–6 relating to the issuance of determination letters for individually designed plans will then apply to the plan as adopted by the employer.

.03 Uniform Allocation or Benefit Formula in Nonstandardized Plan - In general, 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), or a uniform points allocation formula, within the meaning of §

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1.401(a)(4)–2(b)(3)(i)(A) (in each case taking into account § 1.401((a)(4)–2(b)(4)). 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) (taking into account § 1.401(a)(4)–3(b)(6), except the requirement to satisfy §1.401(a)(4)–13(c)). (See sections 4.12, 4.14, and 8.03 for requirements that apply to standardized plans, nonstandardized safe harbor plans, and target benefit plans, respectively. See subsections .04 and .05 for additional requirements that apply to nonstandardized plans.) Thus, an M&P plan generally may not provide different allocation rates or different benefit formulas for different employees, such as two percent of compensation for salaried employees and one percent for hourly employees. However, 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 or in the rates of employerprovided benefits provided the plan satisfies § 401(l) in form. The uniformity requirements described in this paragraph do not apply to plans under which the amount of contributions or benefits is determined pursuant to requirements of the Davis-Bacon Act, 40 U.S.C. 276(a). In addition, the uniformity requirements do not apply to the extent that failure to satisfy the requirements results from the plan’s top-heavy provisions or from the continued application under the plan of the pre-GUST family aggregation rules or the combined plan limit of § 415(e). However, an M&P plan may not continue to apply the pre-GUST 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. In addition, a plan may not continue to apply the combined plan limit of § 415(e) to the extent such application would cause the plan to fail to satisfy § 401(a) (see Q&A8 of Notice 99–44, 1999–35 I.R.B. 326).

.04 Compensation Requirements in Nonstandardized Plans - Each nonstandardized M&P plan must give the adopting employer the option to select total compensation as the compensation to be used in determining allocations or benefits. For this purpose, total compensation means a definition of compensation that includes all compensation within the meaning of § 415(c)(3) and excludes all other compensation or that otherwise sat

isfies § 414(s) under § 1.414(s)–1(c).

.08 Defined Contribution § 415 Aggre

.05 Automatic or Optional Safe Harbor Provisions in Nonstandardized Defined Benefit Plans - Each nonstandardized M&P 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) (taking into account § 1.401(a)(4)–3(b)(6)).

.06 Anti-Cutback Provisions - M&P plans must specifically provide for the protection provided under § 411(a)(10) and (d)(6), to the extent required, 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 M&P plan. An M&P sponsor may not amend its plan in a manner that could result in the elimination of a benefit to the extent the benefit is required to be protected under § 411(d)(6) with respect to the plan of any adopting employer, unless permitted to do so under §§ 1.401(a)–4 and 1.411(d)–4. In addition, an M&P plan that does not contain vesting for all years which is at least as favorable to participants as that provided in § 416(b), 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.

.07 Adopting Employer Modification to Satisfy §§ 415 and 416 - M&P 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 § 415 or 416 because of the required aggregation of multiple plans under these 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 with instructions for the employer to add such language as necessary to satisfy §§ 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 § 416. Such a space must be included in both defined contribution plans and defined benefit plans.

gation - Plan language must be incorporated that aggregates all defined contribution M&P plans to satisfy § 415(c) and (f). Sample language provided in the Listing of Required Modifications may be obtained by writing to the Internal Revenue Service, Employee Plans Rulings and Agreements, Washington, D.C. 20224, Attention T:EP:RA:T:ICU. Requests for sample language may also be faxed to (202) 622-6199 (not a toll-free call). As soon as possible after February 7, 2000, the sample language will also be available on the Internet at the following address: http://www.irs.gov . The Listing of Required Modifications can be found under “Tax Info for Business.”

.09 Top-heavy Requirements - Except to the extent described in section 7.03, relating to paired plans, each plan must either provide that all the additional requirements applicable to top-heavy plans (described in § 416) apply at all times or 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 Questions T-35 and T-36 of § 1.416-1.)

.10 Additional Top-Heavy Minimums to Satisfy § 415(e) - Each plan must provide automatically or by optional provisions, with respect to years beginning before January 1, 2000, the additional minimums described in § 416(h)(2)(A).

.11 Adopting Employer Modification of Trust or Custodial Account Document An employer that adopts an M&P 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), provided 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 § 401(a). 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 adopts a standardized M&P plan may amend the trust or custodial account document provided such amend

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ment 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.

.12 Effective Dates of M&P Plan Provisions Relating to GUST Changes - During the transition period between the effective dates of GUST and the date plans are amended for GUST, plans have in some cases been permitted, and in some cases required, to be operated in a manner that is inconsistent with the plans’ terms but consistent with changes in the qualification requirements made by GUST. When the plans are amended for GUST, they must be amended retroactively and the retroactive amendments must conform to how the plans have been operated during the transition period. In order for a GUST-approved M&P plan to be available to be adopted by an employer to retroactively restate the employer’s plan for GUST, the M&P plan must be able to accommodate whatever choices and elections have been made in the operation of the employer’s plan during the transition period. For example, an employer with a § 401(k) plan may use either the currentyear or the prior-year ADP testing method. During the transition period, an employer may have used the current-year method in 1997, the prior-year method in 1998, and the current-year method again in 1999 and 2000. If the employer adopts a GUST-approved M&P plan to retroactively restate the employer’s plan for GUST, the terms of the M&P plan, as adopted by the employer, must reflect these specific year-by-year changes in the ADP testing method. This requirement will not be satisfied by provisions that state, for example, that they are effective as of the date that they have been made effective in operation where the actual date(s) is not specified in the plan. This requirement also will not be satisfied through incorporation by reference of documents outside the basic plan document and adoption agreement. In general, therefore, 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. These elec

tive 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.

.13 Provisions Required in Adoption Agreements Regarding Reliance - In order to avoid unnecessary confusion as to the scope of an opinion letter, sponsors must include in the adoption agreement of all M&P plans (other than standardized plans and paired plans), in close proximity to the signature blank, a statement that adopting employers may not rely on an opinion letter issued by the Service with respect to the qualification of that plan and should apply to Employee Plans Determinations for a determination letter in order to obtain reliance. Standardized plans and paired plans must also include a similar statement in the adoption agreement that the adopting employer may not rely on the opinion letter issued by the Service but must apply for a determination letter to have reliance under the circumstances described in section 6.

.14 Other Provisions Required in Adoption Agreements - Each M&P plan must contain a dated employer signature line. The employer must sign the adoption agreement when it first adopts the plan and must complete and sign a new adoption agreement if the plan has been restated. In addition, the employer must complete a new signature page if it modifies any prior elections or makes new elections in its adoption agreement. The signature requirement may be satisfied by an electronic signature that reliably authenticates and verifies the adoption of the adoption agreement, or restatement, amendment or modification thereof, by the employer. The adoption agreement must state that it is to be used with one and only one specific basic plan document. In addition, the adoption agreement must contain a cautionary statement to the effect that the failure to properly fill out the adoption agreement may result in failure of the plan to qualify. The adoption agreement must also contain a statement which provides that the sponsor will inform the adopting employer of any amendments made to the plan or of the discontinuance or abandonment of the plan.

.15 Sponsor Telephone Numbers M&P plan adoption agreements must include the sponsor’s address and telephone number (or a space for the address and telephone number of the sponsor’s authorized representative) for inquiries by adopting employers regarding the adoption of the plan, the meaning of plan provisions, or the effect of the opinion letter.

.16 Definition of Employee / § 414(b), (c), (m), (n) and (o) - Each M&P plan must include a definition of employee as any employee of the employer maintaining the plan or any other employer aggregated under § 414(b), (c), (m) or (o) and the regulations thereunder. The definition of employee shall also include any individual deemed under § 414(n) (or under regulations under § 414(o)) to be an employee of any employer described in the previous sentence.

.17 Definition of Service / § 414(b), (c), (m), (n), and (o) - Each M&P plan must specifically credit all service with any employer aggregated under § 414(b), (c), (m) or (o) and the regulations thereunder as service with the employer maintaining the plan. In addition, in the case of an individual deemed under § 414(n) (or under regulations under § 414(o)) to be the employee of any employer described in the previous sentence, service with such employer must be credited to such individual.

.18 Additional Requirements for Plans That Include a CODA - An M&P plan may include a cash or deferred arrangement (CODA) only if the plan is a profitsharing plan or a rural cooperative plan, as defined in § 401(k)(7), and the CODA is a qualified CODA, as defined in the regulations under § 401(k). In addition, the plan must satisfy the following requirements:

1 The plan may not incorporate the ADP test under § 401(k)(3) or the ACP test under § 401(m)(2) by reference;

2 The plan must use the same testing method (either current year or prior year) for both the ADP test under § 401(k)(3) and the ACP test under § 401(m)(2) in any plan year beginning on or after the date the employer adopts its GUST-restated M&P plan;

3 If the CODA provides for hardship distributions, it must adopt the safe harbor standards in the regulations under § 401(k);

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4 The CODA may not be integrated with social security;

5 The plan must describe the method or methods for correcting contributions in excess of those allowed under the ADP or ACP test and for correcting multiple use of the alternative limitation (within the meaning of § 401(m)(9)), including the plan to be corrected; and

6 A plan that uses the safe harbor methods in §§ 401(k)(12) and 401(m)(11) (for plan years beginning after December 31, 1998) must satisfy the nonelective or matching contribution (“safe harbor contribution”) requirement using one of the following options. First, the plan may provide that the safe harbor contributions will be made under the plan. Second, the plan may allow the employer to elect in the adoption agreement whether the safe harbor contributions will be made under the plan or under another specified defined contribution plan that satisfies the requirements of sections IX. and XI. of Notice 98–52, as modified by Notice 2000–3. However, the latter option is not available in standardized plans, other than paired defined contribution plans whose terms satisfy the requirements of sections IX. and XI. of Notice 98–52, as modified by Notice 2000–3. See section 7.04.

The requirements in 2 and 5 of this subsection .18 do not apply to a plan that does not use the ADP test under § 401(k)(3) and the ACP test under § 401(m)(2), but uses only the alternative (“SIMPLE”) method of satisfying the nondiscrimination tests in §§ 401(k)(11) and 401(m)(10) (for plan years beginning after December 31, 1996) or the safe harbor methods in §§ 401(k)(12) and 401(m)(11) (for plan years beginning after December 31, 1998).

.19 Other requirements - In addition to any other substantive requirements, M&P plans must comply with the requirements of all revenue rulings, notices, legislation, and regulations, including:

1 Notice 97–45, relating to the definition of highly compensated employee under § 414(q);

2 Notice 97–75 and § 1.411(d)–4, Q&A 10, relating to the minimum distribution requirements of § 401(a)(9);

3 Notices 97–2, 98–1, 98–52, and 2000–3, Rev. Rul. 98–30, and Rev. Proc. 97–9, relating to the requirements for qualified cash or deferred arrangements

under § 401(k), including SIMPLE § 401(k) plans and § 401(k) plan safe harbors;

4 Rev. Proc. 98–14 and Rev. Proc. 98–42, relating to the repeal of the family aggregation rules under former § 414(q)(6); 5 Rev. Rul. 94–76 and Rev. Proc. 96–55, relating to transfers and rollovers from money purchase pension plans to profit-sharing plans;

6 Rev. Rul. 98–1 and Notice 99–44, relating to the limitations of § 415;

7 Rev. Proc. 96–49, relating to the requirements of USERRA and § 414(u);

8 Section 1.417(e)–1(d), relating to the determination of present value and amounts of certain benefits; and

9 Notice 99–5, relating to the definition of eligible rollover distribution in § 402(c)(4) as amended by RRA.