SECTION 3. OVERVIEW — Internal Revenue Bulletin 2004-40

.01 This revenue procedure establishes a system of staggered five-year remedial amendment periods or cycles for individually designed plans and a system of sixyear amendment/approval cycles for preapproved plans. These systems are established pursuant to the Commissioner’s authority under § 401(b) of the Code and its underlying regulations to designate plan provisions as disqualifying provisions, impose limits and conditions on plan amendments with respect to designated disqualifying provisions, and extend the remedial amendment period, and pursuant to the Commissioner’s authority under § 7805(b) to establish the effective date of any rule or regulation.

.02 These systems will create fixed, regular cycles for the adoption of remedial plan amendments under § 401(b) and the submission of determination, opinion, and advisory letter applications. The plan sponsor will continue to be able to rely on a favorable determination letter for its plan provided the sponsor applies for a new letter not later than the last twelve-month period of each five-year cycle. Similarly, sponsors of pre-approved plan documents will know that they must apply for new opinion and advisory letters once every six years, and an adopter of a pre-approved plan will know that it must adopt an updated plan once every six years.

.03 In the case of individually designed plans, the five-year remedial amendment cycles are staggered. That is, different plans will have different five-year cycles, based generally on the plan sponsor’s taxpayer identification number (TIN), so that the cycle for only 20 percent of plans will end in any given year. Staggering should eliminate significant fluctuations in the

tive (whichever is later). In the case of an amendment to an existing plan maintained by more than one employer, the plan need not be amended until the last day of the tenth month following the last day of the plan year in which the amendment is adopted or effective (whichever is later).

.07 For a disqualifying provision described in § 1.401(b)–1(b)(3), the remedial amendment period begins on the date on which the change becomes effective with respect to the plan or, in the case of a provision that is integral to a qualification requirement that has been changed, the first day on which the plan is operated in accordance with the provision as amended. In the case of a plan maintained by one employer, the remedial amendment period for a disqualifying provision described in § 1.401(b)–1(b)(3) ends on the later of (1) the due date (including extensions) for filing the income tax return for the employer’s taxable year that includes the date on which the remedial amendment period begins or (2) the last day of the plan year that includes the date on which the remedial amendment period begins. A plan maintained by more than one employer need not be amended until the last day of the tenth month following the last day of the plan year in which the remedial amendment period begins.

.08 Section 1.401(b)–1(f) provides that the Commissioner may extend the remedial amendment period at his discretion.

.09 Notice 2001–42, 2001–2 C.B. 70, provides a remedial amendment period under § 401(b), ending no earlier than the end of the 2005 plan year, in which any needed retroactive remedial plan amendments for EGTRRA must be adopted (the EGTRRA remedial amendment period). The availability of the EGTRRA remedial amendment period is conditioned on the timely adoption of required good faith EGTRRA plan amendments. In general, a good faith EGTRRA plan amendment is adopted timely if it is adopted by the later of the end of the plan year that includes the effective date of the EGTRRA change

or the end of the plan’s GUST remedial amendment period. ¹

.10 The end of the EGTRRA remedial amendment period is also the last day on which retroactive remedial amendments may be adopted with respect to the requirements of the final regulations under § 401(a)(9) of the Code (required minimum distributions), Rev. Rul. 2001–62, 2001–2 C.B. 632 (applicable mortality table) and Rev. Rul. 2002–27, 2002–1 C.B. 925 (deemed section 125 compensation). (Except with respect to the requirements of the final § 401(a)(9) regulations for defined benefit plans, the availability of the remedial amendment period with respect to these requirements is conditioned on the adoption of plan amendments by the time specified in the applicable guidance (or, in the case of the final § 401(a)(9) regulations published on April 17, 2002, with respect to defined contribution plans, in Rev. Proc. 2002–29, 2002–1 C.B. 1176, as modified by Rev. Proc. 2003–10, 2003–1 C.B. 259)). .11 Rev. Proc. 2004–25, 2004–16 I.R.B. 791, extends the remedial amendment period with respect to disqualifying provisions described in § 1.401(b)–1(b)(1) that are put into effect (in the case of new plans) or adopted (in the case of existing plans) after December 31, 2001, to the end of the EGTRRA remedial amendment period. The effect of Rev. Proc. 2004–25 is to ensure that plan sponsors do not need to apply for more than one determination letter during the EGTRRA remedial amendment period simply because they have put a plan into effect or adopted voluntary plan amendments after December 31, 2001. The revenue procedure does not extend any other existing plan amendment or determination letter submission deadlines, such as the deadline for adoption of good faith plan amendments for EGTRRA or the final § 401(a)(9) regulations.

.12 Notice 2001–42 and section ._ of Rev. Proc. 2005–6, 2005–1 I.R.B. ___, provide that until further notice, determination letters will not consider and may not be relied on with respect to whether a plan

1 The term “GUST” refers to the following:

the Uruguay Round Agreements Act, Pub. L. 103–465;
the Uniformed Services Employment and Reemployment Rights Act of 1994, Pub. L. 103–353;
the Small Business Job Protection Act of 1996, Pub. L. 104–188;
the Taxpayer Relief Act of 1997, Pub. L. 105–34;
the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105–206; and
the Community Renewal Tax Relief Act of 2000, Pub. L. 106–554. The GUST remedial amendment period generally ended on the later of February 28, 2002, or the end of a plan’s 2001 plan year. However, for certain plans eligible for an extended GUST remedial amendment period under Rev. Proc. 2000–20, 2000–1 C.B. 553, the period generally ended on September 30, 2003.

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be reviewed on the basis of, and may be relied on with respect to, the Cumulative List of Changes in Plan Qualification Requirements that is published in the year preceding the year in which applications may be filed. The revenue procedure also provides that determination letters will include an “expiration date,” stating that the letter may not be relied on after the end of the five-year cycle. These changes to the determination letter program, along with the changes to the remedial amendment period rules described above, are designed to create a system that encourages plans to be updated and submitted for new determination letters on a regular five-year schedule.

.10 In general, a plan’s five-year remedial amendment cycle is determined with reference to the TIN of the employer that maintains the plan. Special rules are provided for plans maintained by more than one employer and plans maintained by multiple members of a controlled group or affiliated service group. In addition, an election is provided for controlled groups and affiliated service groups that will allow the same five-year cycle to be applied to all plans maintained by any member of the group.

.11 If there is a change in the employer that maintains the plan, for example, because of a merger, the plan’s cycle following the change is determined with reference to the TIN of the new employer. However, if this would shorten the plan’s current cycle so that less than twelve months would remain, the current cycle will be extended for twelve months.

.12 The six-year amendment/approval cycles for pre-approved plans are comparable to the five-year cycles for individually designed plans. Provided the sponsor of a pre-approved document submits the plan for a new opinion or advisory letter according to the schedule set forth in the revenue procedure, an adopting employer that timely adopts the approved plan will be treated as having adopted the plan within the employer’s six-year remedial amendment cycle. The Service will announce the deadline for timely adoption after the pre-approved documents have been reviewed, but it is expected that employers will generally have two years in which to adopt. The last date for timely adoption will be the end of the remedial amendment cycle with respect

numbers of determination letter applications filed from year to year. The Service believes this will be a benefit to both the Service and the employee benefits community. In the case of pre-approved plans, defined benefit plans will have a different six-year schedule than defined contribution plans. This should also benefit both the Service and the employee benefits community.

.04 Except as provided below, in the case of an individually designed plan, the end of the remedial amendment period for any disqualifying provision is extended by this revenue procedure to the end of the five-year cycle in which the remedial amendment period would otherwise end. Thus, the end of the remedial amendment period for disqualifying provisions under § 1.401(b)–1(b)(1) (that is disqualifying provisions in new plans and discretionary plan amendments) for an individually designed plan is extended to the end of the five-year cycle in which the remedial amendment period would otherwise end. Thus, if a new plan, or a discretionary plan amendment to an existing plan, contains a provision that causes the plan to fail to meet the qualification requirements under § 401(a), the plan has until the end of the five year cycle to correct that disqualifying provision provided the amendment is retroactively effective. However, there is no extension (remedial amendment period) for the adoption of a plan, or the adoption of a discretionary plan amendment (a plan amendment that is not required or integral to a plan qualification change). These are not disqualifying provisions.

.05 The revenue procedure provides a blanket disqualifying provision designation with respect to future changes in the qualification requirements of the Code. Thus, a plan provision that either results in the failure of a plan to satisfy the qualification requirements of the Code because of a change in those requirements or that is integral to a qualification requirement of the Code that has been changed will generally be a disqualifying provision. In addition, in the case of an individually designed plan, the remedial amendment period with respect to such a disqualifying provision is extended by this revenue procedure to the end of the first five-year cycle that ends at least twelve months after the change in the qualification requirements of the Code

is first listed on the Cumulative List of Changes in Plan Qualification Requirements (as described below in section 10), which will be published annually by the Service. Thus, although a change in the qualification requirements of the Code may be effective before the end of one five-year cycle, a retroactive remedial amendment on account of the change may not be required to be adopted until the end of the plan’s next five-year cycle. Of course, the amendment would need to be retroactively effective as of the effective date of the change.

.06 For most amendments, operational compliance with the amendment provisions beginning on the retroactive effective date is required. For example, for any amendment that is integral to a changed qualification requirement, operational compliance with the amended plan provisions beginning on the retroactive effective date of the amendment is required for the remedial amendment period to begin. In addition, plan sponsors may be required to adopt good faith amendments (as defined in Notice 2001–42) on account of a change in the qualification requirements of the Code earlier than the end of the plan sponsor’s five-year cycle.

.07 The revenue procedure does not provide relief from the requirements of § 411(d)(6) for plan amendments adopted as a result of Code or guidance changes in the plan qualification requirements. Section 411(d)(6) generally prohibits a plan amendment that decreases a participant’s accrued benefits or has the effect of eliminating or reducing an early retirement benefit or retirement-type subsidy, or eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment. However, an amendment that eliminates or decreases benefits that have not yet accrued does not violate § 411(d)(6), provided the amendment is adopted and effective before the benefits accrue.

.08 The revenue procedure provides that the time for adopting plan amendments for guidance changes is extended to the end of the first five-year remedial amendment cycle that ends at least twelve months after the change is first listed on the Cumulative List of Changes in Plan Qualification Requirements.

.09 The revenue procedure provides that determination letters generally will

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remedial amendment cycle for individually designed plans. In the case of a pre-approved plan, the remedial amendment cycle is a six-year cycle. Part II of this revenue procedure contains the rules and procedures for the six-year remedial amendment cycle for pre-approved plans.

.02 In general, a plan’s five-year remedial amendment cycle is determined by reference to the last digit of the TIN of the employer that sponsors the plan. However, in particular circumstances, as described in section 5, a different rule is, or may be, used to determine a plan’s five-year remedial amendment cycle.

.03 Under the general rule, a plan’s five year remedial amendment cycle is determined as follows:

to all disqualifying provisions for which the remedial amendment period would otherwise end during the cycle.

.13 The revenue procedure extends a plan’s EGTRRA remedial amendment period as provided in the chart found in section 9.01, which is the Extension of the EGTRRA Remedial Amendment Period/Schedule of Next Five-Year Remedial Amendment Cycle. The revenue procedure provides that applications for determination letters for individually designed plans that are filed on or after February 1, 2006, will be reviewed taking into account the requirements of EGTRRA.