SECTION 5. PROVISIONS

REQUIRED IN M&P PLANS

.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 IRS, or corrections of prior approved plans may be applied to all employers who have adopted the plan. Sponsors must make reasonable and diligent efforts to ensure that adopting employers of the sponsor’s M&P plan have actually received and are aware of all plan

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amendments and that such employers complete and sign new adoption agreements if necessary. See section 5.11. The provision for sponsor amendment must provide that, for purposes of reliance on the opinion letter, the sponsor will no longer have the authority to amend the plan on behalf of the adopting employer as of the date of the adoption of an employer amendment to the plan to incorporate a type of plan not allowable in the M&P program described in section 6.03 (e.g. the addition of enabling language for multiemployer plan features) or as of the date the IRS notifies the sponsor that the plan is being treated as an individually designed plan pursuant to section 24.03. 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 selected, 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 without substituting 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 sections 5.06 and 5.09 and sample or model amendments published by the IRS that specifically provide that their adoption by an adopter of a M&P plan will not cause such plan to be treated as individually designed. Additionally, a plan will not be treated as individually designed if a closing agreement under the Audit Closing Agreement Program or a compliance statement under the Voluntary Correction Program of the Employee Plans Compliance Resolution System (EPCRS) has been issued with respect to the employer’s plan with regard to the amendment. ³ Also see section 19.03 regarding the effect of employer amendments on an employer’s ability to rely on an opinion letter, and section 24 with respect to applicable remedial amendment periods. An employer that amends a 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 set forth in Rev. Proc. 2015–6, as amended annually and as related to the issuance of determination letters for individually designed plans, will then apply to the plan as adopted by the employer. See also section 19 of Rev. Proc. 2007–44 regarding the effect employer amendments have on eligibility for the six-year remedial amendment cycle applicable to pre-approved plan adopters.

.03 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 that includes all compensation within the meaning of § 415(c)(3) and excludes all other compensation or that otherwise satisfies § 414(s) under § 1.414(s)–1(c).

.04 Automatic or Optional Safe Harbor Provisions in Nonstandardized Plans Each nonstandardized M&P plan, other than a statutory hybrid plan as described in section 4.12, must automatically or by option allow the adopting employer to satisfy one of the design-based safe harbors described in § 1.401(a)(4)–2(b)(2) or in § 1.401(a)(4)–3(b)(3), (4), and (5).

.05 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. A 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, a M&P plan that does not contain vesting rules for all years that are at least as favorable to participants as those provided in § 416(b), must specifically provide that any vesting that occurs while the plan is top-heavy will not be cut back if

the plan ceases to be top-heavy. See §§ 411(d)(6)(C) and 1.411(d)–4(d) for certain exceptions applicable to ESOPs.

.06 Adopting Employer Modification to Satisfy §§ 415 and 416 - M&P plans must provide that plan provisions may be amended by plan language completed by the employer in the adoption agreement if such overriding language is necessary to satisfy § 415 or 416 because of the required aggregation of multiple plans under these sections. 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.

.07 Aggregation for § 415 compliance Plan language must be incorporated that aggregates all defined contribution M&P plans and all defined benefit M&P plans to satisfy § 415(c) and (f).

.08 Top-heavy Requirements - Each plan must either provide that all of the additional requirements applicable to topheavy 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 such latter case, all of 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.)

.09 Adopting Employer Modification of Trust or Custodial Account Document An employer that adopts a nonstandardized M&P plan 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

3See Section 6.05(5)(b) of Rev. Proc. 2013–12, 2013–4 I.R.B. 313.

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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 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.

.10 Provisions Required in Adoption Agreements Regarding Reliance - The adoption agreement of every standardized and nonstandardized M&P plan must include, in close proximity to the signature blank, a statement that describes the limitations on employer reliance on an opinion letter. See section 19.

.11 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 under § 401(a), 403(a), or 4975(e)(7), as applicable. The adoption agreement must also contain a statement that 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.

.12 Sponsor Telephone Numbers M&P plan adoption agreements must include the sponsor’s name, address, and telephone number (or a space for the address and telephone number of the sponsor’s authorized representative) for inqui

ries by adopting employers regarding the adoption of the plan, the meaning of plan provisions, or the effect of the opinion letter.

.13 Definition of Employee under § 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 treated under § 414(n) or under the regulations under § 414(o) as an employee of any employer described in the preceding sentence.

With respect to ESOPs, employees who meet this definition cannot participate in the ESOP unless they are employed by the employer corporation who issues the stock held by the ESOP or by any corporation that is a member of the same controlled group of corporations as the employer corporation (within the meaning of § 1563(a), as modified by § 409(l)(4)(B) and (C) and as determined without regard to §§ 1563(a)(4) and 1563(e)(3)(C)). With respect to ESOPs, for all other purposes, including nondiscrimination testing and coverage, employees who meet the definition of employee in the immediately preceding paragraph are treated as employees.

.14 Definition of Service under § 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 treated under § 414(n) (or under regulations under § 414(o)) as the employee of any employer described in the previous sentence, service with such employer must be credited to such individual.

.15 Additional Provisions Required for ESOPs - ESOPs will not receive favorable opinion letters under this revenue procedure unless, in addition to complying with the requirements of subsections 5.01 through 5.14 of this revenue procedure, the plan documents include the following:

(1) A statement that the plan is an employee stock ownership plan within the meaning of § 4975(e)(7) and is designed to invest primarily in employer stock;

(2) A provision that defines employer stock in accordance with § 409(l)(1) or (2);

(3) Provisions that meet the diversification requirements of § 401(a)(28)(B), or, if applicable, § 401(a)(35);

(4) Provisions that meet the valuation, independent appraiser, and allocation of earnings requirements set forth in § 401(a)(28)(C), § 54.4975–11(d)(5), and Rev. Rul. 80–155, 1980–1 C.B. 84;

(5) Provisions that meet the voting requirements of § 409(e);

(6) Provisions that meet the right to demand and put option requirements of § 409(h), to the extent applicable;

(7) Provisions that meet the distribution requirements of § 409(o);

(8) Provisions that set forth the requirements relating to exempt loans as described in § 4975(d)(3), § 54.4975–7, and § 54.4975–11(c);

(9) Provisions that meet the ESOP annual addition requirements described in § 1.415(c)–1(f), and, if the ESOP is maintained by an employer that is a C corporation, the requirements described in § 415(c)(6);

(10) If an ESOP provides for forfeitures, provisions that meet the forfeiture requirement of § 54.4975–11(d)(4);

(11) If an ESOP holds employer securities consisting of stock in an S corporation, provisions that meet the requirements of § 409(p) and § 1.409(p)–1;

(12) If an ESOP is maintained by employers that are C corporations, provisions that meet the requirements of § 409(n); and

(13) Provisions (in the adoption agreement) that identify the plan sponsor as being either a C corporation or an S corporation.

.16 Additional Provisions Required for Cash Balance Plans - Plans containing cash balance features will not receive favorable opinion letters unless, in addition to complying with the requirements of subsections 5.01 through 5.14 of this revenue procedure, they meet the following requirements:

(1) Prior benefit structures protected All cash balance plans must ensure compliance with the anti-cutback provisions of § 411(d)(6). To receive a favorable opinion letter under this revenue procedure, a cash balance plan must provide

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that, at all times, prior accrued benefits (and other benefits protected under § 411(d)(6)(B)) are protected. A cash balance plan that was the subject of a conversion amendment must comply with the provisions of § 411(b)(5)(B)(iii) and must comply with § 1.411(b)(5)–1(c). However, a favorable opinion letter will not be issued for a plan that uses an opening hypothetical account balance as described in § 1.411(b)(5)–1(c)(3) to meet the requirements of § 1.411(b)(5)–1(c).

(2) Step-rate structure of principal credits - Cash balance plans that contain any structure of principal credits that increase with age, service, or other measure during a participant’s employment must be definitely determinable, operationally nondiscriminatory, and at all times in compliance with the “133 1/3 percent rule” of § 411(b)(1)(B) and the regulations thereunder. Employers may not rely on the opinion letter with respect to the requirements of § 411(b)(1) for increasing principal credit schedules that are created by adopting employers by completing blanks in the plan formula, but may rely on the opinion letter with respect to the requirements of § 411(b)(1) for increasing principal credit schedules specified in the M&P basic plan document and/or adoption agreement.