SECTION 14. PROVISIONS

REQUIRED IN EVERY VS PLAN

.01 Anti-Cutback Provisions - VS 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. If a VS plan authorizes the VS practitioner to amend the plan on behalf of employers, the VS practitioner may not amend the 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 VS plan that is not exempt from the top-heavy requirements and 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.

.02 Definition of Employee under § 414(b), (c), (m), (n), and (o) - Each VS 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.

.03 Definition of Service under § 414(b), (c), (m), (n), and (o) - Each VS 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.

.04 Adopting Employer Modification of Trust or Custodial Account Document An employer 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.

.05 Other Provisions Required in Adoption Agreements - Each VS 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 adop

tion 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 specimen plan. 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) or 403(a). If the VS practitioner has the authority to amend the plan on behalf of employers who have adopted the plan, as described under section 15.03 below, the adoption agreement must also contain a statement that provides that the VS practitioner will inform the adopting employer of any amendments made to the plan or of the discontinuance or abandonment of the plan.

.06 VS Practitioner Telephone Numbers - VS plan adoption agreements must include the VS practitioner’s name, address, and telephone number (or a space for the address and telephone number of the VS practitioner’s authorized representative) for inquiries by adopting employers regarding the adoption of the plan, the meaning of plan provisions, or the effect of the advisory letter.

.07 Additional Provisions Required for ESOPs -, ESOPs will not receive favorable advisory letters under this revenue procedure unless, in addition to complying with the requirements of subsections 14.01 through 14.06 of this revenue procedure, they 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

July 6, 2015 34 Bulletin No. 2015–27

§ 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 options 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 that identify the plan sponsor as being either a C corporation or an S corporation.

.08 Additional Provisions Required for Cash Balance Plans - Plans containing cash balance features will not receive favorable advisory letters unless, in addition to complying with the requirements of subsections 14.01 through 14.06 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 advisory letter under this revenue procedure, a cash balance plan must provide 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 advisory 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 % rule” of § 411(b)(1)(B) and the regulations thereunder. Employers may not rely on the advisory 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 advisory letter with respect to the requirements of § 411(b)(1) for increasing principal credit schedules specified in the specimen plan.