SECTION 9. OPINION — Internal Revenue Bulletin 2017-29

APPLICATIONS AND LETTERS..........................................................................................................................................................................110

SECTION 10. MASS SUBMITTERS .....................................................................................................................................................................114

SECTION 11. OFF-CYCLE FILINGS...................................................................................................................................................................117

SECTION 12. REVIEW OF OPINION LETTER APPLICATIONS; ISSUANCE OF OPINION LETTERS............................................117

SECTION 13. WITHDRAWAL OF REQUESTS.................................................................................................................................................117

SECTION 14. NONTRANSFERABILITY OF OPINION LETTER .................................................................................................................118

SECTION 15. NOTIFICATION OF ADOPTING EMPLOYER REGARDING LOSS OF QUALIFIED STATUS..................................118

SECTION 16. DISCONTINUED PLANS ..............................................................................................................................................................118

SECTION 17. REVOCATION ................................................................................................................................................................................118

SECTION 18. RECORD KEEPING REQUIREMENTS.....................................................................................................................................118

SECTION 19. WHERE TO FILE...........................................................................................................................................................................119

SECTION 20. EFFECT ON OTHER DOCUMENTS..........................................................................................................................................119

SECTION 21. EFFECTIVE DATE.........................................................................................................................................................................119

SECTION 22. PUBLIC COMMENTS ...................................................................................................................................................................119

SECTION 23. PAPERWORK REDUCTION ACT..............................................................................................................................................119

July 17, 2017 92 Bulletin No. 2017–29

SECTION 1. PURPOSE .01 This revenue procedure sets forth the procedures of the Internal Revenue Service (IRS) for issuing Opinion Letters regarding the qualification in form of Pre-approved Plans under §§ 401, 403(a), and 4975(e)(7) of the Internal Revenue Code (Code). In addition, this revenue procedure modifies the IRS pre-approved letter program by combining the master and prototype (M&P) and volume submitter (VS) programs into a new Opinion Letter program. This revenue procedure modifies and supersedes, in part, Rev. Proc. 2015–36, 2015–27 I.R.B. 20, and modifies Rev. Proc. 2017–4, 2017–1 I.R.B. 146, and Rev. Proc. 2016–37, 2016–29 I.R.B. 136.

.02 This revenue procedure also modifies the on-cycle submission period for the third six-year remedial amendment cycle for Providers of pre-approved defined contribution plans so that it begins on October 2, 2017 and ends on October 1, 2018.

.03 This revenue procedure modifies the IRS’s historic approach to Pre-approved Plans in order to expand the Provider market and encourage employers that currently maintain individually designed plans to convert to the pre-approved format.

•The program is simplified by eliminating the distinction between M&P and VS plans.

•The program is liberalized by increasing the types of plans eligible for pre-approved status.

•The program is revised to afford greater flexibility in the design of Pre-approved Plans.

SECTION 2. BACKGROUND

.01 The procedures for the issuance of opinion and advisory letters by the IRS regarding the qualification in form of Pre-approved Plans are set forth in Rev. Proc. 2015–36 (as modified by Rev. Proc. 2016–37).

.02 Rev. Proc. 2007–44, 2007–2 C.B. 54 (clarified, modified, and superseded by Rev. Proc. 2016–37), described a system of cyclical remedial amendment periods under which every individually designed plan qualified under § 401(a) or 403(a) had a regular five-year remedial amendment cycle and every Pre-approved Plan had a regular six-year remedial amendment cycle.

.03 Rev. Proc. 2016–37 modified the IRS determination letter program for qualified plans to eliminate the five-year remedial amendment cycle for individually designed plans. It also described and made modifying changes to the remedial amendment cycle system for preapproved qualified plans and modified the six-year cycle, as applicable, to reflect changes that had been made to the determination letter program.

.04 Rev. Proc. 2016–37 provided that every Pre-approved Plan has a regular, six-year remedial amendment cycle. As a result, M&P sponsors and VS practitioners, as defined in Rev. Proc. 2015–36, may apply for new opinion or advisory letters once every six years. M&P sponsors and VS practitioners generally have until January 31st of the calendar year following the opening of the six-year remedial amendment cycle to submit applications for opinion and advisory letters, although the application period has been modified and extended periodically.

.05 From February 1, 2011, to April 2, 2012, M&P sponsors and VS practitioners maintaining pre-approved defined contribution plans submitted their applications to the IRS for the second six-year remedial amendment cycle. For employers that had adopted a pre-approved defined contribution plan prior to January 1, 2016, the deadline to adopt a modification or restatement of the Pre-approved Plan and apply for a determination letter, if eligible, was April 30, 2016. Pursuant to section 18 of Rev. Proc. 2016–37, the deadline for an employer to adopt a newly approved pre-approved defined contribution plan and apply for a determination letter, if eligible,

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SECTION 3. SIGNIFICANT CHANGES TO REVENUE PROCEDURE 2015–36; FUTURE ENHANCEMENTS

was extended by Notice 2016–3, 2016–3 IRB 278, from April 30, 2016, to April 30, 2017, ¹ for any newly approved pre-approved defined contribution plan adopted on or after January 1, 2016.

.06 Under Rev. Proc. 2016–37, the third six-year remedial amendment cycle for pre-approved defined contribution plans began on February 1, 2017, and ends on January 31, 2023. Also, under Rev. Proc. 2016–37, the 12-month applicable on-cycle submission period for Pre-approved Plan sponsors begins on August 1, 2017, and ends on July 31, 2018. The Cumulative List of Changes in Plan Qualification Requirements for Pre-approved Defined Contribution Plans for 2017, Notice 2017–37, 2017–29 I.R.B. 89, will apply to plans submitted for review during the on-cycle submission period. Once the review of a cycle for Pre-approved Plans has neared completion (after approximately a two-year review process), the IRS will announce the date by which Adopting Employers must adopt the newly approved plans.

.07 Rev. Proc. 2016–37 provided that the second six-year remedial amendment cycle for pre-approved defined benefit plans began on February 1, 2013, and ends on January 31, 2019. The third six-year remedial amendment cycle for pre-approved defined benefit plans is scheduled to begin on February 1, 2019, and end on January 31, 2025.

.08 Rev. Proc. 2017–4 (as updated annually) sets forth the general procedures of the IRS on the issuance of Employee Plans determination letters, including determination letters for Preapproved Plans.

.01 This revenue procedure significantly restructures the current approach for issuing Opinion Letters regarding the qualification in form of Pre-approved Plans described in Rev. Proc. 2015–36. Section 3.02 through 3.12 ² describe the significant changes made by this revenue procedure to Rev. Proc. 2015–36.

.02 The M&P and VS Programs are combined and replaced by a single Opinion Letter program involving two types of plans: Standardized Plans and Nonstandardized Plans. See section 4.07.

.03 A Pre-approved Plan may utilize either of two formats: a basic plan document with an adoption agreement or a single plan document. See section 4.07.

.04 An Adopting Employer of any Nonstandardized Plan may adopt minor modifications. See section 8.04.

.05 The prohibition against combining a money purchase plan with a § 401(k) or profit-sharing plan in the same Pre-approved Plan document is eliminated. See sections 9.06 and 9.07.

.06 A Nonstandardized Plan that contains an ESOP may include a § 401(k) feature. See sections 9.06 and 9.07. (A Pre-Approved Plan that contains an ESOP cannot be a Standardized Plan. See section 4.09.)

.07 A Nonstandardized Plan that contains a Cash Balance Formula may now permit the rate used to determine an Interest Credit to be based on the actual return on plan assets. However, the rate used to determine an Interest Credit cannot be based on a subset of plan assets. See section 6.03(7)(c). (A Pre-Approved Plan that contains a Cash Balance Formula cannot be a Standardized

1The deadline to apply for a determination letter was later extended to May 1, 2017.

2All section references in this revenue procedure are to sections of this revenue procedure unless otherwise specified.

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SECTION 4. DEFINITIONS

Plan. See section 4.09.) For limitations on the eligibility of certain types of Statutory Hybrid Plans under the Pre-approved Plan program, see section 6.03(7).

.08 The prohibition against submitting an application for an Opinion Letter for a non-electing church plan is eliminated. See section 6.03.

.09 Any Nonstandardized Plan may provide for either safe harbor or non-safe harbor hardship distributions. See section 6.03.

.10 The beginning and ending dates for the defined contribution on-cycle submission period for the third six-year remedial amendment cycle are modified to begin on October 2, 2017, and end on October 1, 2018. See section 9.02.

.11 The IRS will no longer rule on the exempt status of a Pre-approved Plan’s related trust or custodial account under § 501(a). See section 9.03.

.12 References to specific requirements under Title I of the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. 93–406, 1974–3 C.B. 1, have been removed and replaced with a statement that Opinion Letters will not consider Title I issues. This is intended to clarify the scope of reliance on Opinion Letters and is not a substantive change in IRS position. See section 6.04.

.13 The procedures for a determination letter application by an Adopting Employer to obtain reliance under §§ 415 and 416 have been modified to permit an application to be made on Form 5307, Application for Determination for Adopters of Modified Volume Submitter Plans . See section 7.05.

.14 Future enhancements

(1) Future updates - The IRS and the Department of the Treasury (Treasury Department) expect to continue to update this Opinion Letter program revenue procedure, in whole or in part, from time to time, including providing further improvements based on comments received. Accordingly, the IRS and Treasury Department continue to invite further comments on how to improve the Opinion Letter program. For information on how to submit comments, see section 22.

(2) Comments relating to the retention of legacy benefits - The Treasury Department and the IRS have received comments relating to ways in which conversion from an individually designed plan to a Pre-approved Plan could be facilitated. One area addressed in these comments relates to enabling Adopting Employers to continue to maintain certain legacy benefit formulas, which often arise in the context of mergers and acquisitions (either as frozen or as continuing benefit formulas for a certain number of participants), when adopting a Pre-approved Plan. The Treasury Department and IRS request comments on this issue, specifically with respect to the effect that appending legacy benefit formulas to the plan document would have on reliance on a plan’s Opinion Letter.

.01 Adopting Employer - An “Adopting Employer” is an employer that adopts a plan that is offered by a Provider, including a plan that is word-for-word identical to, or a minor modification of, a plan of a Mass Submitter.

.02 ESOP Definitions

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(1) ESOP - An “ESOP” is an employee stock ownership plan within the meaning of § 4975(e)(7).

(2) Exempt Loan - An “Exempt Loan” is a loan described in § 4975(d)(3) that meets the requirements for exemption from the excise tax imposed under § 4975(a) and (b) described in § 54.4975–7(b).

(3) Readily Tradable Employer Securities - “Readily Tradable Employer Securities” are publicly traded securities as defined in § 1.401(a)(35)–1(f)(5).

.03 Hybrid Plan Definitions

(1) Cash Balance Formula - A “Cash Balance Formula” is a statutory hybrid benefit formula, as defined in § 1.411(a)(13)–1(d)(4), that is used to determine all or any part of a participant’s accumulated benefit, and under which the accumulated benefit provided under the formula is expressed as the current balance of a hypothetical account maintained for the participant. The hypothetical account balance generally consists of Principal Credits and Interest Credits.

(2) Cash Balance Plan - A “Cash Balance Plan” is a defined benefit plan that includes a Cash Balance Formula.

(3) Conversion Amendment - A “Conversion Amendment” is an amendment defined in § 1.411(b)(5)–1(c)(4). Under this regulation, a conversion amendment is an amendment (i) that reduces or eliminates the benefits that, but for the amendment, a participant would have earned after the effective date of the amendment under a benefit formula that is not a statutory hybrid benefit formula within the meaning of § 1.411(a)(13)–1(d)(4), and (ii) with respect to which, after the effective date of the amendment, all or a portion of the participant’s benefit accruals under the plan are determined under a statutory hybrid benefit formula.

(4) Interest Credit - An “Interest Credit” is an interest credit as defined in § 1.411(b)(5)– 1(d)(1)(ii)(A). Under this regulation, an interest credit is an adjustment to a participant’s hypothetical account balance for a period that is not conditioned on service and that is determined by applying a rate of interest or rate of return to the participant’s hypothetical account balance as of the beginning of the period.

(5) Offset - An “Offset” is the reduction of benefits under an employer’s defined benefit plan by an amount attributable to the benefits payable under another plan of the employer.

(6) Principal Credit - A “Principal Credit” is a principal credit as defined in § 1.411(b)(5)– 1(d)(1)(ii)(D), which includes any increase in a participant’s hypothetical account balance that is not an Interest Credit.

(7) Statutory Hybrid Plan - A “Statutory Hybrid Plan” is a defined benefit plan that contains a statutory hybrid benefit formula as defined in § 1.411(a)(13)–1(d)(4).

(8) Variable Annuity Plan - A “Variable Annuity Plan” is any defined benefit plan that includes a variable annuity benefit formula as defined in § 1.411(a)(13)–1(d)(6).

.04 Mass Submitter - A “Mass Submitter” is any person that (1) has an established place of business in the United States where it is accessible during every business day and (2) submits Opinion Letter applications on behalf of at least 30 unaffiliated Providers, each of which is offering, on a word-for-word identical basis, the same plan. A flexible plan (as defined in section

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that is offered by a Provider will be considered a word-for-word identical plan. For purposes of determining whether 30 unaffiliated Providers offer, on a word-for-word basis, the same Pre-approved Plan, a Mass Submitter that is also a Provider is treated as an unaffiliated Provider. For purposes of this definition, affiliation is determined under § 414(b) and (c). Additionally, any law firm, accounting firm, consulting firm, etc., will be considered to be affiliated with its partners, members, associates, etc. A Mass Submitter is treated as a Mass Submitter with respect to all of its plans, provided the 30 unaffiliated Provider requirement is met with respect to at least one plan. See section 10 for rules relating to Mass Submitter plans.

.05 Nonstandardized Plan - A “Nonstandardized Plan” is a Pre-approved Plan that is not a Standardized Plan and that satisfies section 5.15.

.06 Opinion Letter - An “Opinion Letter” is a written statement issued by the IRS to a Provider or Mass Submitter as to the qualification in form of a plan under § 401, § 403(a), or both §§ 401 and 4975(e)(7).

.07 Pre-approved Plan

(1) A “Pre-approved Plan” is a plan (including a plan covering self-employed individuals) that is made available by a Provider for adoption by employers. The term Pre-approved Plan includes both Standardized Plans and Nonstandardized Plans, as defined in sections 4.09 and 4.05, respectively.

(2) A Pre-approved Plan may use a single funding medium (for example, a Trust or Custodial Account Document) for the joint use of all Adopting Employers or separate funding mediums established for each Adopting Employer.

(3) A Pre-approved Plan may be an “Adoption Agreement Plan” or a “Single Document Plan.” An Adoption Agreement Plan consists of a basic plan document and an adoption agreement. The basic plan document contains all of the non-elective provisions applicable to all Adopting Employers, and the adoption agreement contains the options that may be selected by each Adopting Employer. No options (including blanks to be completed) may be provided in the basic plan document portion of the Adoption Agreement Plan (except as provided in section 10 regarding flexible plans). A Single Document Plan consists of a single plan document offered by a Provider without an adoption agreement. A Single Document Plan may contain alternate paragraphs and options (including blanks to be completed by the Adopting Employer in accordance with specified parameters) that may be selected by an Adopting Employer.

.08 Provider - A “Provider” is any person (including, if applicable, a Mass Submitter) that (1) has an established place of business in the United States where it is accessible during every business day, and (2) represents to the IRS in its application for an Opinion Letter that it has at least 15 employer-clients, each of which is reasonably expected to adopt the same Pre-approved Plan of the Provider.

A Provider (as described in the previous paragraph) may request an Opinion Letter for more than one plan provided it represents to the IRS that it has at least 30 employer-clients in the aggregate, each of which is reasonably expected to adopt at least one of the Provider’s plans.

The IRS reserves the right at any time to request from the Provider a list of the employers that have adopted or are expected to adopt the Provider’s plans, including the employers’ business addresses and employer identification numbers.

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SECTION 5. PROVISIONS REQUIRED IN PRE-APPROVED PLANS

Notwithstanding the preceding provisions of this section 4.08, any person that has an established place of business in the United States where it is accessible during every business day may offer a plan as a word-for-word identical adopter or minor modifier adopter of a plan of a Mass Submitter regardless of the number of employers that are expected to adopt the plan. See section 10 for rules relating to Mass Submitter plans, including procedures for word-for-word identical adopters and minor modifier adopters of Mass Submitter plans.

By submitting an application for an Opinion Letter for a Pre-approved Plan under this revenue procedure (or by having an application filed on its behalf by a Mass Submitter), a person represents to the IRS that it is a Provider, and that it agrees to comply with any requirements imposed on Providers by this revenue procedure. Failure to comply with these requirements may result in the loss of eligibility to offer Pre-approved Plans and the revocation of Opinion Letters that have been issued to the Provider.

.09 Standardized Plan - A “Standardized Plan” is a Pre-approved Plan (other than an ESOP or Statutory Hybrid Plan) that meets the requirements set forth in section 5.16.

.10 Trust or Custodial Account Document - A “Trust or Custodial Account Document” is the separate portion of a plan that contains the trust agreement or custodial account agreement and includes provisions covering such matters as the powers and duties of trustees, investment authority, and the kinds of investments that may be made. All provisions of the Trust or Custodial Account Document must be applicable to all Adopting Employers of that trust or custodial account. The trust agreement or custodial account agreement must be in a document separate from the rest of the plan.

.01 Provisions required in all Pre-approved Plan - Each Pre-approved Plan must comply with the requirements set forth in sections 5.03 through 5.14.

.02 Additional Provisions - Section 5.15 provides additional provisions that apply to Nonstandardized Plans and section 5.16 contains additional provisions required for all Standardized Plans. If a Pre-approved Plan contains an ESOP or a Cash Balance Formula, the plan also must include the provisions set forth in section 5.17 or 5.18, as applicable.

.03 Provider Amendments - Each Pre-approved Plan must include a procedure for Provider amendments, so that corrections of prior approved plans and changes in the Code, regulations, or other guidance published in the Internal Revenue Bulletin may be applied to all employers who have adopted the plan. The procedure for Provider amendments also must state that, for purposes of reliance on the Opinion Letter, the Provider will no longer have the authority to amend the plan on behalf of the Adopting Employer as of the date the plan is treated as an individually designed plan pursuant to section 8.06.

.04 Anti-Cutback Provisions - Each Pre-approved Plan must specifically provide for the protection required under § 411(a)(10) and (d)(6) in the event that the Adopting Employer amends the plan (including by revising the options selected in the adoption agreement or adopting a new plan). A Plan may not be amended 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 the amendment is permitted under §§ 1.401(a)–4 and 1.411(d)–4. See section 5.07 for anti-cutback provisions that are required in situations in which a plan becomes top-heavy. See § 411(d)(6)(C) and § 1.411(d)–4, Q&A–2(d) for certain exceptions applicable to ESOPs.

.05 Adopting Employer Modification to Satisfy §§ 415 and 416 - Each Pre-approved Plan must provide that plan provisions may be amended by the Adopting Employer to the extent necessary

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to satisfy § 415 or 416 because of the required aggregation of multiple plans under these sections. Generally, a space should be provided in the plan with instructions for the Adopting Employer to add such language as necessary to satisfy §§ 415 and 416. In addition, a space must be provided in the plan for the Adopting 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. These provisions must be included in the adoption agreement of an Adoption Agreement Plan.

.06 Aggregation for § 415 compliance – Each Pre-approved Plan must provide for aggregation of all of an employer’s defined contribution plans and all of an employer’s defined benefit plans as necessary to satisfy § 415 (b), (c), and (f).

.07 Top-heavy Requirements - Each Pre-approved Plan must either provide that all of 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 options in the plan are completed. In the 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.) In addition, a plan that is subject to 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 reduced if the plan ceases to be top-heavy.

.08 Provisions Regarding Reliance - Each Pre-approved Plan must include, in close proximity to the signature line, a statement that describes the limitations on employer reliance on an Opinion Letter. See section 7.

.09 Provisions Regarding Conflicting Trust Provisions - Each Pre-approved Plan must contain a statement that the provisions of the plan override any conflicting provision contained in Trust or Custodial Account Documents used with the plan.

.10 Requirements Regarding Dated Signatures and Adoption Agreement Provisions - Each Pre-approved Plan must contain an Adopting Employer signature and date line. The plan also must contain a statement that the Provider will inform the Adopting Employer of any amendments made to the plan or of the discontinuance of the plan. The employer must sign and date the adoption agreement or signature page of the plan when it first adopts the plan and must complete, sign, and date a new adoption agreement or signature page if the plan has been restated. In addition, the employer must complete a new dated adoption agreement or signature page if it modifies any prior elections or makes new elections. 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. In the case of an Adoption Agreement Plan, the adoption agreement must state that it is to be used with only one plan. In addition, the adoption agreement must contain a cautionary statement to the effect that the failure to properly complete the adoption agreement may result in failure of the plan to qualify under § 401, 403(a), or 4975(e)(7), as applicable.

.11 Provider Telephone Numbers - Each Pre-approved Plan must include the Provider’s name, address, and telephone number (or a space for the address and telephone number of the Provider’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.

.12 Definition of Employee - (1) In general. Each Pre-approved Plan must define an employee as any employee of the employer maintaining the plan or any other employer aggregated with that

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employer under § 414(b), (c), (m), or (o) and the regulations thereunder. The definition of employee also must include any individual treated under § 414(n) or (o) as an employee of any employer described in the preceding sentence.

(2) ESOPs. With respect to an ESOP, employees who meet the definition in section 5.12(1) may not participate in the ESOP unless they are employed by the corporation that issues the stock held by the ESOP or by any corporation that is a member of the same controlled group of corporations (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 (e)(3)(C)). For all other purposes under the ESOP, including nondiscrimination and coverage, employees who meet the definition of employee in section 5.12(1) are treated as employees.

.13 Crediting of Service taking into account § 414(b), (c), (m), (n), and (o) - Each Pre-approved Plan must 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 (o) as an employee of any employer described in the previous sentence, service with such employer must be credited to such individual.

.14 Uniformed Services Employment and Reemployment Rights Act and § 414(u) - Each Pre-approved Plan must contain a provision reflecting the requirements of § 414(u). (See Rev. Proc. 96–49, 1996–2 C.B. 369.)

.15 Provisions Applicable to Nonstandardized Plans - In addition to the provisions set forth in sections 5.03 through 5.14, the following provisions apply to Nonstandardized Plans:

(1) Compensation Provisions in Nonstandardized Plans - Each Nonstandardized Plan may provide 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 a definition that otherwise satisfies § 414(s) under § 1.414(s)–1(c).

(2) Automatic or Optional Safe Harbor Provisions in Nonstandardized Plans - Each Nonstandardized Plan, other than a Statutory Hybrid Plan as described in section 4.03(7), may automatically or by option allow the Adopting Employer to satisfy the requirements of one of the design-based safe harbors described in § 1.401(a)(4)–2(b)(2) or § 1.401(a)(4)–3(b)(3), (4), and (5).

.16 Provisions Applicable to Standardized Plans - In addition to the requirements set forth in sections 5.03 through 5.14, each Standardized Plan must meet the following requirements:

(1) Under the provisions governing eligibility and participation, the plan by its terms must benefit all employees described in section 5.12(1) (regardless of whether any employer is treated as operating separate lines of business under § 414(r)) except those employees that may be excluded under § 410(a)(1) or (b)(3). The plan may provide options as to whether some or all of the employees described in § 410(a)(1) or (b)(3) are excluded, provided that the criteria for excluding employees described in § 410(a)(1) or (b)(3) apply uniformly to all employees. A Standardized Plan generally may not deny an accrual or allocation to an employee eligible to participate merely because the employee is not an active employee on the last day of the plan year or has failed to complete a specified number of hours of service during the year. However, the plan may deny an allocation or accrual to an employee who is eligible to participate if the employee terminates service during the plan year with not more than 500 hours of service and is not an active employee on the last day of the plan year.

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A plan will not fail to satisfy the requirements of this paragraph (1) merely because the plan provides, either as the result of an elective provision or by default in the absence of an election to the contrary, that individuals who become employees, within the meaning of section 5.12(1), as the result of a transaction described in § 410(b)(6)(C) will be excluded from eligibility to participate in the plan during the period beginning on the date of the transaction and ending on a date that is not later than the last day of the first plan year beginning after the date of the transaction. A transaction described in § 410(b)(6)(C) is an asset or stock acquisition, merger, or other similar transaction involving a change in the employer of the employees of a trade or business.

(2) The eligibility requirements under the plan are not more favorable for highly compensated employees (as defined in § 414(q)) than for other employees.

(3) Under the plan, allocations, in the case of a defined contribution plan (other than any cash or deferred arrangement portion of the plan), or benefits, in the case of a defined benefit plan, are determined on the basis of total compensation. 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 a definition that otherwise satisfies § 414(s) and § 1.414(s)– 1(c).

(4) Unless the plan is a target benefit plan or a § 401(k) and/or 401(m) plan, the plan satisfies, by its terms, one of the design-based safe harbors described in § 1.401(a)(4)–2(b)(2) (taking into account § 1.401(a)(4)–2(b)(4)) or § 1.401(a)(4)–3(b)(3), (4), or (5) (taking into account § 1.401(a)(4)–3(b)(6)).

(5) All benefits, rights, and features under the plan (other than those, if any, that have been prospectively eliminated) are currently available to all employees benefiting under the plan.

(6) Any past service credit under the plan meets the safe harbor in § 1.401(a)(4)–5(a)(3).

(7) Any hardship distribution satisfies the safe harbor standards in the regulations under § 401(k).

.17 Additional Provisions Required in ESOPs - In addition to complying with sections 5.03 through 5.15, each Pre-approved Plan that includes an ESOP feature must include the following provisions:

(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;

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(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 plan document or adoption agreement) that identify the Adopting Employer as either a C corporation or an S corporation.

.18 Additional Provisions Required in Cash Balance Plans - In addition to complying with sections 5.03 through 5.15, each Pre-approved Plan that includes Cash Balance Formulas must 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 an Opinion Letter under this revenue procedure, a Cash Balance Plan must provide that, at all times, any benefits accrued prior to the Adopting Employer’s adoption of the Pre-approved Plan (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 § 1.411(b)(5)–1(c). However, an 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 any 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 Pre-approved Plan document.

July 17, 2017 102 Bulletin No. 2017–29