SECTION 2. BACKGROUND

.01 Effective January 1, 2017, Rev. Proc. 2016-37 provides the circumstances under which plan sponsors may submit determination letter applications to the IRS. In general, a sponsor of an individually designed plan may submit a determination letter application only for initial plan qualification and for qualification upon plan termination. However, as described in section 4.03(3) of Rev. Proc. 2016‑37, the Department of the Treasury (Treasury Department) and the IRS will consider each year whether to accept determination letter applications for individually designed plans in specified circumstances other than for initial qualification and qualification upon plan termination.

.02 In Notice 2018-24, 2018-17 I.R.B. 507, the Treasury Department and the IRS requested comments on the potential expansion of the scope of the determination letter program for individually designed plans.

.03 Section 401(b) of the Code and the regulations thereunder provide a remedial amendment period during which a plan may be amended retroactively to comply with the Code’s qualification requirements. Section 1.401(b)-1(e)(3) provides, in part, that the submission of a determination letter application extends the remedial amendment period until the expiration of 91 days after the date a determination

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letter is issued. Section 1.401(b)-(1)(f) provides that the Commissioner also may extend the remedial amendment period.

.04 Rev. Proc. 2016-37 extended the remedial amendment period that would otherwise apply under § 1.401(b)-1 for certain disqualifying provisions, as described in § 1.401(b)-1(b) and Rev. Proc. 2016-37. Section 5.05(3) of Rev. Proc. 2016-37 provides that the remedial amendment period for a disqualifying provision with respect to a change in qualification requirements (a statutory change or a change in the requirements provided in regulations or other guidance, as noted in section 5.04 of that revenue procedure) is extended to the end of the second calendar year that begins after the issuance of the Required Amendments List in which the change in qualification requirements appears. A later date may apply to a governmental plan (as defined in § 414(d)), as provided in section 5.06 of Rev. Proc. 2016-37. As provided in Rev. Proc. 2016-37, the Treasury Department and the IRS intend to publish a Required Amendments List annually. Section 5.05(2) of Rev. Proc. 2016-37 also provides that the remedial amendment period for a disqualifying provision with respect to an amendment to an existing plan (other than a disqualifying provision with respect to a change in qualification requirements) is extended to the end of the second calendar year following the calendar year in which the amendment is adopted or effective, whichever is later.

.05 Notice 2017-72, 2017-52 I.R.B. 601, sets forth the 2017 Required Amendments List. The 2017 Required Amendments List provides that December 31, 2019, is generally the last day of the remedial amendment period with respect to a disqualifying provision arising as a result of a change in qualification requirements that appears on the 2017 Required Amendments List. December 31, 2019, is also generally the plan amendment deadline for a disqualifying provision arising as a result of a change in qualification requirements that appears on the 2017 Required Amendments List. A later date may apply to a governmental plan (as defined in § 414(d)). ¹

.06 Prior to the issuance of Rev. Proc. 2016-37, an annual Cumulative List of Changes in Retirement Plan Qualification Requirements (Cumulative List) was issued to identify changes in the qualification requirements resulting from changes in statutes, or from regulations or other guidance published in the Internal Revenue Bulletin, that were required to be taken into account in a written plan document submitted for a determination letter.

.07 Section 411(a)(13)(C)(i) defines the term “applicable defined benefit plan” as a defined benefit plan under which the accrued benefit (or any portion thereof) is calculated as the balance of a hypothetical account maintained for the participant or as an accumulated percentage of the participant’s final average compensation. Section 411(a)(13)(C)(ii) provides that the Secretary shall issue regulations which include in the definition of an applicable defined benefit plan any defined benefit plan (or any portion of such a plan) which has an effect similar to an applicable defined benefit plan. Notice 2007-6, 2007-1 C.B. 272, refers to a plan described in either § 411(a)(13)(C)(i) or in regulations or other guidance issued pursuant to § 411(a) (13)(C)(ii) as a statutory hybrid plan. Section 1.411(a)(13)-1(d)(5) defines a “statutory hybrid plan” as a defined benefit plan that contains a statutory hybrid benefit formula.

.08 Section 411(b)(5)(B)(i)(I) provides, in part, that an applicable defined benefit plan shall be treated as failing to meet the requirements of § 411(b)(1)(H) (which provides that the rate of an employee’s benefit accrual must not be reduced because of the attainment of any age) unless the terms of the plan provide that any interest credit (or an equivalent amount) for any plan year shall be at a rate that is not greater than a market rate of return. Final regulations providing rules regarding statutory hybrid retirement plans and transitional amendments to satisfy the market rate of return rules for statutory hybrid retirement plans were issued in 2010 (75 Fed. Reg. 64123), 2014 (79 Fed. Reg. 56442), and 2015 (80 Fed. Reg. 70680), herein referred to individually and collectively as “final hybrid plan reg

ulations.” The 2014 and 2015 final hybrid plan regulations appear on the 2017 Required Amendments List.

.09 Section 411(d)(6) provides, in part, that a plan does not satisfy § 411 if an amendment to the plan decreases a participant’s accrued benefit.

.10 Notwithstanding the requirements of § 411(d)(6), § 1.411(b)(5)-1(e)(3)(vi) permits a plan with an interest crediting rate that does not comply with the 2010 and 2014 final hybrid plan regulations (a noncompliant interest crediting rate) to be amended with respect to benefits that have already accrued so that its interest crediting rate complies with the market rate of return rules of § 411(b)(5)(B)(i) and § 1.411(b) (5)-1(d). Pursuant to § 1.411(b)(5)-1(e) (3)(vi)(B)( 3 ), in order to qualify for this treatment, the amendment had to be adopted prior to, and effective no later than, the applicability date of the regulatory market rate of return rules (generally, the first day of the first plan year that began on or after January 1, 2017, with a delayed applicability date for collectively bargained plans).