SECTION 7. APPLICABLE

SANCTIONS – STATUTORY HYBRID PLANS

.01 In General . A plan sponsor that has applied for a determination letter pursuant to this revenue procedure with respect to a statutory hybrid plan that has a plan document failure, as defined in section 5.01(2) (a) of Rev. Proc. 2019-19, 2019-19 I.R.B. 1086, (which includes the failure to adopt an amendment to correct a disqualifying provision within the applicable remedial amendment period), must amend the plan to comply with applicable qualification requirements. In addition, except as provided in section 7.02 of this revenue procedure, the plan sponsor must pay the applicable sanction described in section 7.03 or 7.04 of this revenue procedure, and enter into a closing agreement with the IRS.

.02 No Sanctions for Plan Document Failures Related to Final Hybrid Plan Regulations . The Treasury Department and the IRS are mindful that the IRS’s scope of review during a statutory hybrid plan’s most recent remedial amendment cycle did not include all the provisions related to the final hybrid plan regulations under § 1.411(a)(13)-1 and § 1.411(b)(5)1. As a result, plan sponsors of statutory hybrid plans did not have the opportunity to have their plans reviewed for all provisions related to those regulations. Accordingly, the IRS will not impose a sanction for any plan document failure with respect to a plan provision required to meet the requirements of § 1.411(a)(13)-1 and § 1.411(b)(5)-1 that is discovered by the IRS in its review of a plan submitted for a determination letter pursuant to this revenue procedure.

.03 Special Sanction Structure for Plan Document Failures Unrelated to Final Hybrid Plan Regulations . This section 7.03 sets forth a sanction structure that applies to a statutory hybrid plan submitted for a determination letter pursuant to this revenue procedure that has a plan document failure other than a plan document failure with respect to a plan provision that is required to meet the requirements of § 1.411(a)(13)-1 or § 1.411(b)(5)-1, provided the conditions in section 7.03(1) (a) or (b) of this revenue procedure are satisfied. The amount of the sanction is equal to the applicable Employee Plans

Voluntary Compliance Resolution System (EPCRS) Voluntary Correction Program user fee that would have applied had the plan sponsor identified the failure and submitted the plan for consideration under the Voluntary Correction Program.

(1) Conditions for special sanction structure .

(a) The amendment that creates the failure (without regard to whether that amendment was required to be adopted) was adopted timely and in good faith with the intent of maintaining the qualified status of the plan; or

(b) In the case of an amendment required because of a change in qualification requirements, the plan sponsor reasonably and in good faith determined that no amendment was required because the qualification change does not impact provisions of the written plan document.

(2) Other rules for special sanction structure .

(a) The IRS will make the final determination in all cases as to whether an amendment was adopted in good faith with the intent of maintaining the qualified status of the plan, or whether a plan sponsor reasonably and in good faith determined that no amendment was required.

(b) If the conditions of section 7.03(1) (a) or (b) of this revenue procedure are not satisfied, the sanction set forth in section 7.04 will apply. .04 General Sanction Structure Un- der EPCRS . This section 7.04 sets forth a general sanction structure that applies to a statutory hybrid plan submitted for a determination letter pursuant to this revenue procedure that (1) has a plan document failure other than a plan document failure with respect to a plan provision that is required to meet § 1.411(a)(13)-1 or § 1.411(b)(5)-1 and (2) does not satisfy the conditions of section 7.03(1)(a) or (b) of this revenue procedure. The amount of the sanction is equal to the applicable sanction amount set forth in section 14.04 of Rev. Proc. 2019-19. Section 14.04 of Rev. Proc. 2019-19 provides for a sanction for certain plan document failures that are discovered by the IRS during the determination letter process that is equal to 150% or 250% (depending on the duration of the failure) of the applicable user fee that would apply to the plan had it been submitted under the EPCRS Voluntary Cor

rection Program. See Appendix A of Rev. Proc. 2019-4 (and its annual successors) for the applicable Voluntary Correction Program user fee.