SECTION 4. USE — Internal Revenue Bulletin

AMENDMENT

.01 All plans—Sponsors described in subsection .02 may amend their plans by adopting the model language in the appendix to this revenue procedure on a word-for-word basis, in accordance with the instructions in this revenue procedure. If a sponsor to whom the model language is available pursuant to subsection .02 adopts the model language, neither application to the Service nor a user fee is required. The Service will not issue new opinion, notification, advisory, or determination letters for plans that are amended solely to add the model language described in this section.

.011 The model language in the appendix contains 2 options for sponsors electing to use the simplified method of determining HCEs. Option 1 provides model language for sponsors that choose to apply this simplified method on the basis of the employer’s workforce as of a snapshot day. If option 1 is selected, a snapshot day must be specified in the provided blank that is reasonably representative of the employer’s workforce and the plan’s coverage throughout the plan year. Option 2 may be used by sponsors that are not applying this method on the basis of a snapshot day. Neither option provides for the use of reasonably approximated or projected compensa

386 1995–2 C.B.

tion as part of the simplified method of determining HCEs.

.02 The only sponsors to whom the model language is available are sponsors of M&P, regional prototype, volume submitter specimen, and individually designed plans (including volume submitter plans) and SEPs that have received favorable opinion, notification, advisory, determination, or ruling letters that take into account the requirements of TRA ’86 under Rev. Proc. 87–50, 1987–2 C.B. 647, as modified; Rev. Proc. 89–9, as modified; Rev. Proc. 89–13, as modified; Rev. Proc. 90–20, 1990–1 C.B. 495; Rev. Proc. 91–41, 1991–2 C.B. 697; Rev. Proc. 91–66, 1991–2 C.B. 870; or Rev. Proc. 93–39. .021 Sponsors of individually designed plans that are adopting the model language in the appendix must select between options 1 and 2 for inclusion in their plans. M&P and regional prototype plan sponsors may adopt both options and allow adopting employers to elect between those options in the adoption agreement.

.03 M&P and Regional Prototype Sponsors—M&P and regional prototype plan sponsors that use the model language must send copies of the amended plan or, if more convenient, the changed pages, to the appropriate Key District Director in accordance with section 10.10 of Rev. Proc. 89–9 and section 14 of Rev. Proc. 89–13 in order to notify the Service that they are using the model language. Sponsors should include a copy of the opinion or notification letter previously issued with ‘‘Highly Compensated Employee Model Amendment’’ printed clearly on the top of the copy of the letter. In addition, mass submitters must certify that all identical adopters of M&P mass submitter plans and regional prototype sponsors that use the mass submitter’s plan will adopt the plan as amended. Sponsors must notify all adopting employers of the changes to their plans. If sponsors that either are identical adopters of an M&P mass submitter’s plan or use a regional prototype mass submitter’s plan do not adopt the plan as amended by the mass submitter, the adopting employer’s plan will become individually designed.

.04 Volume Submitter Specimen Plans—Sponsors of volume submitter specimen plans that use the model language must send copies of the amended plan or, if more convenient, changed pages, to the appropriate Key

ments other than amendments provided in the preceding sentence will be returned to the sponsor. In addition, mass submitters must certify that all identical adopters of M&P mass submitter plans, and regional prototype sponsors that use the mass submitter’s plan, will adopt the plan as amended.

.04 Upon receipt of an application, the National Office will issue an acknowledgement letter that confirms receipt of the application and informs the sponsor that the Service will notify the sponsor if any changes need to be made to the non-model language. If the Service does not notify the sponsor within 90 days of the date of the acknowledgement letter that changes to the non-model language are necessary, the sponsor may treat the non-model language as approved. In such case, the sponsor will receive no further correspondence from the Service regarding the aforementioned non-model language.

.05 Sponsors that either are identical adopters of an M&P mass submitter’s plan or use a regional prototype mass submitter’s plan must adopt the plan as amended by the mass submitter. If the mass submitter’s amendment is treated as approved under subsection .04 above, the identical adopter may also treat the amendment as approved without submitting a separate application.

.06 Sponsors must notify all adopting employers of the change to their plans and must send copies of the amended plan or, if more convenient, changed pages, to the appropriate Key District Directors in accordance with Rev. Procs. 89–9 and 89–13.

(B) LIMITED AMENDMENT PROCEDURE FOR REGIONAL PROTOTYPE PLANS

.01 This section 5(B) provides a limited amendment procedure under which sponsors of regional prototype plans that have received favorable notification letters can amend their plans to include the simplified method of determining HCEs using non-model language.

.02 A regional prototype sponsor must apply to the Key District Office that issued the plan’s notification letter for approval of the non-model language. The application should be addressed to the attention of the Volume Submitter Coordinator. The application should include both the pink and white copies of page 1 of Form 4461 or Form

4461–A with ‘‘Highly Compensated Employee Amendment’’ printed clearly on the top of the white copy, Form 8717 with a January 1994 revision date or later, and a user fee of $400.00.

.03 All changes made to include the simplified method of determining HCEs must be clearly described in a cover letter. A copy of the plan or, if more convenient, changed pages, must also be submitted. In addition, a copy of the most recent notification letter must be included. All applicants must certify that no changes have been made other than those made to include the simplified method of determining HCEs under this revenue procedure, or those made under the limited amendment procedures described in section 6. Plans with amendments other than amendments described in the preceding sentence will be returned to the sponsor.

.04 Upon approval of the non-model language submitted by a regional prototype sponsor, the Key District Office will issue a notification letter.

.05 Sponsors must notify all adopting employers of the change to their plans and must send copies of the amended plan or, if more convenient, changed pages, to the Key District Directors in accordance with Rev. Proc. 89–13.

(C) LIMITED AMENDMENT PROCEDURE FOR VOLUME SUBMITTER SPECIMEN PLANS

.01 This section 5(C) provides a limited amendment procedure under which sponsors of volume submitter specimen plans that have received favorable advisory letters can amend their plans to include the simplified method of determining HCEs using non-model language.

.02 A sponsor of a volume submitter specimen plan must apply to each of the Key District Offices that issued the original advisory letter(s) for approval of the non-model language. The application should be addressed to the attention of the Volume Submitter Coordinator identified in the advisory letter(s) and must include a cover letter with ‘‘Highly Compensated Employee Amendment’’ printed clearly on the top, Form 8717 with a January 1994 revision date or later, and a user fee of $400.00.

.03 All changes made to include the simplified method of determining

HCEs must be clearly described in a cover letter. A copy of the plan or, if more convenient, changed pages, must also be submitted. In addition, a copy of the most recent advisory letter must be included. All applicants must certify that no changes have been made other than those made to include the simplified method of determining HCEs under this revenue procedure, or those made under the limited amendment procedures described in section 6. Plans with amendments other than amendments provided in the preceding sentence will be returned to the sponsor.

.04 Upon approval of the non-model language submitted by a volume submitter specimen plan sponsor, the Key District Office will issue an advisory letter.

.05 Volume submitter specimen plan sponsors may offer the amended specimen plan prospectively only, as volume submitter specimen plan sponsors do not have the power to adopt amendments on behalf of employers. However, an employer that adopted a volume submitter specimen plan prior to this amendment of the specimen plan may individually adopt non-model language in accordance with section 5(D) of this revenue procedure.

(D) LIMITED AMENDMENT PROCEDURE FOR ADOPTERS OF INDIVIDUALLY DESIGNED PLANS INCLUDING PREVIOUSLY APPROVED VOLUME SUBMITTER PLANS

.01 This section 5(D) provides a limited amendment procedure under which an employer that maintains an individually designed plan, including a previously approved volume submitter plan, that has received a favorable determination letter that takes into account TRA ’86 and later laws, can amend its plan to include the simplified method of determining HCEs using non-model language. Section 4.01(2) of Rev. Proc. 93–42 permits the compensation used in the simplified method of determining HCEs to be compensation that reasonably approximates the employee’s § 414(q)(7) compensation for the plan year. Section 4.02(2) of Rev. Proc. 93–42 provides that, if the determination of HCEs is made earlier than the last day of the plan year, the employee’s compensation must be projected for a plan year under a reasonable method established by the employer. In order for approximated or projected compensation to be used as part of the simplified method of determining HCEs, the plan language incorporating the simplified method must specifically describe the method by which compensation will be approximated or projected by the employer in a manner that satisfies the requirement in § 1.401–1(b) that a plan provide for the payment of definitely determinable retirement benefits.

.02 An employer maintaining an individually designed plan must apply to the Key District Director for the district in which the principal place of business of the employer (within the meaning of § 414(b), (c), and (m)) is located for approval of the non-model language. If the employer’s principal place of business is not located within the United States, the application should be filed with the District Director of the Baltimore Key District Office. The application should include both the pink and white copies of page 1 of Form 6406 with ‘‘Highly Compensated Employee Amendment’’ printed clearly on the top of the white copy, Form 8717 with a January 1994 revision date or later, and a user fee of $125.00. For purposes of section 10 of Rev. Proc. 95–6, an amendment that merely adds the simplified method of determining HCEs to the plan is not considered a ‘‘complex amendment’’ that would render an employer ineligible to use the Form 6406, Short Form Application for Determination for Amendment of Employee Benefit Plan.

.03 An employer that has previously adopted a volume submitter’s specimen plan, and that wishes to use the version of the specimen plan that includes the non-model amendment provided in section 5(C), must apply to the Key District Office for the district in which the principal place of business of the employer (within the meaning of § 414(b), (c), and (m)) is located for approval of the non-model language. The application should include both the pink and white copies of page 1 of Form 5307 with ‘‘Highly Compensated Employee Amendment’’ printed clearly on the top of the white copy, Form 8717 with a January 1994 revision date or later, and a user fee of $125.00.

.04 All changes to the plan must be clearly described in a cover letter. A copy of the plan or, if more convenient, changed pages, must also be submitted. In addition, a copy of the most recent determination letter must be included. All applicants must certify

388 1995–2 C.B.

that no changes have been made other than those made to include the simplified method of determining HCEs under this revenue procedure or those made under the limited amendment procedures described in section 6. Plans with amendments other than amendments described in the preceding sentence will be returned to the employer.

.05 Upon approval of the non-model language submitted by an adopting employer, the Key District Office will issue a favorable determination letter.

.06 Adopting employers must notify interested parties of the application to the Service for an advance determination regarding the qualification of the amended plan in accordance with Section II of Rev. Proc. 95–6.

(E) LIMITED AMENDMENT PROCEDURES FOR SEPS

.01 This section 5(E) provides limited amendment procedures under which sponsors of SEPs (other than employers that have adopted model SEP Form 5305–SEP or 5305A–SEP) that have received favorable opinion or ruling letters can amend their plans to include the simplified method of determining HCEs using non-model language.

.02 A sponsor of a prototype SEP or SEP mass submitter must apply to the National Office for approval of the non-model language. The application should include the first page of Form 5306–SEP with ‘‘Highly Compensated Employee Amendment’’ printed clearly on the top of the Form and a user fee of $400.00. For all plans submitted simultaneously by each sponsor, only one user fee is required regardless of the number of plans affected.

.03 An employer that has adopted an individually designed SEP must apply to the National Office for a ruling letter on the non-model language in accordance with Rev. Proc. 87–50, as modified by Rev. Proc. 91–44, 1991–2 C.B. 733, and Rev. Proc. 95–4, 1995–1 C.B. 397, and pay a user fee of $400.00. .04 All changes to include the simplified method of determining HCEs must clearly be described in a cover letter. A copy of the SEP or, if more convenient, changed pages, must also be submitted. In addition, a copy of the most recent opinion or ruling letter must be included. All applicants must certify that no changes have been made

other than those made to include the simplified method of determining HCEs under this revenue procedure, or those made under the limited amendment procedures described in section 6. Plans with amendments other than amendments described in the preceding sentence will be returned to the employer.

.05 Upon receipt of an application for a SEP or SEP mass submitter, the National Office will issue an acknowledgement letter that confirms receipt of the application and informs the sponsor that the Service will notify the sponsor if any changes need to be made to the non-model language. If the Service does not notify the sponsor within 90 days of the date of the acknowledgement letter that changes to the nonmodel language are necessary, the sponsor may treat the non-model language as approved. In this case, the sponsor will receive no further correspondence from the Service regarding the aforementioned non-model language.

.06 Sponsors who use a SEP mass submitter’s plan must adopt the plan as amended by the mass submitter. If the mass submitter’s amendment is treated as approved under subsection .05 above, the identical adopter may also treat the amendment as approved without submitting a separate application.

.07 Sponsors must notify all adopting employers of the change to their plans and must send copies of the amended plan or, if more convenient, changed pages, to the applicable Key District Directors in accordance with Rev. Proc. 87–50, as modified.