Rev. Proc. 75-38

Section 1. Purpose

.01 This Revenue Procedure provides supplemental and revised procedures of the Internal Revenue Service pertaining to the issuance of opinion letters by the National Office as to the acceptability of the form of certain master and prototype pension, annuity, and profit-sharing plans that include self-employed individuals, and the status for exemption of related trusts or custodial accounts.

.02 This revision is made to permit the issuance of opinion letters with respect to the acceptability of the form of these plans under sections 401 and 501(a) of the Internal Revenue Code of 1954, as amended by the Employee Retirement Income Security Act of 1974 (Public Law 93-406) 1974-3 C.B., approved September 2, 1974, (hereinafter referred to as "the Act").

Sec. 2. Background and General Information

.01 Rev. Proc. 72-7, 1972-1 C.B. 715, contains procedures relating to the issuance of opinion letters as to the acceptability of the form of master and prototype plans designed to include self-employed individuals.

.02 Rev. Proc. 74-39, 1974-2 C.B. 494, was issued to temporarily limit the issuance of opinion letters until guidelines could be developed for determining whether certain types of defined contribution plans meet the requirements of sections 401 and 405, as amended by the Act.

.03 These guidelines have now been developed, thereby permitting publication of Rev. Proc. 75-5, 1975-1 C.B. 645, authorizing the issuance of determination letters on those plans. The development of those guidelines also permits publication of this Revenue Procedure authorizing the issuance of opinion letters with respect to the acceptability as to form of certain master and prototype plans designed to include self-employed individuals.

Sec. 3. Rulings and Opinion Letters

.01 Except for the plans described in subsection .02 below, the National Office of the Service, upon request, will furnish a written opinion as to the acceptability (for purposes of section 401 of the Code, as amended by the Act, and section 501(a)) of the form of any defined contribution, master or prototype plan designed to include groups of self-employed individuals who may adopt the plan. If the form of plan includes a master trust or custodial account, a ruling will also be issued with respect to the exempt status of the trust or custodial account which forms part of the master or prototype plan.

.02 Subsection .01 above does not permit the issuance of opinion letters and rulings with respect to the following:

(1) a plan submitted by a sponsor other than a trade or professional association, a bank within the meaning of section 401(d)(1), an insurance company, or a regulated investment company;

(2) a plan that provides for determining whether an employee has a year of service, for purposes of sections 401(d)(3)(A) and 410(a)(3)(A) relating to minimum participation standards, on any basis other than a 12-month period beginning with the commencement of employment or an anniversary date thereof;

(3) a plan that does not contain provisions with respect to credit for hours of service or breaks in service, consistent with guidelines published by the Service or the Department of Labor at the time the opinion letter is to be issued.

(4) a plan under which it is possible for the 12-consecutive-month period used to determine whether an employee has completed a year of service for purposes of section 410(a)(3) not to coincide with the 12-consecutive-month period used to determine whether the employee has had a break in service for purposes of section 410(a)(5).

(5) a plan (including a target benefit plan) under which the test for prohibited discrimination under section 401(a)(4) is to be made by reference to benefits rather than contributions.

(6) a plan that includes a provision permitted under section 410(a)(5)(C) with respect to the effect of a one-year break in service on the aggregation of years of service.

(7) a plan that permits the return of employer contributions for any reason except for correcting distributions under section 4972(b)(5).

(8) a plan designed to be used as a multi-employer plan within the meaning of section 414(f).

(9) a plan that permits contributions in excess of the lesser of $2500 or 10 percent of earned income (including provision for the new maximum deductible limit of the lesser of $7500 or 15 percent of earned income), but does not satisfy the requirements of section 401(a)(17) of the Code with respect to the limitation on earned income (the first $100,000) which may be taken into account in a nondiscriminatory manner.

(10) a plan that permits the contribution of more than 25 percent of a participant's compensation in any taxable year.

.03 In order to be entitled to a favorable opinion letter under this Revenue Procedure, the form of plan must conform to all requirements of the Internal Revenue Code in effect at the time the opinion letter is to be issued. However, opinion letters issued pursuant to this Revenue Procedure will not constitute an opinion whether the form of plan meets requirements of the Act which are not applicable at the time the opinion letter is issued. Specifically, such opinion letters do not express opinions with respect to section 401(a)(11) of the Code, relating to plan provisions on qualified joint and survivor annuities, section 401(a)(12), relating to plan provisions on mergers, consolidations, etc. of plans, section 401(a)(13), relating to plan provisions restricting assignment of alienation of plan benefits, or section 415, relating to limitations on benefits and contributions under qualified plans.

.04 Plans with respect to which favorable opinion letters are issued pursuant to subsection .01 above may have to be amended subsequently to include or revise the provisions described in subsection .03 above. Such plans may also have to be amended if any provisions therein fail to meet the requirements of regulations adopted subsequent to the time the opinion letters are issued. Plans with respect to which favorable opinion letters have been issued pursuant to this Revenue Procedure may be amended, without adverse effect, to meet the requirements of subsequently issued regulations.

.05 Where an employer adopts a master or prototype plan and any related master or prototype trust or custodial account previously approved as to form pursuant to this Revenue Procedure, the employer's plan will be deemed to satisfy the requirements of sections 401 and 501(a) of the Code provided the following conditions are met:

(1) the requirements of section 3.02 of Rev. Proc. 72-7 are satisfied;

(2) the employer properly notified all interested parties of the adoption of the plan in accordance with the provisions of applicable rules, procedures, and regulations;

(3) the employer does not receive notice from the Service that the qualification of his plan has been challenged by an interested party within 90 days after he gives the notice mentioned in section 3.05(2) above (see section 3.06, below, for procedure in the event such a notice is received from the Service);

(4) the plan does not involve the question of credit for service with a predecessor employer or under a predecessor plan;

(5) the qualification of the plan is not affected by failure to provide appropriate plan contributions or benefits for employees of another trade or business under common control within the meaning of section 414(c);

(6) the plan is not involved in a merger or consolidation of plans or in the transfer of assets or liabilities from one plan to another;

(7) the plan is not one under which employees would be eligible to participate only if they had three years of service, within the meaning of section 410(a)(3) and any such employees are (1) engaged in the operation of vessels on bodies of water including the high seas, coastal waters, and inland waterways and (2) are compensated, pursuant to articles or other similar contracts or agreements, on a basis (either expressly set forth in the governing documents or by practice) of basic pay rates computed in units no smaller than one day; and

(8) the plan is not one under which seasonal employees would be eligible to participate only if they had at least three years of service, within the meaning of section 410(a)(3), but this section 4.05(8) will not apply if the customary period of employment for each such employee is more than 1,000 hours during a calendar year.

.06 If the Service receives one or more comments from interested parties or the Secretary of Labor with respect to an employer's adoption of a master or prototype plan pursuant to this procedure, the Service will notify the employer that the comments have been received. The employer may then request a determination letter with respect to his plan in accordance with the procedures contained in Rev. Proc. 75-5 and applicable regulations, except that a second notice to interested parties will not be required. The appropriate District Director's office will then consider the plan and the comments and will notify the employer and the party or parties who commented of its finding with respect to the plan. If the District Director's finding is favorable with respect to the qualification of the plan, the employer's adoption of the plan will thereafter be treated as any other adoption of a master or prototype plan in accordance with this Revenue Procedure.

Sec. 4. Instructions to Sponsoring Organizations and Employers

.01 A sponsoring organization of the type referred to in section 3.02(1) above that desires a written opinion as to the acceptability of the form of a master or prototype plan (or as to the exempt status of a related trust or custodial account) should submit its request to the National Office of the Service in accordance with the provisions of section 4 of Rev. Proc. 72-7.

.02 Necessary amendments to plans with respect to which favorable opinion letters have been issued under the authority of this Revenue Procedure will also be processed in accordance with the provisions of section 4 of Rev. Proc. 72-7.

Sec. 5. Effect on Other Documents

.01 Rev. Proc. 74-39 is hereby modified to permit the issuance of opinion letters on the acceptability as to form of master and prototype plans designed to include self-employed individuals, to the extent authorized by this Revenue Procedure.

.02 The general procedures of Rev. Proc. 72-7 continue to apply except to the extent they are inconsistent with this Revenue Procedure or with Rev. Proc. 74-39.

Sec. 6. Effective Date

This Revenue Procedure is effective on September 5, 1975.

¹ Also released as TIR-1401, dated Sept. 5, 1975.