Rev. Proc. 80-17

Section 1. Purpose

This revenue procedure sets forth the procedures for the issuance of rulings and opinion letters by the National Office of the Internal Revenue Service as to the acceptability of the form of any prototype simplified employee pension (SEP) agreement under sections 408(k) and 415 of the Internal Revenue Code.

Sec. 2. Background and General Information

.01 The Revenue Act of 1978, Pub. L. 95-600, 1978-3 C.B. (Vol. 1) 1, created new rules that permit simplified employee pensions for tax years beginning after December 31, 1978.

.02 The general procedures of the Service relating to the issuance of rulings, determination letters, and opinion letters for employee plans matters are set forth in section 601.201 of the Statement of Procedural Rules.

.03 Procedures relating to the issuance of rulings, determination letters, and opinion letters pertaining to the establishment of individual retirement accounts and individual retirement annuities (IRAs) are set forth in Rev. Proc. 75-6, 1975-1 C.B. 646, as modified by Rev. Procs. 76-32, 1976-2 C.B. 654, and 77-24, 1977-2 C.B. 532.

.04 The Service has developed a model SEP agreement that meets the requirements of section 408(k) of the Code for those employers who wish to adopt such a program. Form 5305-SEP, Simplified Employee Pension-Individual Retirement Accounts Contribution Agreement, is used for this purpose. Eligible employers who adopt the model SEP agreement and follow its terms are assured that the model SEP meets the requirements of section 408(k). Because automatic approval has been granted with respect to model SEPs, no ruling, opinion, or determination letter from the Service is necessary.

.05 Receipt of a favorable opinion letter on a SEP is not required as a condition of receiving favorable tax treatment.

.06 The Service will only issue opinion letters on prototype SEP agreements. The Service will not issue opinion letters with respect to prototype SEP-IRAs that consolidate the SEP and IRA in one document. Nor will an opinion letter issued on a prototype SEP provide reliance as to the status of any IRA.

Sec. 3. Opinion Letters

.01 The National Office of the Service will furnish, on request, a written opinion as to whether the prototype SEP submitted by a sponsor satisfies the requirements of section 408(k) of the Code. For this purpose, a sponsor is a trade or professional association (other than an employee association), a bank (including credit unions, savings and loan associations, etc.), a regulated investment company, an insurance company, or a person who under regulations may act as a trustee or custodian of an IRA.

.02 Each opinion letter will contain an identifying serial number and a file-folder number. A copy of the opinion letter should be furnished to employers using the approved SEP agreement.

.03 If a particular employer adopts a prototype SEP in accordance with the form approved by the Service and observes the provisions thereof, the affected taxpayers may rely on the opinion letter provided (a) SEP contributions are made to an Internal Revenue Service model IRA or a Service approved master or prototype IRA and (b) contributions under the SEP do not (in combination with another SEP or any terminated, qualified defined benefit plan of the employer) fail to satisfy the requirements of section 415 of the Code.

Sec. 4. Instructions to Sponsoring Organizations and Employers

.01 A sponsoring organization, of the type referred to in section 3.01 above, that desires a written opinion as to the acceptability of the form of a prototype SEP should submit its request to the National Office. A single copy of all applicable documents, including the SEP agreement, must be submitted with the request.

.02 The request should be addressed to:

Commissioner of Internal Revenue 1111 Constitution Ave., N.W. Washington, D.C. 20224 ATTENTION: E:EP:T

.03 Form 5306-SEP, Simplified Employee Pension (SEP) Application for Approval of Prototype SEP Agreement, is to be used for SEP agreements being submitted to the Service.

.04 Any amendment to an IRA, the sole effect of which is to permit or facilitate SEP contributions of up to $7,500, will not affect the status of the IRA to which it relates and should not be submitted to the Service for review.

.05 If an amendment is made to the form of a previously approved prototype SEP agreement, the following procedure will apply:

(1) Amendments to SEPs by sponsors will require submission of Form 5306-SEP and documentation as described under section 4.01 above, together with the amendments.

(2) Upon approval by the Service, an opinion letter will be issued to the applicant, and the sponsor should send a copy of the amended SEP and opinion letter to every affected employer.

Sec. 5. Effect on Other Plans

.01 Under section 415(e), (f), and (g) of the Code, a SEP is combined with other plans maintained by an employer for purposes of determining whether the limitations on benefits and contributions in section 415 are exceeded.

.02 Service model profit-sharing plans (Form 5612 or 5613) and money purchase plans (Form 5614 or 5615) specify that they cannot be used with any other qualified plan maintained by the employer. If such model plans are not used with any other qualified plan, the employer and affected employees may rely on the assurance of the Service that the terms of the model plan meet the qualification requirements of the Code. A SEP agreement is not a qualified plan, but it will be treated as such, for the purpose of applying the above restriction, if the employer concurrently maintains a SEP and a model profit-sharing, or money purchase pension plan. The effect of this treatment is that the affected taxpayers may no longer rely on the qualified status of the model plan if a SEP is also maintained.

.03 If an employer maintains a master or prototype defined contribution plan, the plan currently contains language which will coordinate contributions under that plan with any other master or prototype defined contribution plan maintained by the same employer. However, such a plan does not contain language to coordinate with a SEP and may, as a consequence, not satisfy section 415 of the Code if it is maintained with a SEP.

.04 If an employer maintains any combination of defined contribution or defined benefit plans including those enumerated in section 5.02 and 5.03 or, in addition to any defined contribution or defined benefit plan, has ever maintained a defined benefit plan which is now terminated, and wants a determination as to whether that plan, or those plans, in combination with a SEP agreement satisfy the requirements of section 415 of the Code, the employer may apply to the District Office for a determination letter on the plan under the procedures prescribed in section 601.201 of the S.R.R., and Rev. Procs. 72-6, 1972-1 C.B. 710 (as modified by Rev. Procs. 75-47, 1975-2 C.B. 581, and 77-25, 1977-2 C.B. 534), 72-7, 1972-1 C.B. 715, 75-52, 1975-2 C.B. 592, 76-38, 1976-2 C.B. 661, and 77-22, 1977-2 C.B. 529, as appropriate.

Sec. 6. Ruling Letters

.01 If an adopting employer maintains more than one SEP, or has ever maintained a qualified defined benefit plan (which is now terminated), covering any of the same employees as does the SEP, the employer may request a ruling letter as to whether the SEP (in combination with the other SEP or plans) satisfies the requirements of section 415 of the Code.

.02 The employer should submit the request for a ruling letter to the National Office and include a single copy of each SEP and qualified plan.

.03 The ruling request should be addressed to:

Commissioner of Internal Revenue 1111 Constitution Ave., N.W. Washington, D.C. 20224 ATTENTION: E:EP:T

Sec. 7. Effect on Other Documents

.01 The general instructions of section 601.201 of the S.P.R. are applicable to the extent that the matter is not covered by the specific procedures and instructions contained in this revenue procedure.

.02 Rev. Proc. 75-6, concerning the issuance of Service rulings, determination letters, and opinion letters for IRAs, is modified to allow existing IRAs on which a favorable ruling, determination letter, or opinion letter has been issued, to be amended to accept SEP contributions up to $7,500 without affecting their tax-qualified status.

.03 Rev. Proc. 77-15, 1977-1 C.B. 572, concerning Service model money purchase and profit-sharing plans is modified to treat SEP agreements as a qualified plan for the purpose of applying the conditions for full reliance.

Sec. 8. Effective Date

This revenue procedure is effective May 12, 1980, the date of its publication in the Internal Revenue Bulletin, and only applications received after this date will be considered.