PROCEDURES ARE SET FORTH FOR DETERMINATION LETTERS RELATING TO QUALIFIED DEFINED CONTRIBUTION AND DEFINED BENEFIT PLANS

Rev. Proc. 84-86

TABLE OF CONTENTS

SECTION 1. PURPOSE

This revenue procedure sets forth the procedures of the Internal Revenue Service for issuing notification and determination letters relating to the qualification of certain defined contributions and defined benefit plans, and any related trusts or custodial accounts, under sections 401, 403(a), and 501(a) of the Internal Revenue Code, as amended by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, 1982-2 C.B. 462, the Tax Reform Act of 1984 (TRA), Pub. L. 98-369, and the Retirement Equity Act of 1984 (REA), Pub. L. 98-397. This procedure updates the procedures previously set forth in Rev. Proc. 76-15, 1976-1 C.B. 553, relating to "pattern plans"; Rev. Proc. 77-23, 1977-2 C.B. 530, relating to "field prototype plans"; and Rev. Proc. 79-28, 1979-1 C.B. 569, which defines "basic plans." Such plans are "uniform plans" as defined in section 3.01 of this procedure. This revenue procedure establishes a means whereby certain "sponsors" (as defined in section 3.02) may submit uniform plans to Key District directors for approval as to form.

SEC. 2. BACKGROUND AND GENERAL INFORMATION

01 Rev. Proc. 76-15 provides a program whereby a law firm may obtain approval from a District Director of the form of a pattern plan which the law firm contemplates using in submitting determination letter applications on behalf of adopting employers. Rev. Proc. 76-15 also sets forth procedures for the issuance of determination letters to employers adopting pattern plans.

02 Rev. Proc. 77-23 establishes a program under which a sponsor of plans may obtain approval from District Directors of the form of a plan which the sponsor contemplates using as a field prototype plan in submitting determination letter requests on behalf of the sponsor's clients (i.e., adopting employers).

03 Rev. Proc. 79-28 defines the term "basic plan" and establishes a simplified procedure for requesting opinion, notification and determination letters in connection with plan amendments made to satisfy final regulations under the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. 93-406, 1974-3 C.B. 1, and for obtaining assurance that such amendments satisfy these final regulations.

04 Rev. Proc. 80-30, 1980-1 C.B. 685, sets forth general procedures for the issuance by Key District Directors of determination letters on the qualification of pension, profit-sharing, stock bonus, and money purchase plans involving sections 401, 403(a), 405(a), 409A, and 4975(e)(7) of the Code, as amended by ERISA and the status for exemption of any related trusts or custodial accounts under section 501(a).

05 Rev. Proc. 83-36, 1983-1 C.B. 763, sets forth the general procedures of the Service relating to the issuance of rulings, determination, opinion, notification, and information letters on Employee Plans and Exempt Organization matters.

06 Rev. Proc. 84-23, 1984-1 C.B. 457 sets forth the procedures of the Service pertaining to the issuance of opinion letters relating to master or prototype pension, annuity, and profit-sharing plans involving sections 401(a) and 403(a) of the Internal Revenue Code, as amended by TEFRA, and the status for exemption of related trusts or custodial accounts under section 501(a).

07 TEFRA, TRA, and REA substantially altered the requirements that a plan must meet in order to be qualified under section 401(a) of the Code. The TEFRA qualification changes are generally effective for years beginning after December 31, 1983, except for provisions amending section 415 of the Code, which have an earlier effective date. The Service has issued substantive guidelines, specifically cited later in this revenue procedure, for conforming plans to the TEFRA requirements. The TRA qualification changes are generally effective for years beginning after December 31, 1983, except that in certain cases there are different effective dates. The REA qualification changes are generally effective for years beginning after December 31, 1984, except in certain cases there are different dates.

SEC. 3. DEFINITIONS

01 A "UNIFORM PLAN" is a defined contribution or a defined benefit plan that is made available by a "sponsor", as defined in 02 below, for adoption by employers and includes plans that were previously defined as "pattern", "field prototype", and/or "basic" plans. A uniform plan consists of an "adoption agreement", as defined in 06 below, and a "basic plan document", as defined in 07 below. Uniform plans may include self-employed individuals.

02 The term "SPONSOR" means, for purposes of this procedure, a firm (other than an organization described in section 4.06 of Rev. Proc. 84-23 as modified by Rev. Proc. 84-83, 1984-50 I.R.B. 40) that has at least 10 clients who have their principal places of business within the jurisdiction of a region and who are expected to adopt and request a determination letter with respect to one uniform plan of that firm.

03 A "NOTIFICATION LETTER" is the letter informing a sponsor that the plan is acceptable as to form and may be submitted by adopting employers requesting determination letters.

04 "DEFINED CONTRIBUTION PLAN" means a plan described in section 414(i) of the Code.

05 "DEFINED BENEFIT PLAN" means a plan described in section 414(j) of the Code.

06 An "ADOPTION AGREEMENT" is the portion of the plan containing all the options that may be selected by the adopting employer.

07 A "BASIC PLAN DOCUMENT" is the portion of the plan containing all the non-elective provisions applicable to all adopting employers. No options (including blanks to be completed) may be provided in the basic plan document.

SEC. 4. NOTIFICATION LETTERS

01 A notification letter does not constitute a ruling or determination as to either the qualification of the plan as adopted by a particular employer, or the exempt status of its related trust or custodial account.

02 Notification letters will not be issued with respect to plans containing provisions that, in the judgement of the Service, are susceptible of resulting in prohibited discrimination.

03 Notification letters will not be issued for:

1 Collectively-bargained plans (section 413(b) of the Code).

2 Stock bonus plans.

3 Plans containing a cash or deferred arrangement as described in section 401(k) of the Code.

4 Bond Purchase plans.

5 Employee Stock ownership plans (see Rev. Proc. 75-48, 1975-2 C.B. 583).

6 Pooled fund arrangements contemplated by Rev. Rul. 81-100, 1981-1 C.B. 326.

7 Annuity contracts under section 403(b) of the Code.

8 Master and prototype plans (see Rev. Proc. 84-23).

9 Defined contribution plans (except for target benefit plans) under which the test for prohibited discrimination under section 401(a)(4) of the Code is made by reference to benefits rather than contributions.

10 Plans that involve integration with Social Security benefits except for plans that define annual compensation to be all of each employee's compensation (such plans may, however, limit the dollar amount of compensation that will be considered) that would be subject to taxation under section 3101(a) of the Code without the dollar limitation of section 3121(a)(1).

11 Plans described in section 414(k) of the Code (relating to a defined benefit plan which provides a benefit derived from employer contributions which is based partly on the balance of the separate account of a participant).

12 Target benefit plans that integrate with Social Security benefits using the offset method of integration.

13 Profit-sharing plans that allocate contributions or forfeitures to the account of any participant in any manner other than on the basis of compensation.

14 Governmental plans described in section 414(d) of the Code.

15 Church plans described in section 414(e) of the code that have not made the election provided by section 410(d).

04 The key district issuing a notification letter will assign a number to each approved plan. This number will identify the Service's issuing office and provide a means of identifying the plan. All correspondence with the Service regarding a plan must refer to the plan's latest notification letter number.

05 A favorable notification letter issued by a Key District Director with respect to a plan will be accepted throughout the particular region. However, a separate application is required to be submitted to a key district in each region in which the plan is to be used. See section 6.02 of this procedure.

SEC. 5. PROVISIONS REQUIRED IN EVERY UNIFORM PLAN

A uniform plan must meet all of the following requirements:

01 ANTI-CUTBACK PROVISIONS--Uniform plans must specifically provide for the protection of sections 411(a)(10) and (d)(6) of the Code in the event of any plan amendment (including the adoption of another plan).

02 ELIGIBILITY--The eligibility requirements under the plan must not be more favorable for officers, owners, or highly compensated employees than for other employees.

03 VESTING--The vesting schedule in the plan must provide vesting at a rate at least as favorable for every year as would be required by the schedules set forth in section 416(b)(1)(A) or (B) of the Code if the plans were top-heavy for every year after 1983.

04 TOP-HEAVY REQUIREMENTS--Each plan must provide that all the additional requirements applicable to top-heavy plans (described in section 416 of the Code) apply at all times or provide that such requirements apply automatically if the plan is top-heavy regardless of how the adoption agreement is completed. In any case where the latter option is chosen, all the requirements for determining whether the plan is top-heavy must be included in the plan. See section 1.416-1 of the Income Tax Regulations.

05 ADDITIONAL TOP-HEAVY MINIMUMS TO SATISFY SECTION 415(e)--Each plan must provide automatically or by optional provisions the additional minimums described in section 416(h)(2)(A) of the Code.

06 PROVISION IN ADOPTION AGREEMENT ON EXTENT OF RELIANCE--In order to avoid unnecessary confusion as to the scope of a notification letter, sponsors must include in the adoption agreement of all uniform plans, in close proximity to the signature blank, a statement that adopting employers may not rely on a notification letter issued by a key district with respect to the qualification of that plan and must apply to the appropriate key district for a determination letter in order to obtain reliance.

07 DEFINITION OF EMPLOYEE/SECTION 414(b), (c), (m), and (n)--Each uniform plan must include a definition of employee as any employee of the employer maintaining the plan or of any other employer aggregated under section 414(b), (c), or (m) of the Code. The definition of employee shall also include any individual deemed under section 414(n) to be an employee of any employer described in the previous sentence.

08 DEFINITION OF SERVICE/SECTION 414(b), (c), (m), and (n)--Each uniform plan must specifically credit all service with any employer aggregated under section 414(b), (c), or (m) of the Code as service with the employer maintaining the plan. In addition, in the case of an individual deemed under section 414(n) to be the employee of any employer described in the previous sentence, service with such employer must be credited to such individual.

09 SPECIFIC NON-TEFRA REQUIREMENTS--In addition to other substantive requirements, uniform plans must comply with the requirements of the revenue rulings and notices listed below:

1 Rev. Rul. 79-90, 1979-1 C.B. 15 (statement in plan of basis for determining actuarial equivalence), see also section 401(a)(25) of the Code.

2 Rev. Rul. 81-211, 1981-2 C.B. 98 (requiring full vesting at normal retirement age rather than at normal retirement date).

3 Notice 82-7, 1982-1 C.B. 357 (amendments to comply with the requirements under section 414(m) of the Code).

4 Notice 82-9, 1982-1 C.B. 358 (amendments to comply with final regulations under section 415 of the Code prior to amendment by TEFRA).

5 Notice 82-23, 1982-2 C.B. 752 (amendments to comply with final regulations on suspension of benefits).

SEC. 6. INSTRUCTIONS TO SPONSORS OF PLANS

01 KEY DISTRICT OFFICE ISSUES NOTIFICATION LETTERS--The Key District Director will, upon a request by a plan sponsor that meets the requirements of this procedure, issue a notification letter as to the acceptability under section 401, 403(a) or 501(a) of the Code of the form of a uniform plan and any related trust or custodial account. Key district offices are listed in Announcement 84-12, 1984-6 I.R.B. 22.

02 NOTIFICATION LETTER REQUESTS SUBMITTED TO KEY DISTRICT OFFICES--A sponsor of a plan having at least 10 clients expected to adopt the uniform plan within the jurisdiction of a region shall submit a request for a notification letter, which shall include the application form, adoption agreement and basic plan document, to a key district in that region. If prior to the submission for a notification letter to a key district office, the sponsor has received a favorable notification letter on the word for word identical plan from a key district in another region, the application should include a statement of that fact and a copy of the notification letter. If the sponsor submits the same or a substantially similar plan to one or more other key districts, the sponsor shall inform each key district to which such plans are submitted of all applications for notification letters for the same or a substantially similar plan.

03 SEPARATE UNIFORM PLAN REQUIRED FOR DIFFERENT CATEGORIES OF PLANS--An application for a uniform plan under this procedure shall not contain any combination of profit-sharing, money purchase (other than target benefit), target benefit, non-integrated defined benefit, or integrated defined benefit plan features. However, separate defined contribution plans may have the same basic plan document. Similarly, separate integrated and non-integrated defined benefit plans may have the same basic plan document.

04 MULTIPLE PLANS FROM A SINGLE SPONSOR--A sponsor of a plan may receive separate notification letters for more than one defined contribution plan and more than one defined benefit plan. However, a separate application must be filed for each plan. A sponsor must assign a three-digit plan number to each plan. This number may not be changed or used for any other plan. The three digit number assigned to each plan should start with 001 and each additional plan should be one number higher.

05 FORMS FOR REQUESTING NOTIFICATION LETTERS--A request for a notification letter relating to a uniform plan shall be submitted on the most recent revision of Form 4461, Application for Approval of Master or Prototype Defined Contribution Plan, or Form 4461-A, Application for Approval of Master or Prototype Defined Benefit Plan, whichever is appropriate. Such requests must include a copy of the plan (the adoption agreement and basic plan document) and the trust or custodial account document (omitting therefrom the identify of the sponsor, trustee, or custodian). A request for a notification letter by a sponsor of a plan must be accompanied by a covering letter requesting application of this procedure and containing the representation that the sponsor of a plan can reasonably expect the submitted uniform plan to be adopted by at least 10 employers with principal places of business in the jurisdiction of that Region.

06 AVAILABLE PLAN OPTIONS--Elections by adopting employers must be contained in the adoption agreement. Elections will be permitted only in the following areas:

1 Provisions which, by necessity, must vary among adopting employers, such as the effective date, plan year, and the names of fiduciaries.

2 Age and number of years of service required for participation.

3 Job classification required as a condition of participation in the plan.

4 Vesting schedule.

5 Benefit formula.

6 Contribution and/or allocation formula.

7 Provisions permitting voluntary employee contributions, if any, and the maximum rate of such contributions.

8 Provisions to conform to section 415 of the Code.

9 Method of computing years of service.

07 ADDITIONAL INFORMATION MAY BE REQUESTED--The Service may, at its discretion, require any additional information that it deems necessary.

08 INADEQUATE SUBMISSIONS--The Service will return, without further action, plans which are not in substantial compliance with the qualification requirements or plans that are so deficient that they cannot be reviewed in a reasonable amount of time. A plan will not be considered to be in substantial compliance if, for example, it omits any of the TEFRA, TRA, or REA requirements set forth below, or merely incorporates these requirements by reference to the applicable Code section. The Service will not consider these plans until after they are revised, and such a plan will be treated as a new request as of the date it is resubmitted. The following are some examples of TEFRA, TRA, and REA requirements the omission of which will cause a plan to be regarded as not being in substantial compliance:

1 Section 401(a)(9) of the Code, as amended by section 521 of TRA, relating to required distributions from qualified plans.

2 Section 415 of the Code, as amended by section 235 of TEFRA and sections 15 and 528 of TRA, relating to contribution and benefit limits for qualified plans. (See Notice 83-10, 1983-1 C.B. 536, for guidelines in meeting TEFRA requirements.)

3 Section 416 of the code, as added by section 240 of TEFRA and amended by section 524 of TRA, containing special rules for top-heavy plans. (See section 1.416-1 of the Income Tax Regulations for guidance in meeting the top-heavy requirements.)

4 If the plan is an integrated defined contribution plan, section 401(1) of the Code, as added by section 249 of TEFRA, relating to nondiscriminatory coordination with Social Security benefits. (See Rev. Rul. 83-110, 1983-2 C.B. 70, for guidance in meeting the requirement.)

5 Section 414(m) of the Code, including section 414(m)(5), as added by section 236 of TEFRA and amended by section 526 of TRA.

6 Section 414(n) of the Code, as added by section 248 of TEFRA, and as amended by section 526 of TRA.

7 Section 401(c) and (d) of the Code, as amended by sections 237 and 238 of TEFRA, unless the plan precludes participation by self-employed individuals.

8 Section 401(a)(11) of the Code, as amended by section 203 of REA, containing special rules for survivor benefits.

9 Section 410 of the Code, as amended by section 202 of REA, relating to minimum participation standards.

10 Section 411 of the Code, as amended by section 202 and 301 of REA, relating to minimum vesting standards and accrued benefit requirements.

11 Section 401(a)(25) of the Code, added by section 301(b) of REA, requiring actuarial assumptions.

09 MATERIAL FURNISHED TO ADOPTING EMPLOYERS--A sponsor must furnish each adopting employer with a copy of the approved plan and the Internal Revenue Service notification letter.

10 NONIDENTIFICATION OF QUESTIONABLE ISSUES MAY CAUSE DELAY--If the plan document submitted as part of the notification letter request contains a provision that gives rise to an issue for which contrary authorities exist, failure to disclose the distinguish significant contrary authorities may result in requests for additional information, which will delay action on the request (see section 7.06 of Rev. Proc. 83-36).

SEC. 7. DETERMINATION LETTERS AND INSTRUCTIONS TO ADOPTING EMPLOYERS

DETERMINATION LETTERS IN GENERAL--The issuance of a notification letter does not imply that employers who adopt the uniform plan have a qualified plan. Adopting employers desiring a favorable determination letter with respect to the qualification of such a plan under section 401 or 403(a) of the Code and the exemption of any related trust under section 501(a) should file a request in accordance with Rev. Proc. 80-30.

02 SUBMISSION OF DETERMINATION LETTER REQUESTS--Requests for determination letters by employers who have adopted a sponsor's plan shall be submitted to the Key District Director for the district in which the employer's principal place of business is located. Form 5307 is to be used for such submissions. Such submissions must include a copy of the notification letter sent to the sponsor, and must be accompanied by a certification that the notification letter has not been withdrawn and is still in effect with respect to the plan being submitted. The submission must include an executed adoption agreement which details the options selected with regard to the elective items contained in the plan.

03 AMENDMENT BY EMPLOYER--Adopting employers must amend their plans to retain qualified status if any provisions therein fail to meet the requirements of law, regulations or other rules or guidelines affecting qualification that become effective subsequent to the issuance of a determination letter. The requirements stated in Rev. Proc. 80-30 relating to the issuance of determination letters for individually designed plans will apply to all plans after the issuance of the initial determination letter.

SEC. 8. CHANGES IN APPROVED STATUS

01. REVOCATION OF NOTIFICATION LETTER BY THE SERVICE--A notification letter found to be in error or not in accord with the current views of the Service may be revoked. Revocation may be effected by a notice to the sponsor of the plan to whom such letter was originally issued, or by regulation, revenue ruling or other statement published in the Internal Revenue Bulletin. The sponsor should then notify each adopting employer of the revocation.

02 AMENDMENTS--A sponsor of a plan amending a previously approved uniform plan shall submit a request for the issuance of a new notification letter for the amended plan. The notification letter issued for the previously approved uniform plan is no longer valid for the amended plan. If any provision of a previously approved uniform plan fails to meet the requirements of law, regulations, or other rules and guidelines affecting qualification that become effective subsequent to the issuance of a notification letter or if 8.01 above applies, in order to obtain Service approval the sponsor must submit a uniform plan containing all of the current requirements along with a request for a new notification letter. In such situations, employers that previously adopted the plan for which the prior notification letter was issued must adopt and request a determination letter for a plan meeting all of the current qualification requirements in order to obtain reliance as to plan qualification.

SEC. 9. WITHDRAWAL OF REQUESTS

01 NOTIFICATION AND EFFECT--A sponsor may withdraw its request for a notification letter at any time prior to the issuance of such letter by notifying the office in which the request is pending, in writing, of such withdrawal.

02 SERVICE RETAINS INFORMATION--Even though a request is withdrawn, the Service will retain all correspondence and documents associated with that request and will not return them to the sponsor of the plan.

Sec. 10. Effect On Other Documents

01 Rev. Proc. 76-15 is superseded.

02 Rev. Proc. 77-23 is superseded.

03 Rev. Proc. 79-28 is superseded.

04 The following revenue procedures are hereby modified to substitute references to this revenue procedure for references to Rev. Proc. 76-15, Rev. Proc. 77-23, and Rev. Proc. 79-28, and to substitute references to "uniform plans" for references to "pattern plans", "field prototype plans", and "basic plans":

1 Rev. Proc. 80-30;

2 Rev. Proc. 83-36; and

3 Rev. Proc. 84-23.

SEC. 11. EFFECTIVE DATES

This revenue procedure is effective December 31, 1984, with respect to notification letters issued thereafter. The Internal Revenue Service will no longer accept applications for determination letters after one year from the above date for plans not in conformance with the requirements of this revenue procedure