New guidance released for retirement plans

Written on Apr 25, 2018

The IRS has released three guidance items for retirement plans.

  • Revenue Procedure 2018-19 modifies Rev. Proc. 2018-4 and reduces one user fee
  • Announcement 2018-05 provides that the IRS will issue opinion and advisory letters for approved master and prototype plans and volume submitter defined benefit plan that were restated for changes in plan qualification requirements listed in the 2012 Cumulative List and that were filed with the IRS during the second six-year remedial amendment cycle
  • Revenue Procedure 2018-21 changes the pre-approved plan program for cash balance plans

Rev. Proc. 2018-4 increased the user fee for Form 5310 from $2,300 to $3,000. Rev. Proc. 2018-19 reverses the increase back to $2,300. The reduction was effective January 2, 2018. If you paid the higher fee, the IRS will issue you a refund of $700.

Announcement 2018-5 provides that the IRS intends to issue opinion and advisory letters for pre-approved master and prototype (M&P) and volume submitter (VS) defined benefit plans that were restated for changes in plan qualification requirements listed in Notice 2012-76, 2012-52 I.R.B. 775 (2012 Cumulative List), and that were filed with the IRS during the submission period for the second six-year remedial amendment cycle under Rev. Proc. 2007-44, 2007-2 C.B. 54. The IRS expected to issue the opinion and advisory letters on March 30, 2018, or, in some cases, as soon as possible thereafter. An employer using these pre-approved plan documents to restate a plan for the plan qualification requirements included on the 2012 Cumulative List will be required to adopt the plan document by April 30, 2020.

Starting May 1, 2018, and ending April 30, 2020, the IRS will accept an application for an individual determination letter from certain employers eligible to submit a determination letter request under the second six-year remedial amendment cycle for defined benefit pre-approved plans. See Rev. Proc. 2018-4, 2018-1 I.R.B. 146, including sections 12 and 13, for guidance on when an adopter of an M&P or VS plan is eligible to submit a determination letter application. The IRS will announce in future guidance a delayed beginning date for the third six-year remedial amendment cycle for pre-approved defined benefit plans.

Rev. Proc. 2018-21 announced that non-standardized prototype and volume submitter defined benefit plans with a cash balance formula may now provide a rate equal to the actual rate of return on aggregate plan assets to determine interest credits for second six-year remedial amendment cycle plans filed under Rev. Proc. 2015-36. Originally, the implementation for accepting the actual rate of return in pre-approved defined benefit plans with a cash balance formula was for the third six-year remedial amendment cycle under Rev. Proc. 2017-41. Based upon comments after the Rev. Proc. 2017-41 release, the IRS determined that the change for the actual rate of return could be implemented for non-standardized prototype and volume submitter plans submitted during the second six-year remedial amendment cycle pursuant to Rev. Proc. 2015-36.

Rev. Proc. 2018-21 clarified the rate used to determine interest credits may be equal to the actual rate of return on aggregate plan assets, even if that return includes returns on registered investment companies (RICs). Additionally, Rev. Proc. 2018-21 changed references to “hypothetical interest” and “hypothetical interest credits” in Rev. Proc. 2015-36 to “interest credits.” This makes the language consistent with terminology used in Rev. Proc. 2017-41.

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