United States

IRS expands pre-approval program for certain qualified plans

TAX ALERT  | 

Effective June 8, 2015, Rev. Proc. 2015-36 modifies and supersedes Rev. Proc. 2011-49. Rev. Proc. 2015-36 includes procedures to request pre-approval from the IRS that master and prototype (M&P) and volume submitter (VS) plan documents for certain qualified plans meet the qualification requirements.

The largest change from the previous guidance is that the IRS will now issue preapproval opinion letters for certain cash balance plans as well as many employee stock ownership plans (ESOPs). The updated procedures include new required definitions and additional provisions related to these types of plans and a listing of the types of ESOP, cash balance, stock bonus, and hybrid plans for which the IRS will not issue preapproval letters.

The updated guidance in Rev. Proc. 2015-36 is favorable to many employers that sponsor rather straightforward cash balance and employee stock ownership plans as it will allow more such plans to use IRS pre-approved documents, thus, saving the cost of going through the determination letter process. Unfortunately, the IRS has still included stock bonus plans in the plan types that cannot apply for preapproval under the M&P and VS guidance so employers with these plans cannot yet escape the more burdensome rules associated with individually designed plans.

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