Rev. Proc. 2019-20

SECTION 1. PURPOSE

This revenue procedure, consistent with the process described in

Rev. Proc. 2016-37, 2016-29 I.R.B. 136, provides for a limited expansion of the

determination letter program with respect to individually designed plans. Under this

This revenue procedure also provides for a limited extension of the remedial

amendment period under § 401(b) of the Internal Revenue Code (Code) and Rev. Proc.

2016-37 under specified circumstances, and for special sanction structures that apply to

certain plan document failures discovered by the IRS during the review of a plan

submitted for a determination letter pursuant to this revenue procedure.

SECTION 2. BACKGROUND

.01 Effective January 1, 2017, Rev. Proc. 2016-37 provides the circumstances

under which plan sponsors may submit determination letter applications to the IRS. In

.02 In Notice 2018-24, 2018-17 I.R.B. 507, the Treasury Department and the

IRS requested comments on the potential expansion of the scope of the determination

letter program for individually designed plans.

.03 Section 401(b) of the Code and the regulations thereunder provide a

remedial amendment period during which a plan may be amended retroactively to

comply with the Code’s qualification requirements. Section 1.401(b)-1(e)(3) provides, in

part, that the submission of a determination letter application extends the remedial

amendment period until the expiration of 91 days after the date a determination letter is

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.04 Rev. Proc. 2016-37 extended the remedial amendment period that would

otherwise apply under § 1.401(b)-1 for certain disqualifying provisions, as described in

§ 1.401(b)-1(b) and Rev. Proc. 2016-37. Section 5.05(3) of Rev. Proc. 2016-37

provides that the remedial amendment period for a disqualifying provision with respect

to a change in qualification requirements (a statutory change or a change in the

requirements provided in regulations or other guidance, as noted in section 5.04 of that

revenue procedure) is extended to the end of the second calendar year that begins after

the issuance of the Required Amendments List in which the change in qualification

requirements appears. A later date may apply to a governmental plan (as defined in

§ 414(d)), as provided in section 5.06 of Rev. Proc. 2016-37. As provided in

whichever is later.

.05 Notice 2017-72, 2017-52 I.R.B. 601, sets forth the 2017 Required

Amendments List. The 2017 Required Amendments List provides that

December 31, 2019, is generally the last day of the remedial amendment period with

respect to a disqualifying provision arising as a result of a change in qualification

requirements that appears on the 2017 Required Amendments List. December 31,

2019, is also generally the plan amendment deadline for a disqualifying provision arising

as a result of a change in qualification requirements that appears on the 2017 Required

Amendments List. A later date may apply to a governmental plan (as defined in

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required to be taken into account in a written plan document submitted for a

determination letter.

.07 Section 411(a)(13)(C)(i) defines the term “applicable defined benefit plan” as

a defined benefit plan under which the accrued benefit (or any portion thereof) is

calculated as the balance of a hypothetical account maintained for the participant or as

an accumulated percentage of the participant’s final average compensation.

Section 411(a)(13)(C)(ii) provides that the Secretary shall issue regulations which

include in the definition of an applicable defined benefit plan any defined benefit plan (or

any portion of such a plan) which has an effect similar to an applicable defined benefit

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Notice 2018-91, 2018-50 I.R.B. 985, sets forth the 2018 Required Amendments List. There were no changes in

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§ 411(a)(13)(C)(ii) as a statutory hybrid plan. Section 1.411(a)(13)-1(d)(5) defines a

“statutory hybrid plan” as a defined benefit plan that contains a statutory hybrid benefit

formula.

.08 Section 411(b)(5)(B)(i)(I) provides, in part, that an applicable defined benefit

plan shall be treated as failing to meet the requirements of § 411(b)(1)(H) (which

provides that the rate of an employee’s benefit accrual must not be reduced because of

the attainment of any age) unless the terms of the plan provide that any interest credit

(or an equivalent amount) for any plan year shall be at a rate that is not greater than a

market rate of return. Final regulations providing rules regarding statutory hybrid

.09 Section 411(d)(6) provides, in part, that a plan does not satisfy § 411 if an

amendment to the plan decreases a participant’s accrued benefit.

Pursuant to § 1.411(b)(5)-1(e)(3)(vi)(B)(3), in order to qualify for this treatment, the

amendment had to be adopted prior to, and effective no later than, the applicability date

of the regulatory market rate of return rules (generally, the first day of the first plan year

that began on or after January 1, 2017, with a delayed applicability date for collectively

bargained plans).

SECTION 3. EXPANSION OF DETERMINATION LETTER PROGRAM

The Treasury Department and the IRS received numerous comments in

response to the request for comments in Notice 2018-24. After consideration of the

5.01(2) of this revenue procedure) on an ongoing basis. Sections 6, 7, and 8 of this

revenue procedure provide for a limited extension of the remedial amendment period

and special sanction structures applicable to plans submitted for a determination letter

pursuant to this revenue procedure.

SECTION 4. STATUTORY HYBRID PLANS

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.01 Expansion of Determination Letter Program for Statutory Hybrid Plans.

(1) In general. The IRS will accept a determination letter application for an

individually designed statutory hybrid plan, as defined in § 1.411(a)(13)-1(d)(5), during

the 12-month period beginning September 1, 2019, and ending August 31, 2020

(statutory hybrid plan submission period).

(2) Applicable procedures. The procedures relating to the submission of

determination letter applications for individually designed plans set forth in

procedure will be based on the 2017 Required Amendments List (Notice 2017-72). The

review will also take into account all Required Amendments Lists and Cumulative Lists

issued prior to 2016.

SECTION 5. MERGED PLANS

.01 Definitions for Guidance Related to Merged Plans.

(1) Plan Merger. The term “Plan Merger” means a merger or consolidation, as

described in § 1.414(l)-1(b)(2), that combines two or more plans maintained by

merger or consolidation of two or more plans into a single individually designed plan

pursuant to a Plan Merger.

(3) Unrelated Entities. The term “Unrelated Entities” means entities that are

not members of the same controlled group under § 414(b), the same set of trades or

businesses under common control under § 414(c), or members of the same affiliated

service group under § 414(m).

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(5) Date of the Plan Merger. The “Date of the Plan Merger” is the effective

date of the Plan Merger as evidenced by (a) a corporate board resolution or written

documentation signed and dated by persons duly authorized to represent the entities

involved, or (b) a plan amendment.

.02 Expansion of Determination Letter Program for Merged Plans.

(1) In general. Beginning September 1, 2019, the IRS will accept a

determination letter application that satisfies the conditions set forth in section 5.02(2)

with respect to a Merged Plan. Determination letter applications submitted for a Merged

(a) The Date of the Plan Merger occurs no later than the last day of the first

plan year that begins after the plan year that includes the Date of a Corporate Merger,

Acquisition, or Other Similar Business Transaction between Unrelated Entities, and

(b) A determination letter application for the Merged Plan is submitted within

a period beginning on the Date of the Plan Merger and ending on the last day of the first

plan year of the Merged Plan that begins after the Date of the Plan Merger (Merged

Plan submission period).

.03 Applicable Procedures. The procedures relating to the submission of

Plans that are submitted for a determination letter pursuant to this revenue procedure

will be based on the Required Amendments List that was issued during the second full

calendar year preceding the submission of the determination letter application. The

review will also take into account all previously issued Required Amendments Lists and

Cumulative Lists.

SECTION 6. EXTENSION OF THE REMEDIAL AMENDMENT PERIOD

.01 Extension of Remedial Amendment Period. With respect to a plan submitted

for a determination letter pursuant to this revenue procedure, any remedial amendment

submission of a determination letter application extends the remedial amendment

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period until the expiration of 91 days after the date a determination letter is issued) will

continue to apply.

.02 No Relief Provided Under § 411(d)(6). Section 1.411(b)(5)-1(e)(3)(vi)

provides relief from the anti-cutback requirements of § 411(d)(6) with respect to the

modification of a plan’s interest crediting rate under certain circumstances. However,

pursuant to § 1.411(b)(5)-1(e)(3)(vi)(B)(3), that relief applies only to plan amendments

that were adopted prior to, and effective no later than, the applicability date of the

regulatory market rate of return rules (generally, the first day of the first plan year that

SECTION 7. APPLICABLE SANCTIONS – STATUTORY HYBRID PLANS

.01 In General. A plan sponsor that has applied for a determination letter

pursuant to this revenue procedure with respect to a statutory hybrid plan that has a

plan document failure, as defined in section 5.01(2)(a) of Rev. Proc. 2019-19, 2019-19

I.R.B. 1086, (which includes the failure to adopt an amendment to correct a disqualifying

provision within the applicable remedial amendment period), must amend the plan to

comply with applicable qualification requirements. In addition, except as provided in

section 7.02 of this revenue procedure, the plan sponsor must pay the applicable

sanction described in section 7.03 or 7.04 of this revenue procedure, and enter into a

§ 1.411(a)(13)-1 and § 1.411(b)(5)-1. As a result, plan sponsors of statutory hybrid

plans did not have the opportunity to have their plans reviewed for all provisions related

to those regulations. Accordingly, the IRS will not impose a sanction for any plan

document failure with respect to a plan provision required to meet the requirements of

§ 1.411(a)(13)-1 and § 1.411(b)(5)-1 that is discovered by the IRS in its review of a plan

submitted for a determination letter pursuant to this revenue procedure.

.03 Special Sanction Structure for Plan Document Failures Unrelated to Final

Hybrid Plan Regulations. This section 7.03 sets forth a sanction structure that applies

to a statutory hybrid plan submitted for a determination letter pursuant to this revenue

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failure and submitted the plan for consideration under the Voluntary Correction

Program.

(1) Conditions for special sanction structure.

(a) The amendment that creates the failure (without regard to whether that

amendment was required to be adopted) was adopted timely and in good faith with the

intent of maintaining the qualified status of the plan; or

(b) In the case of an amendment required because of a change in

(a) The IRS will make the final determination in all cases as to whether an

amendment was adopted in good faith with the intent of maintaining the qualified status

of the plan, or whether a plan sponsor reasonably and in good faith determined that no

amendment was required.

(b) If the conditions of section 7.03(1)(a) or (b) of this revenue procedure are

not satisfied, the sanction set forth in section 7.04 will apply.

.04 General Sanction Structure Under EPCRS. This section 7.04 sets forth a

general sanction structure that applies to a statutory hybrid plan submitted for a

certain plan document failures that are discovered by the IRS during the determination

letter process that is equal to 150% or 250% (depending on the duration of the failure)

of the applicable user fee that would apply to the plan had it been submitted under the

EPCRS Voluntary Correction Program. See Appendix A of Rev. Proc. 2019-4 (and its

annual successors) for the applicable Voluntary Correction Program user fee.

SECTION 8. APPLICABLE SANCTIONS – MERGED PLANS

.01 In General. A plan sponsor that has applied for a determination letter

pursuant to this revenue procedure with respect to a Merged Plan that has a plan

qualification requirements. In addition, except as provided in section 8.02 of this

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revenue procedure, the plan sponsor must pay the applicable sanction as described in

section 8.03 or 8.04 of this revenue procedure, and enter into a closing agreement with

the IRS.

.02 No Sanctions for Plan Provisions Included to Effectuate the Plan Merger.

For Merged Plans submitted for a determination letter pursuant to this revenue

procedure, the IRS will not impose a sanction for any plan document failure with respect

to a plan provision included to effectuate the Plan Merger.

.03 Special Sanction Structure for Plan Provisions Other Than Those Included to

user fee that would have applied had the plan sponsor identified the failure and

submitted the plan for consideration under the Voluntary Correction Program.

(1) Conditions for special sanction structure.

(a) The amendment that creates the failure (without regard to whether that

amendment was required to be adopted) was adopted timely and in good faith with the

intent of maintaining the qualified status of the plan; or

(b) In the case of an amendment required because of a change in

(a) The IRS will make the final determination in all cases as to whether an

amendment was adopted in good faith with the intent of maintaining the qualified status

of the plan, or whether a plan sponsor reasonably and in good faith determined that no

amendment was required.

(b) If the conditions of section 8.03(1)(a) or (b) of this revenue procedure are

not satisfied, the sanction set forth in section 8.04 will apply.

.04 General Sanction Structure Under EPCRS. This section 8.04 sets forth a

general sanction structure that applies to a Merged Plan submitted for a determination

revenue procedure. The amount of the sanction is equal to the applicable sanction

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amount set forth in section 14.04 of Rev. Proc. 2019-19. Section 14.04 of Rev. Proc.

2019-19 provides for a sanction for certain plan document failures that are discovered

by the IRS during the determination letter process that is equal to 150% or 250%

(depending on the duration of the failure) of the applicable user fee that would apply to

the plan had it been submitted under the EPCRS Voluntary Correction Program. See

Appendix A of Rev. Proc. 2019-4 (and its annual successors) for the applicable

Voluntary Correction Program user fee.

SECTION 9. CONTINUED CONSIDERATION OF COMMENTS

SECTION 10. EFFECT ON OTHER DOCUMENTS

This revenue procedure amplifies and modifies Rev. Proc. 2016-37.

SECTION 11. EFFECTIVE DATE

This revenue procedure is effective September 1, 2019.

SECTION 12. DRAFTING INFORMATION