IRS Updates Guidance for Pre-Approved Retirement Plans

On November 21, 2023, the IRS released Revenue Procedure (Rev. Proc.) 2023-37, which combines, conforms, clarifies, and updates rules for qualified pre-approved plans and Section 403(b) pre-approved plans previously set forth in prior revenue procedures.

A pre-approved plan is a plan document that has been submitted by the document provider (i.e., the legal or financial institution that drafts and maintains the document) to the IRS for approval before it is adopted by an employer. The IRS issues a favorable opinion letter if the form of the document satisfies applicable requirements. Under prior guidance, the IRS has implemented remedial amendment cycles for pre-approved plans. During each cycle, the IRS issues a cumulative list of changes in the plan requirements that must be incorporated into the plan documents. Each cycle involves a submission period during which the pre-approved plan provider submits the document to the IRS for review and an adoption period during which employers adopt the IRS-approved document form.

Accordingly, Rev. Proc. 2023-37 consolidates and updates the rules regarding remedial amendment periods, the remedial amendment cycle system, and plan amendment deadlines. Under the guidance, every pre-approved plan has a recurring remedial amendment cycle, although defined contribution-qualified pre-approved plans, defined benefit qualified pre-approved plans, and 403(b) pre-approved plans each have different cycles. Additionally, although the same cycle applies with respect to all defined contribution qualified pre-approved plans, separate cycles apply with respect to all defined benefit-qualified pre-approved plans and all Section 403(b) pre-approved plans. Providers may apply for new opinion letters for each cycle. The rules reflect numerous changes and clarifications, including provisions that impact plan amendment deadlines and an employer’s eligibility to adopt a pre-approved plan under certain circumstances.

Rev. Proc. 2023-37 also sets forth the provider application process and clarifies the scope of review for an opinion letter. The rules clarify that an opinion letter will not be issued for amendments made between submission periods. Instead, a provider must submit a restated plan that incorporates the amendments during the next submission period. Furthermore, the IRS’s review of a pre-approved plan’s application for an opinion letter will consider only the terms of the plan document and adoption agreement, as applicable, and not the terms of any trust or custodial account, investment arrangements or other documents incorporated by reference.

Additionally, Rev. Proc 2023-37 explains the process for an adopting employer to apply for a determination letter, which provides assurance that the employer’s specific plan meets applicable requirements. The guidance also clarifies the circumstances under which a pre-approved plan will be treated as an individually designed plan and the consequences of such treatment.

Although the updated procedures are primarily of interest to plan document providers who are directly involved in the submission process, retirement plan sponsors should be aware of the guidance and contact their plan service providers for further information.

IRS Revenue Procedure 2023-37 »