Trucker Huss APC is pleased to announce that Director Kevin Nolt has provided insights in the Tax Notes article “Expanded Use of Actual Rates for Preapproved Plans Is ‘Win-Win’” published March 19, 2018 by Emily L. Foster.
The article discusses the new IRS guidance allowing preapproved cash balance plans with an interest credit rate based on the actual rate of return to obtain a IRS opinion letter, and how it opens doors to certain plan sponsors shifting from individually designed plans to preapproved ones. It further explains that Rev. Prov. 2017-41 has streamlined and increased flexibility for determination letters for preapproved plans, and that practitioners expected this would result in more plan sponsors shifting from individually designed plans to preapproved ones. However, Kevin suggests that the procedure contains an inconsistency that has discouraged some plans from making the switch at this time.
Kevin states that before the IRS modified Rev. Proc. 2017-41 under Rev Proc. 2018-21, “nonstandardized preapproved cash balance plans that provide for an interest credit rate based on the actual rate of return” would fall under “under the IRS’s revamped opinion letter program.” But this only applies to letters filed in the third and in subsequent six-year remedial amendment cycles, which means “plans with identical formulas submitted during the second six-year cycle, which runs until April 30, 2020, [wouldn’t be] able to file for an IRS opinion letter.” Kevin also notes that the new guidance “reflects the IRS’s desire to encourage plans to convert to preapproved status due to its recent elimination of the determination letter program for individually designed plans.”
