IRS to Issue Preapproved ESOP Plan Documents?

Robert Richter, vice-president of SunGard and senior vice-president of the American Society of Pension Professionals & Actuaries, has told the BNA Pension Reporter (April 20) that the IRS is considering providing preapproved plan language for ESOPs. The IRS does not currently allow ESOP prototype plans, although it does for some other kinds of ERISA plans. While the IRS probably would not issue an actual model fill-in-the blanks plan, it could provide preapproved language for inclusion in ESOP plan documents that would make the process easier for companies adopting the plans. One danger is that some companies might rely too heavily on standard language, when what they really need is some variant that will be better suited to their needs. But having more certainty about what will work with the IRS and language that less-experienced providers can use so that they do not make errors would be very valuable. Richter also notes that a major benefit "to practitioners (and ultimately employers) is that they won't have to incur the expense of dealing with the restatement deadline under the five-year cycle for qualified plans. By fitting them into the six-year cycle for pre-approved plans, most ESOPs would have the same restatement deadline and wouldn't need to vary language based on the latest cumulative list."