rp-02-10.pdf

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Part III. Administrative, Procedural, and Miscellaneous
26 CFR 601.201: Procedures for amending Individual Retirement Arrangements
(IRAs), Simplified Employee Pensions, and SIMPLE IRA plans.
(Also, Part I, §§ 408, 408A.)
Rev. Proc. 2002-10
SECTION 1. PURPOSE
This revenue procedure provides (1) guidance to drafters of IRAs, SEPs and
SIMPLE IRA plans; (2) guidance to users of Internal Revenue Service model IRAs and
plans; and (3) transitional relief for users of IRAs and plans that have not been
approved by the Service.
SECTION 2. BACKGROUND AND GENERAL INFORMATION
.01 The Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA"), Pub. L. 107-16, made several changes to the Internal Revenue Code,
affecting IRAs (traditional, Roth and SIMPLE IRAs), SEPs (including salary reduction
SEPs, "SARSEPs") and SIMPLE IRA plans, that are effective beginning January 1,
2002.
.02 On January 17, 2001, proposed regulations concerning required minimum
distributions from retirement plans were published in the Federal Register. These
proposed regulations can be used to figure required minimum distributions from IRAs
beginning with the 2001 distribution calendar year. Final regulations are expected to be
issued in the near future.
.03 Rev. Proc. 87-50, 1987-2 C.B. 647, provides the procedures for a
sponsoring organization or a mass submitter (a "prototype sponsor") to apply to the
Service for an opinion letter on whether a prototype traditional IRA or a prototype SEP
meets the requirements of § 408(a) or (b), or § 408(k), respectively. Rev. Proc. 87-50
also contains procedures for employers and employee associations to apply for a ruling
on a § 408(c) IRA and for employers to apply for a ruling on whether a SEP, in
combination with a terminated defined benefit plan, satisfies the requirements of § 415.
.04 Rev. Proc. 91-44, 1991-2 C.B. 733, modified Rev. Proc. 87-50 to permit
prototype sponsors to apply to the service for an opinion letter on whether a prototype
SARSEP meets the requirements of § 408(k)(6). The Small Business Job Protection
Act of 1996 (Pub. L. 104-188) prohibited the establishment of SARSEPs after
December 31, 1996.
.05 Rev. Proc. 97-29, 1997-1 C.B. 698, modified Rev. Proc. 87-50 to permit
prototype sponsors to apply to the Service for an opinion letter on whether a prototype

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SIMPLE IRA or a SIMPLE IRA plan meets the requirements of § 408(p).
.06 Rev. Proc. 98-59, 1998-2 C.B. 727, modified Rev. Proc. 87-50 to permit
prototype sponsors to apply to the Service for an opinion letter on whether a prototype
Roth IRA meets the requirements of § 408A.
.07 In Announcement 2001-96, 2001-41 I.R.B. 317 (October 9, 2001), the
Service announced that opinion letters would not be issued covering EGTRRA changes
to SEPs and SIMPLE IRA plans until further notice.
.08 Model forms are available for taxpayers who want to use a pre-approved
document to establish an IRA or a SEP or SIMPLE IRA plan without using a prototype
document. The model forms referenced in the preceding sentence are: Form 5305,
Individual Retirement Trust Account; Form 5305-A, Individual Retirement Custodial
Account; Form 5305-R, Roth Individual Retirement Trust Account; Form 5305-RA, Roth
Individual Retirement Custodial Account; Form 5305-RB, Roth Individual Retirement
Annuity Endorsement; Form 5305-S, SIMPLE Individual Retirement Trust Account;
Form 5305-SA, SIMPLE Individual Retirement Custodial Account; Form 5304-SIMPLE,
Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) – (Not
Subject to the Designated Financial Institution Rules); Form 5305-SIMPLE, Savings
Incentive Match Plan for Employees of Small Employers (SIMPLE) – (For Use With a
Designated Financial Institution); Form 5305-SEP, Simplified Employee Pension; and
Form 5305A-SEP, Salary Reduction and Other Elective Simplified Employee Pension.
SECTION 3. OPINION LETTERS FOR IRAS AND SEP AND SIMPLE IRA PLANS
.01 Mandatory submission. Beginning April 1, 2002, prototype sponsors can
apply for opinion letters on prototype documents that incorporate EGTRRA changes
and the final required minimum distribution rules. All prototype sponsors with currently
approved prototype IRAs, SEPs and SIMPLE IRA plans must amend these documents
and submit an application for opinion letters on the amended documents no later than
December 31, 2002, in order to remain a prototype sponsor of such documents.
Drafters of § 408(c) IRAs must also amend such § 408(c) IRA documents and submit
an application for opinion letters on the amended documents no later than October 1,
2002. The documents must be submitted using the appropriate application form and
following the instructions on that form. Form 5306, Application for Approval of
Prototype or Employer Sponsored Individual Retirement Arrangement (IRA), is used for
prototype IRA submissions, and Form 5306-A, Application for Approval of Prototype
Simplified Employee Pension (SEP) or Savings Incentive Match Plan for Employees of
Small Employees (SIMPLE IRA plan), is used for prototype SEP and SIMPLE IRA plan
submissions.
.02 Sample language. A Listing of Required Modifications, or LRMs, that the
Service finds acceptable for prototype IRAs, SEPs and SIMPLE IRA plans will be
available shortly on the Service's Web Site at www.irs.gov. Click on "Tax Info For

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Business," then "Employee Plans Corner," then "Listing of Required Modifications
(LRMs)." In order to receive a favorable opinion letter, prototype documents must
include language that addresses every point in the LRMs, unless clearly inapplicable.
Identical language is not necessary, but LRM concepts may not be abbreviated by
using references to Code sections or such phrases as "in accordance with the law."
.03 Annuities. In the case of a prototype sponsor that is an issuer of individual
retirement annuities described in § 408(b) and that must apply to one or more state
insurance departments for approval of amended IRA documents, the Service will grant
expedited review of Service-approved EGTRRA prototype IRA documents amended for
changes required by a state insurance department, provided: (1) the Service-approved
EGTRRA document is submitted to the state insurance department within 90 days of
the date the Service issues a favorable EGTRRA opinion letter on the document and;
(2) the prototype sponsor resubmits the document, as amended to comply with
changes required by the state insurance department, to the Service within 90 days after
it is approved by such state insurance department.
SECTION 4. ADOPTION OF REVISED IRAS, SEPS AND SIMPLE IRA PLANS
.01 Model IRAs. The Service expects to issue revised model IRAs in early 2002
containing EGTRRA changes and required minimum distribution rules that comply with
the final regulations. Existing model IRAs may not be used to establish new IRAs after
June 1, 2002. An individual using an existing model IRA who wants to take advantage
of the 2002 EGTRRA changes to IRAs in 2002 must adopt a revised model IRA (or an
appropriate amended prototype IRA) by the end of 2002.
.02 Prototype IRAs. An individual using a currently approved prototype IRA
must adopt either (1) the prototype sponsor's amended document within 180 days after
the date the Service issues a favorable EGTRRA opinion letter on the amended
document or (2) an appropriate model IRA by the end of 2002.
.03 Section 408(c) IRAs. An employer or employee association using a
currently approved § 408(c) IRA must adopt an amended § 408(c) IRA within 30 days
after the date the Service issues a favorable EGTRRA opinion letter on the amended
document.
.04 Disclosure statements. A financial institution that serves as a trustee, issuer
or custodian for a model or prototype IRA must change the corresponding disclosure
statement, required pursuant to § 408(i), to reflect the contents of the revised IRA. The
financial institution must distribute the amended disclosure statement to each individual
using the revised IRA.
.05 Model SEPs and SIMPLE IRA plans. The Service expects to issue revised
model SEP and SIMPLE IRA forms, also in early 2002, containing EGTRRA changes.
Existing model SEPs and SIMPLE IRA plans may not be used to establish new SEPs or

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SIMPLE IRA plans after June 1, 2002. An employer using an existing model SEP who
wants to take advantage of the EGTRRA changes to such plans for the first plan year
beginning after December 31, 2001, must adopt a revised model plan (or an
appropriate amended prototype plan) by the end of such first plan year. An employer
using an existing model SIMPLE IRA plan, must adopt a revised model plan (or an
appropriate amended prototype plan) by the end of 2002. However, notwithstanding
the preceding two sentences or otherwise applicable notice requirements, participating
employees must be notified of the increased EGTRRA contribution limits by October 1,
2002.
.06 Prototype SEPs and SIMPLE IRA plans. An employer using a currently
approved prototype SEP who wants to take advantage of the EGTRRA changes to
such plans for the first plan year beginning after December 31, 2001, must adopt the
prototype sponsor's amended document within 180 days after the date the Service
issues a favorable opinion letter on the amended document. An employer using a
currently approved prototype SIMPLE IRA plan must adopt the prototype sponsor's
amended document within 180 days after the date the Service issues a favorable
opinion letter on the amended document. However, notwithstanding the preceding two
sentences or otherwise applicable notice requirements, participating employees must
be notified of the increased EGTRRA contribution limits by October 1, 2002.
.07 SEPs with § 415 rulings. An employer using a SEP that has a favorable
ruling because participants also participated in the employer's terminated defined
benefit plan must adopt an amended SEP in accordance with section 4.05 above.
Because the aggregation rules under § 415(e) have been repealed, the Service will no
longer issue rulings on whether a SEP, in combination with a terminated defined benefit
plan, satisfies the requirements of § 415.
SECTION 5. TRANSITIONAL RELIEF FOR PROTOTYPE ADOPTERS
.01 IRAs. An individual and financial institution who establish a trust, custodial
account or annuity contract as an IRA after 2001 using a document that has not
received an EGTRRA opinion letter are deemed to have established an IRA using an
EGTRRA-approved document provided the conditions in (1) through (4) below are
satisfied:
(1) The individual and financial institution used a document provided by a
prototype sponsor to establish the "IRA."
(2) No later than December 31, 2002, the prototype sponsor applies to the
Service for an opinion letter on the document described in section 5.01(1).
(3) The individual and financial institution adopt the approved document within
180 days after the date the Service issues a favorable opinion letter on the document to
the prototype sponsor.

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(4) The individual and financial institution comply in operation with applicable
statutory requirements for the period beginning on the date the "IRA" was established
under the original document through the date the Service-approved document is
adopted.
.02 SEPs and SIMPLE IRA plans. An employer who establishes a plan as a
SEP or SIMPLE IRA plan after 2001 using a document that has not received an
EGTRRA opinion letter is deemed to have established such a plan using an EGTRRA-
approved document provided the conditions in (1) through (4) below are satisfied:
(1) The employer used a document provided by a prototype sponsor to establish
the "SEP" or "SIMPLE IRA plan."
(2) No later than December 31, 2002, the prototype sponsor applies to the
Service for an opinion letter on the document described in section 5.02(1).
(3) Within 180 days after the Service issues a favorable opinion letter on the
document to the prototype sponsor, the employer adopts the approved document.
(4) The employer complies in operation with applicable statutory requirements for
the period beginning on the date the "SEP" or "SIMPLE IRA plan" was established
under the original document through the date the Service-approved document is
adopted.
SECTION 6. EFFECT ON OTHER DOCUMENTS
Section 4.01 of Rev. Proc. 87-50 is modified by section 4.07 of this revenue
procedure.
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective on January 28, 2002.
SECTION 8. PAPERWORK REDUCTION ACT
The collections of information contained in this revenue procedure have been
reviewed and approved by the Office of Management and Budget in accordance with
the Paperwork Reduction Act (44 U.S.C. section 3507) under control number
1545-1769.
An agency may not conduct or sponsor, and a person is not required to respond
to, a collection of information unless the collection of information displays a valid control
number.

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The collections of information in this revenue procedure are in sections 4.04,
4.05 and 4.06. This information is required to inform IRA owners and plan participants
of the new rules applicable to their retirement savings. The likely respondents are (1)
businesses or other for-profit institutions and (2) not-for-profit institutions.
The estimated total annual reporting burden is 7,371,000 hours.
The estimated annual burden per respondent varies from 0.1 hours to 1,000
hours, depending on individual circumstances, with an estimated average of 19.5 hours.
The estimated number of respondents is 378,000.
The estimated annual frequency of responses is one.
Books or records relating to a collection of information must be retained as long
as their contents may become material in the administration of any internal revenue
law.
DRAFTING INFORMATION
The principal author of this revenue procedure is Roger Kuehnle of the
Employee Plans, Tax Exempt and Government Entities Division. For further
information regarding this revenue procedure, please contact Employee Plans’ taxpayer
assistance telephone service at 1-877-829-5500 (a toll-free number), between the
hours of 8:00 a.m. and 6:30 p.m. Eastern Time, Monday through Friday.