Our company sponsors a prototype SEP plan. The Plan specifically states that an adopting employer who previously sponsored an now-terminated defined benefit plan may not rely on the IRS approval letter that is part of the prototype. Such an employer would need to file the plan as an individually-designed plan in order to receive a letter.
Does anyone know if there are any special procedures to do this that are different from those which apply to qualified plans? Also, does anyone know the IRS's rationale for this position?

Thanks for the help!

I am not aware of any special procedures for filing for the opinion letter. The rationale is that now that the DB plan is terminated, who is going to monitor the combined plan limits? Because SEPs are supposed to be "simplified", the IRS forms preclude there ever being a defined benefit plan or any other plan for that matter. Prototypes can recognize other qualified plans and the general assumption is that if there is a DB plan in existance, someone is there to advise the employer of any limitations in operating the two plans. If the DB plan has been terminated, however, who is advising the employer and are they capable of calculating and enforcing the limits?

The employer may request a private letter ruling for approval of its nonmodel arrangement. [See Rev Proc 83-36 and 87-50; PLR 9552055, 9036038]

[This message has been edited by Gary Steven Lesser (edited 12-18-98).]