Changes to determination letter process, qualified retirement plans

Changes to determination letter process

The IRS today released an advance version of Announcement 2015-19, announcing that with respect to determination letters for individually designed employee plans:

Related content

  • Effective July 21, 2015—the IRS will no longer (except as noted immediately below) accept determination letter applications that are submitted off-cycle, effective July 21, 2015.
  • Effective January 1, 2017—the IRS will eliminate the staggered five-year determination letter remedial amendment cycles for individually designed employee plans.
  • Effective January 1, 2017—the sponsor of an individually designed plan will be permitted to submit a determination letter application for a plan concerning initial plan qualification and for qualification upon plan termination.

Announcement 2015-19 [PDF 38 KB] provides that beginning January 1, 2017, a sponsor of an individually designed plan will be permitted to submit a determination letter application for a plan on initial plan qualification—that is, a plan for which a Form 5300, Application for Determination for Employee Benefit Plan, has not been filed or for which a Form 5300 has been filed but a determination letter was not issued with respect to the plan (regardless of when the plan was adopted) and for qualification upon plan termination.

Also, today’s guidance states that a plan sponsor will be allowed to submit a determination letter application in certain other limited circumstances (as to be determined by the IRS and Treasury).

Future guidance

The IRS stated that changes to the determination letter filing procedures will be reflected in an update to Rev. Proc. 2007-44 (that sets forth the procedures for issuing determination letters and describes the five-year remedial amendment cycle for individually designed plans) and in successor guidance to Rev. Proc. 2015-6.

Also, the IRS and Treasury intend to request comments periodically regarding the other limited circumstances under which a plan sponsor will be eligible to apply for a determination letter. Treasury and the IRS will identify those circumstances in published guidance on a periodic basis.

In connection with the modifications to the determination letter program described in today’s announcement, the IRS and Treasury Department are considering ways to make it easier for plan sponsors to comply with the qualified plan document requirements, for example:

  • By providing model amendments
  • Not requiring certain plan provisions or amendments to be adopted if and for as long as they are not relevant to a particular plan (for example, because of the type of plan, employer, or benefits offered), or
  • Expanding plan sponsors’ options to document qualification requirements through incorporation by reference

Today’s announcement accordingly includes a request for comments, specifically concerning:

  • What changes are needed to the remedial amendment period that would otherwise apply to individually designed plans under section 401(b)?
  • What additional considerations need to be taken into account in connection with the current interim amendment requirement?
  • What guidance would assist plan sponsors that wish to convert an individually designed plan into a pre-approved plan?
  • What changes are needed to other IRS programs to facilitate today’s announced changes, including changes to the Employee Plans Compliance Resolution System provided by Rev. Proc. 2013-12, and modified by Rev. Proc. 2015-27 and Rev. Proc. 2015-28?

Comments are due by October 1, 2015.

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