determination letter

Under Revenue Procedure 2019-20, sponsors of individually designed statutory hybrid plans, including cash balance plans, have a short window of opportunity to file determination letter applications with the IRS by August 31, 2020.  In addition, sponsors of merged plans have an ongoing opportunity to file determination letter applications within certain periods of time after the corporate transaction and plan merger. Plan sponsors should strongly consider taking advantage of these opportunities, since other opportunities for filing determination letter applications are limited.  This post discusses key highlights of the expansion of the determination letter application program under this Revenue Procedure.
Continue Reading Don’t Miss Your Window: Upcoming Deadlines for Determination Letter Applications

On July 21, the IRS announced that it is eliminating its current determination letter program for tax-qualified retirement plans. (IRS officials had been sending signals that this was coming for several months. It is now official.) Starting in 2017, the IRS will accept determination letter applications in only three circumstances:

  1. Initial qualification for a new plan. The IRS will still review any plan that has not previously received a determination letter.
  2. Plan termination. The IRS will still accept applications for a determination upon termination of a plan.
  3. Other limited circumstances to be determined by the Treasury Department and IRS. The Announcement says that Treasury and the IRS intend periodically to request public comments on what circumstances should be included in this category.

For plan sponsors, favorable IRS determination letters provide protection against disqualification for a “plan document failure”–for example, if the IRS later determines that a plan provision does not comply with the tax-qualification requirements or the IRS determines that a required provision is missing. Given the significant potential costs of a plan being disqualified, third parties often rely on determination letters to confirm that a plan is qualified. For example, buyers in corporate transactions, plans and IRAs accepting rollovers, and lenders often request to see copies of a plan’s favorable determination letter.Continue Reading Changes to IRS Determination Letter Program Raise Practical Questions