IRS Determination Letter Changes

Effective January 1, 2017, individually designed plans (those uniquely designed for a business) will no longer be able to request determination letters from the IRS in accordance with its five-year remedial schedule.

If your business has a pre-approved plan such as a master, prototype or volume submitter plan, the previous six-year cycle will remain in place. However, submissions for those plans for the third six-year remedial cycle will begin on August 1, 2017, instead of the original February 1, 2017 date. See Section 16 of the IRS Internal Revenue Bulletin –

When Can A Determination Letter Application Be Submitted?

For those companies that do have individually designed plans, the IRS will now only accept requests for determination letters in the following three circumstances:

  • Initial determination letter at plan creation
  • At plan termination
  • IRS special exception (like significant law changes)

The IRS discusses these changes including what could qualify as an IRS special exception in the Revenue Bulletin linked above (Part II, Section 4).

Required Amendments List for Individually Designed Plans

The IRS plans to publish a Required Amendments List for individually designed plans. The requirements of these lists must be met by the end of the second calendar year following its publication year (2017 list must be met by end of 2019).

The elimination of the five-year remedial cycle will require plans to track their compliance with IRS regulations without the support of the determination letters program. Examinations may be the only form of evaluation the IRS makes for these plans moving forward.

Plan sponsors should consider establishing procedures to test whether their plan has met the requirements of the Required Amendments List published by the IRS each year.

If you have any questions, please contact Scott Esworthy today!