July 23, 2015

IRS Officially Announces Determination Letter Program Overhaul

On July 21, the Internal Revenue Service (IRS) issued Announcement 2015-19, officially ending the current cycle-based determination letter program for individually designed plans, effective as of January 1, 2017. Plans that have filed or are expecting to file in the second Cycle E or in the third Cycle A will be permitted to file in accordance with the existing cycle rules, but no further cycle-based filings will be allowed.

In addition, as of July 21, 2015, the IRS will no longer accept “off-cycle” determination letter filings (i.e., determination letter requests submitted at any time other than the plan’s filing year), except for new plans (plans for which a Form 5300 has never been filed or for which a determination letter has never been issued) and terminating plans (plans that file a Form 5310).

Because plans will continue to need amendments and corrections, this program change raises many practical questions about what rules will replace the existing rules. In order to begin addressing these questions, the guidance asks for comments on certain very technical issues, including:

  • The rules applicable to adopting and correcting plan amendments (remedial amendment period rules)
  • The rules for adopting required amendments (interim amendment rules)
  • Related changes needed in the voluntary corrections program
  • For plans that wish to convert to a pre-approved plan document, information that is needed in order to facilitate such a conversion

Comments on these issues are due on or before October 1, 2015.

The guidance indicates that Treasury and the IRS also intend to request comments about other specified circumstances in which plan sponsors should be able to apply for determination letters, but they are not asking for comments on that question at this time.

If you have any questions about these changes, please contact your Sibson consultant or send us a note.

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