Determination Letter ChangesJuly 19, 2016
Amid concern from the IRS’s Advisory Committee on Tax Exempt and Government Entities that the curtailment of the determination letter program is a “mistake” and “shortsighted,” recent guidance issued by the IRS has made clear that starting in 2017, individually designed plans generally will be able to submit for a determination letter only at inception and termination. However, the IRS may consider on an annual basis special circumstances in which it will issue determination letters, such as significant law changes and new approaches to plan design.
Plan sponsors whose EIN ends in a 1 or 6 (i.e., Cycle A filers) will be the last to file under the current five-year filing cycle. The Cycle A filing period will end on January 31, 2017. If you are a Cycle A filer, please notify us if you would like to take advantage of and apply for this last filing period.
In lieu of the current five-year remedial amendment cycle, the IRS intends to begin publishing an annual “required amendments list,” which would enumerate how an individually designed plan must be amended to retain its qualified plan status. The IRS will publish the required amendments list after October 1 of a given year. Generally, any item placed on the required amendments list must be adopted by plan sponsors by the end of the second calendar year following the year in which the required amendments list is published. For example, plan amendments for items on the 2016 required amendments list generally must be adopted by December 31, 2018. However, plan sponsors need to operate their plans in compliance with any change in qualification requirements from the effective date of the change, regardless of the plan’s remedial amendment period for adopting amendments. To assist plan sponsors, the IRS also intends to provide annually an “operational compliance list” to identify changes in qualification requirements that are effective during a calendar year.
Discretionary amendments must still be adopted by the end of the plan year in which the plan amendment is operationally put into effect (i.e., when the plan is administered consistently with the plan amendment rather than existing plan terms).PDF