IRS Revises Employee Plans Determination Letter Program

Author: Ashley Shaw

July 31, 2015

Due to budget cuts and the need to more efficiently direct its limited resources, the IRS has announced important changes to its Employee Plans Determination Letter program for qualified retirement plans. The announcement also provides a transition rule with respect to the remedial amendment period for certain plans currently on the five-year cycle, and requests comments on specific issues relating to the implementation of the changes to the determination letter program.

IRS determination letters inform employers that sponsor individually designed plans that their plan language satisfies the requirements of the Internal Revenue Code (IRC) that allow such plans to have tax-favored status. While getting a determination letter from the IRS is not required for an employer's plan to be tax-qualified, it assures an employer that its plan complies with the IRC. Currently, an employer may apply for a determination letter whenever a retirement plan is created, amended, or terminated.

Effective January 1, 2017, the IRS will eliminate the staggered five-year remedial amendment cycles for individually designed plans under IRC § 401(b). As of that date, the IRS will no longer accept determination letter applications based on the five-year remedial amendment cycles. However, sponsors of Cycle A plans (described in section 9.03 of Rev. Proc. 2007-44, 2007-2 C.B. 54) will still be permitted to submit determination letter applications during the period beginning February 1, 2016 and ending January 31, 2017.

In addition, a sponsor of an individually designed plan will be permitted to submit a determination letter application for a plan on initial plan qualification (i.e., 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. A sponsor will also be permitted to submit a determination letter application in certain other limited circumstances that will be determined by the IRS.

The IRS plans to request comments periodically from the public regarding the other limited circumstances under which a plan sponsor will be eligible to apply for a determination letter, and will identify those circumstances in published guidance on a periodic basis. The agency is also considering ways to make it easier for plan sponsors to comply with the qualified plan document requirements.

For instance, this may include:

  • Providing model amendments;
  • Not requiring certain plan provisions or amendments to be adopted if, and for so long as, they are not relevant to a particular plan (e.g., because of the type of plan, employer or benefits offered); or
  • Expanding plan sponsors' options to document qualification requirements through incorporation by reference.

Transition Period

Rev. Proc. 2007-44 extends the remedial amendment period for disqualifying provisions to the end of a plan's applicable remedial amendment cycle. As a result of the elimination of the five-year remedial amendment cycles, the extension of the remedial amendment period will not be available after December 31, 2016, and the remedial amendment period definition in Internal Revenue Code § 1.401(b)-1 will apply. However, the IRS intends to extend the remedial amendment period for individually designed plans to a date that is expected to end no earlier than December 31, 2017.

Immediate Elimination of Off-Cycle Determination Letter Applications

Effective July 21, 2015 through December 31, 2016, the IRS will no longer accept off-cycle determination letter applications (as defined in section 14 of Rev. Proc. 2007-44), except for determination letter applications for new plans (as defined in section 14.02(2) of Rev. Proc. 2007-44) and for terminating plans.

Comments Requested

The IRS is requesting comments on the following specific issues relating to the implementation of the determination letter program changes:

  • What changes should be made to the remedial amendment period that would otherwise apply to individually designed plans under IRC § 401(b)?
  • What additional considerations should be taken into account in connection with the current interim amendment requirement?
  • What guidance should be issued to assist plan sponsors that wish to convert an individually designed plan into a pre-approved plan?
  • What changes should be made to other IRS programs to facilitate the changes described in the announcement, including revisions to the Employee Plans Compliance Resolution System?

Comments may be sent electronically to with "Announcement 2015-19" included in the subject line.

The IRS notes that the changes to the determination letter filing procedures will be reflected in a future update to Rev. Proc. 2007-44, and in a successor to Rev. Proc. 2015-6, 2015-1 I.R.B. 194.