IRS issues notice of planned update to guidance on Employee Plans determination letter program

The IRS intends to update Rev. Proc. 2007-44 in anticipation of the elimination, effective January 1, 2017, of the 5-year remedial amendment cycle system for individually designed plans under the Employee Plans (EP) determination letter program. The future guidance will provide that controlled groups and affiliated service groups that have previously made a Cycle A election are permitted to submit determination letter applications during the Cycle A submission period, which begins February 1, 2016, and ends January 31, 2017. The guidance will also provide that expiration dates on determination letters issued prior to January 4, 2016, are no longer operative. Finally, the period on or after January 1, 2016, during which certain employers may establish or adopt a defined contribution pre-approved plan and, if permissible, apply for a determination letter, will be extended from April 30, 2016 to April 30, 2017. Employers may rely on this notice until Rev. Proc. 2007-44 has been updated to reflect the changes described in the notice.

Rev. Proc. 2007-44 provides rules and procedures for 5-year remedial amendment cycles for individually designed plans and 6-year remedial amendment/approval cycles for pre-approved plans. As stated in Announcement 2015-19, the IRS intends to make certain changes in the EP determination letter program for qualified retirement plans. Effective January 1, 2017, staggered 5-year remedial amendment cycles for individually designed plans will be eliminated, and the scope of the program will be limited to initial plan qualification, qualification on plan termination, and certain other limited circumstances.
Rev. Proc. 2007-44 will be modified to provide that controlled groups and affiliated service groups that maintain more than one plan are permitted to submit determination letter applications during the Cycle A submission period beginning February 1, 2016, and ending January 1, 2017, provided that a prior Cycle A election with respect to the controlled group or affiliated service group has been made by January 31, 2012.

Expiration dates included in determination letters issued prior to January 4, 2016, will no longer be operative. The IRS will issue guidance that will clarify the extent to which an employer may rely on a determination letter after a subsequent change in law or plan amendment.

Another modification of Rev. Proc. 2007-44 will extend the deadline for an employer to adopt a current defined contribution pre-approved plan and to apply for a determination letter, if permissible, from April 30, 2016, to April 30, 2017, with respect to any defined contribution pre-approved plan adopted on or after January 2, 2016, with certain exceptions. The IRS states that this extension will facilitate a plan sponsor’s ability to convert an existing individually designed plan into a current defined contribution pre-approved plan. For this purpose, a “current defined contribution pre-approved plan” is a plan that was approved based on the 2010 Cumulative List. The IRS provides examples.
Source: IRS Notice 2016-03.

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