IRS revises employee plan determination letter procedures

The IRS has issued revised procedures for issuing determination letters on the qualified status of pension, profit-sharing, stock bonus, annuity and employee stock ownership plans (ESOPs) under Code Sec. 401, Code Sec. 403(a), Code Sec. 409 and Code Sec. 4975(e)(7), and on the status for exemption of any related trusts or custodial accounts under Code Sec. 501(a). The procedures are divided into three parts. The first part contains instructions for requesting determination letter for various types of plans and transactions. The second part contains procedures for providing notice to interested parties and for interested parties to comment on determination letter requests. The third part contains procedures concerning the processing of determination letter requests and describes the effect of a determination letter.

In addition to minor reference updates and clarifications, the procedures make several changes to reflect the planned elimination in 2017 of the staggered five-year determination letter remedial amendment cycles for individually designed plans, as described in IRS Announcement 2015-19. In anticipation of future changes to the Employee Plans determination letter program eliminating the five-year remedial amendment cycles, the procedures provide that, effective January 4, 2016, determination letters issued to individually designed plans will no longer contain an expiration date. In response to comments submitted concerning Announcement 2015-19, the IRS intends to issue guidance on the status of existing expiration dates on determination letters issued prior to January 4, 2016.

Among other things, the procedures also provide a clarification to reflect that certain plans may be reviewed for a design-based safe harbor rather than a nondiscrimination in amount requirement; clarify rules regarding EPCRS documentation for closing agreements or compliance statements; direct applicants to pay the user fees provided in Rev. Proc. 2016-8 until a revised Form 8717, User Fee for Employer Plan Determination Letter Request, is published; provide that certain applications may be treated as incomplete if they do not disclose or distinguish contrary authorities; caution that incomplete applications will not be returned; add Schedule SB of Form 5500 for defined benefit plans as one of the forms required for requesting a determination letter in specified circumstances; and provide that a Code Sec. 420 determination will require the plan to provide that no transfer will be made after 2025.
The procedures are effective February 1, 2016, except that the elimination of expiration dates in determination letters is effective January 4, 2016.

Source: Rev. Proc. 2016-6.

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