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Major Revisions to Qualified Plan Determination Letter Process Announced


September 2015

Effective January 1, 2017, the staggered five-year determination letter remedial amendment cycles for individually designed plans will be eliminated, the IRS announced in Announcement 2015-19. Additionally, according to the announcement, the scope of the determination letter program will be limited to initial plan qualification and qualification upon plan termination. Effective July 21, 2015, the IRS has stopped accepting off-cycle determination letter applications, with the exception of applications for new plans.

By way of background, the remedial amendment periods that are being eliminated allowed plan sponsors to retroactively adopt required amendments to their plan documents, in essence extending the deadlines for such amendments. Additionally, the determination letter program allowed plan sponsors to be periodically assured by the IRS that the plan document was in compliance with the Internal Revenue Code. With the announced changes, plan sponsors will no longer receive such periodic assurances.

The announcement indicates that the Treasury Department and the IRS are considering how to make it easier for plan sponsors to comply with the qualified plan document requirements in light of the elimination of the remedial amendment cycles. One such option would be for the IRS to timely issue model amendments for plan sponsors to use in reflecting required amendments.

Many plan sponsors with individually designed plans have relied on the determination letter program to ensure their plan documents remain compliant with changes in law. Sponsors should now consider making changes to their administrative procedures to ensure that plan amendments are timely adopted. Such changes may include implementing periodic internal audits of the plan document or, if the plan sponsor currently relies solely on a third-party administrator for amendments, engaging outside ERISA counsel to ensure the plan document is amended on a timely basis.

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