Changes to IRS Determination Letter Program

August 27, 2019 – Internal Revenue Service (IRS) Revenue Procedure 2019-20, which is effective September 1, 2019, most notably provides for a limited expansion of the determination letter program with respect to individually-designed benefit plans. Previously, Revenue Procedure 2016-37 eliminated the ability for these types of plans to obtain periodic determination letters from the IRS, and as a result, placed responsibility for ensuring that plan documents are updated to remain in compliance with revisions to the Internal Revenue Code (the Code) entirely on plan administrators. However, with the limited expansion provided by Revenue Procedure 2019-20, the IRS will now accept determination letter applications for individually-designed hybrid plans that combine features of both defined-contribution and defined-benefit plans during a 12-month period beginning September 1, 2019, as well as for individually-designed merged plans on an ongoing basis. Plan sponsors continue to be permitted to submit a determination letter application for initial plan qualification and for qualification upon plan termination.

To assist sponsors of individually-designed plans to ensure that all required amendments to plan documents are made, the IRS continues to publish a required amendments list on an annual basis (see https://www.irs.gov/retirement-plans/required-amendments-list). It is important that that administrators and fiduciaries of individually-designed plans monitor this list, as the IRS regularly issues notices requiring amendments to certain benefit plan documents.

The determination letter program remains available for pre-approved plans submitted for approval by providers or mass submitters. One way sponsors of individually-designed plans can mitigate the risk of noncompliance with the Code is to switch to using a pre-approved plan document. In an effort to encourage plans to use pre-approved plan documents, the IRS issued Revenue Procedure 2017-41 in June 2017. This revenue procedure increased the types of plans eligible for pre-approved status and allows greater flexibility in the design of pre-approved plans.

This article is an excerpt from Dopkins Employee Benefits Newsletter.  To read the complete content, please click here.

For more information, please contact Justin Renaud at jrenaud@dopkins.com.

 

About the Author

Justin S. Renaud CPA

Justin is a member of Dopkins Assurance Services Group. He helps provide management with financial information by researching and analyzing accounts and preparing financial statements.

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