IRS Eliminates 5-Year Determination Letter Remedial Amendment Cycles for Individually Designed Plans
Written By Jason Rothman
Plan sponsors of individually designed tax-qualified plans are subject to Revenue Procedure 2007-44 which sets forth the procedures for issuing determination letters and the terms of the 5-year remedial amendment period for such plans. This allows plan sponsors of individually designed plans to apply for a determination letter once every five years (5-year period generally determined based on a plan sponsor’s EIN). In addition, the Revenue Procedure provides an extension of a plan’s remedial amendment period for disqualifying provisions until the end of the 5-year remedial amendment period.
On July 21, 2015, the IRS issued Announcement 2015-19, which eliminates the 5-year remedial amendment cycles for individually designed plans, effective January 1, 2017. As of that effective date, the IRS will no longer accept determination letter submissions for plans based on the 5-year remedial amendment cycles (with the exception of Cycle A plans which have a determination letter submission period of February 1, 2016 through January 31, 2017).
Under Announcement 2015-19, effective January 1, 2017, plan sponsors may only file for a determination letter two times in the life of a plan – upon initial qualification and upon plan termination. The IRS/Treasury may determine other limited situations in which a plan sponsor may file for a determination letter.
Plan Sponsor Action Items
This guidance provides a significant change in the way plan sponsors will need to operate their plans from a compliance perspective. Sponsors will need to:
- keep their eyes on future remedial amendment period guidance;
- be diligent in properly amending their plans in a timely manner, both for required amendments and discretionary amendments, to preserve the tax-qualified status of their plans; and
- take into account the IRS’s stated intent to extend the remedial amendment period for individually designed plans to a date no earlier than December 31, 2017 and completely (and timely) review their documents for compliance to make sure plan amendments are adopted prior to the end of the period.