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IRS Announces Changes to Employee Plans Determination Letter Program.

(Parker Tax Publishing August 14, 2015)

Effective January 1, 2017, the IRS will eliminate the staggered 5-year determination letter remedial amendment cycles for individually designed plans and will limit the scope of the determination letter program for individually designed plans to initial plan qualification and qualification upon plan termination. Announcement 2015-19.

The IRS announced important changes to the Employee Plans determination letter program for qualified plans. The changes to the determination letter filing procedures described in Ann. 2015-19 will be reflected in an update to Rev. Proc. 2007-44.

Revenue Procedure 2007-44 describes procedures for issuing determination letters and the 5-year remedial amendment cycle for individually designed plans. Under these procedures, sponsors of individually designed plans generally can apply for determination letters once every 5 years.

The IRS will eliminate the staggered 5-year remedial amendment cycles for individually designed plans effective January 1, 2017. As of that date, the IRS will no longer accept determination letter applications based on the 5-year remedial amendment cycles. However, sponsors of Cycle A plans, described in Rev. Proc. 2007-44, can submit determination letter applications during the period beginning February 1, 2016, and ending January 31, 2017.

As a result of the elimination of the 5-year remedial amendment cycles, the extension of the remedial amendment period provided in Rev. Proc. 2007-44 will not be available after December 31, 2016, and the remedial amendment period definition in Reg. Sec. 1.401(b)-1 will apply.

OBSERVATION: The IRS intends to extend the remedial amendment period for individually designed plans to a date that is expected to end no earlier than December 31, 2017.

Effective January 1, 2017, a sponsor of an individually designed plan will be permitted to submit a determination letter application for a plan on initial qualification (that is, a plan for which a Form 5300, Application for Determination for Employee Benefit Plan, has not been filed or for which a Form 5300 has been filed but a determination letter was not issued with respect to the plan, regardless of when the plan was adopted) and for qualification upon plan termination. In addition, a sponsor will be permitted to submit a determination letter application in certain other limited circumstances that will be determined by the IRS.

In addition, effective July 21, 2015, through December 31, 2016, the IRS will no longer accept off-cycle determination letter applications, except for determination letter applications for new plans, as defined in Rev. Proc. 2007-44, and for terminating plans.

For a discussion of qualified plans, see Parker Tax ¶ 130,120. (Staff Editor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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