Determination Letters: New and Improved?
The IRS has made big changes to the Determination Letter (DL) program. It’s new, but is it improved? An Oct. 25 panel at the ASPPA Annual Conference held at National Harbor, Md. discussed this year's changes in the program.
Richard Hochman, 2017 ASPPA President, was joined by 2012 Past President Robert Richter, vice president at FIS Relius, and Donald Kieffer, tax law specialist at the IRS Tax-Exempt and Government Entities Division, at the session.
Richter opened with a look at the remedial amendment period (RAP), the period during which a disqualifying plan provision can be retroactively corrected. Without the RAP, the voluntary correction program (VCP) is the only means for correcting disqualifying plan provisions.
IRS Revenue Procedure 2016-37 eliminates the five-year cycle for individually designed plans (IDPs) after 2016. Instead of five-year cycles, IDPs now have two new procedural RAPs:
1. All plan sponsors will be deemed to have filed for an extension of their tax return.
2. Interim (required) amendments are covered by a new procedural rule.
And since the five-year cycle is gone, there is no need for the Form 8905 — a change that at least Hochman does not lament, remarking “We’re not going to play taps for it.”
Another aspect of the new approach is that the IRS will issue a required amendments list (RAL) annually. Kieffer noted that an item will be on the RAL when:
- the law changes and the IRS determines no guidance is needed;
- the law changes and the IRS has issued guidance on the subject; and
- the IRS issues changed guidance (such as the final Section 415 regulations).
The RAL rules, which go into effect on Jan. 1, 2017, are “our indication to you that this change in the law requires a change in the plan document,” said Kieffer. He could not, however, comment on the specific timing of the issuance of the RAL.
Kieffer added that the IRS will issue an operational compliance list annually as well. But the IRS is “still working on what it will contain,” he said.
The cumulative list of changes will no longer be used for individually designed plans (IDPs). It will be used only for pre-approved plans and will be issued twice every six years.
If a plan has ever received a determination letter, it cannot request one via form 5300. There are some exceptions, however:
- Form 5307 or 5310;
- Cycle A restatements (deadline Jan. 31, 2017); and
- special circumstances that the IRS may identify.
There are a limited number of people available to review documents, Kieffer said, noting that the IRS “wants to use limited resources where necessary.”
Additionally, updates to the Employee Plans Compliance Resolution System
(EPCRS) are intended to reflect changes to the DL program. Kieffer said that the tendency with EPCRS has been to focus on what is allowable; however, now the emphasis is on eliminating the situations that require a determination letter.