IRS Asks Plans to Walk the Line on Determinations Shift

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By Kristen Ricaurte Knebel

Feb. 26 — The IRS may have stepped into the retirement plan community's ring of fire when it announced changes to the determination letter program last year, but the agency wants to make the transition as smooth as possible for plans.

The Internal Revenue Service decided to make changes to its determination letter program after its Tax Exempt and Government Entities Division looked at determinations and found that 63 percent of the workload during a 321-day cycle was for amended plans, and mere hours were being spent on the determinations, Victoria A. Judson, associate chief counsel with IRS’s TE/GE division, said Feb. 26.

“We know you can’t do anything useful or substantive in three hours,” Judson said.

With the IRS in financially “dire straits,” the agency made the choice to cut back on the determination letters it offers, Judson said to a conference of benefits practitioners in Baltimore.

“The budget keeps getting cut year after year. We’re asked by Congress to do more things and more programs. Faced with that reality, people did make a judgment,” she said.

Judson said ideally, the agency would have had more time to communicate with the retirement plan community and come up with alternative solutions. But instead of lamenting the changes, practitioners should accept them and give as much constructive feedback as possible, she said.

The IRS called for feedback in last year’s Announcement 2015-19, which formally announced the changes to the determination letter program . Beginning in 2017, the program generally will only accept determination letter applications from sponsors of individually designed plans for initial plan qualification and upon the plan's termination.

Judson told the room of practitioners, who were expressing concerns over the determination letter changes, that the IRS is more than happy to work with retirement plans on this shift. “There’s a lot you can do to help build a system that is better than it would be otherwise,” she said.

Seeking Feedback on Helpful Tools

The IRS would like to hear about what kind of tools it can offer to retirement plans in place of a determination letter and what it can do so that plans can perform the same tasks without going in to the IRS for a determination letter's “stamp of approval,” Judson said.

Some have asked the IRS if plans could come in for a private letter ruling in lieu of a determination letter, Judson said. While she didn't completely nix that idea, she said the IRS doesn't want a PLR to become a “backdoor to a determination.”

Also speaking during the session, Rhonda G. Migdail, of counsel at Keightley & Ashner LLP in Washington, likened the determination letter program to a carrot leading a horse.

“Think about what would be a good carrot in the next generation of things,” she said.

Judson and Migdail spoke during a session of the 2016 Annual EP/EO Meeting, a joint meeting of several groups around the country that serve as liaisons between practitioners and the Internal Revenue Service on employee benefit plan issues.

To contact the reporter on this story: Kristen Ricaurte Knebel in Baltimore at

To contact the editor responsible for this story: Jo-el J. Meyer at