Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
By Kristen Ricaurte Knebel
Oct. 2 — The IRS's changes to its determination letter program that will begin in 2017 are getting bad reviews from commenters, who think the shift away from providing letters to amended, individually designed plans is a mistake.
“The sudden and unanticipated discontinuance of that program would represent a sea change in the regulation of tax-qualified retirement plans, with unpredictable results and a possible (further) decline in plan sponsorship,” the ERISA Industry Committee said in its Oct. 1 comment letter.
The IRS officially announced the forthcoming change in its determination letter program in Announcement 2015-19, citing a need to focus limited resources (140 PBD, 7/22/15). The change to the determination letter process means that after Jan. 1, 2017, sponsors of individually designed plans will only be permitted to submit applications for determination letters for initial plan qualification and upon the plan's termination, as well as in certain other circumstances.
Large employers frequently make changes in their retirement plans in an effort to comply with new regulations and laws, or to reflect a merger or acquisition, ERIC said in the letter. If large plans aren't allowed to obtain a favorable determination letter for their plan, it “would create great uncertainty in plan administration,” the group said, leading to an inability to demonstrate compliance with the law.
In addition, third parties often use determination letters to verify a plan's qualification and if such a document isn't available, they may require much more to confirm that a retirement plan had qualified status, ERIC said.
The group proposed that “certain large plans” retain the ability to apply for a favorable determination letter in a similar manner to the current remedial amendment cycle, but placing less stress on the IRS's resources.
“Specifically, we recommend that the IRS limit the current determination letter program for individually designed plans with assets in excess of $500 million OR with 15,000 or more participants,” ERIC said.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)