IRS expands qualified plan determination letter program

Tax Hot Topics newsletterThe IRS recently issued Rev. Proc. 2019-20, which expands the IRS’s retirement plan determination letter program to allow plan sponsors to submit determination letter applications for certain individually designed cash balance plans (and other hybrid plans) and merged plans.

Prior to Rev. Proc. 2019-20, the IRS issued Rev. Proc. 2016-37 to modify the IRS’s prior determination letter program to eliminate, as of Jan. 1, 2017, the five-year remedial amendment cycle for individually designed plans. Under Rev. Proc. 2016-37, individually designed plan sponsors generally were permitted to submit determination letter applications only for initial plan qualification and for qualification upon termination.

Rev. Proc. 2019-20 provides that the IRS will now accept determination letter applications for statutory hybrid plans (including cash balance plans) for a 12-month period beginning on Sept. 1, 2019, and ending Aug. 31, 2020, as well as certain individually designed merged plans on an ongoing basis. For this purpose, a merged plan is defined as a plan that results from the merger or consolidation of two or more plans into a single individually designed plan in connection with a corporate merger, acquisition or other similar business transaction among unrelated entities that each maintained its own plan or plans prior to the plan merger.

Plan sponsors may still submit determination letter applications for initial plan qualification and for qualification upon plan termination. The guidance also provides for a limited extension of the remedial amendment period detailed in Section 401(b) and Rev. Proc. 2016-37 under specified circumstances, and for special sanction structures that apply to certain plan document failures discovered by the IRS during the review of a plan submitted for a determination letter pursuant to Rev. Proc. 2019-20.

Under Rev. Proc. 2019-20, the IRS’s review of individually designed statutory hybrid plans that are submitted for a determination letter will be based on the 2017 Required Amendments List provided in Notice 2017-72. Reviews will also take into account pre-2016 Required Amendments Lists and Cumulative Lists. IRS reviews of merged plans will be based on the Required Amendments List that was issued during the second full calendar year preceding the submission of the determination letter application. The review will also take into account all previously issued Required Amendments Lists and Cumulative Lists.

The IRS will continue to consider comments on additional situations in which the submission of a determination letter application may be appropriate. Rev. Proc. 2019-20 amplifies and modifies Rev. Proc. 2016-37 and is effective Sept. 1, 2019.

Jeff Martin
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
T +1 202 861 4107

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