IRS determination letters after 2016; what are the options?
(Posted on July 28, 2015 by )


Internal Revenue ServiceAs previously discussed, faced with substantial budget cuts, the Internal Revenue Service (“IRS”) has announced that it is eliminating most determination letters (letters concerning the qualified status of retirement plans, which gives rise to numerous tax benefits), effective December 31, 2016. (Announcement 2015-19.) In the past, individually designed retirement plans were able to obtain a determination letter once every five years, during a cycle provided by the IRS. The most likely new regime will involve making determination letters on individually designed plans available only when a plan is first adopted, or when it is terminated. Between those dates, the only way to ensure qualification other than filing a declaratory judgment action with the Tax Court is likely to be to adopt annual updates put out by the IRS that will include model wording for amendments.

For entities that maintain a retirement plan, the new regime may mean that they discover qualification issues only on audit, when it is too late to fix the issue. And the potential penalties on audit (for the employer, the trust under the plan, and the employees) are, as set forth in a prior article, huge. What steps should a plan administrator take to ensure the qualification of a plan after that point? Read more.

Governmental Plan Determination Letters: Last Chance?
(Posted on July 21, 2015 by )


irsOn July 21, 2015, the Internal Revenue Service (“IRS”) issued Announcement 2015-19, in which it announced that it would be making substantial changes to the determination letter program intended to allow retirement plan sponsors to ensure that their plans are qualified (eligible for tax benefits). This announcement will affect all retirement plans intended to be qualified, but will create particular issues for plans maintained by governmental employers (“governmental plans”). Read more.

New Mandatory Rollover Rules Will Apply to Government, Church Plans
(Posted on December 29, 2004 by )


Section 657 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) amended Internal Revenue Code (“Code”) section 401(a)(31) to provide that a distribution from an “eligible plan” of more than $1,000 had to be directly rolled over to an individual retirement account unless a participant affirmatively elected another form of distribution (e.g., to receive the amount in cash). The term “eligible plan” was defined as follows:

a plan which provides that any nonforfeitable accrued benefit for which the present value (as determined under section 411(a)(11)) does not exceed $5,000 shall be immediately distributed to the participant.

The effective date of the provision was tied to the issuance of regulations by the Department of Labor. Thus, the question arose as to whether a plan that was not subject to either Department of Labor regulations or section 411 (a governmental plan or a nonelecting church plan) would be subject to the EGTRRA change. Read more