IRS to Curtail Determination Letter Program for Qualified Retirement Plans

July 21, 2015

On July 21, 2015, the Internal Revenue Service announced that, beginning January 1, 2017, it will no longer accept determination letter applications requesting a determination with respect to the tax-qualified status of retirement plans except in connection with the initial adoption of the plan, the termination of the plan, and in certain other circumstances to be identified.  The IRS is limiting the determination letter program in order to more "efficiently direct its limited resources."  This change will increase the risk of maintaining an individually designed tax-qualified plan and will push more employers to adopt preapproved plans made available by service providers (the opinion letter program for those plans is not changing).


An IRS determination letter generally protects a plan sponsor from the risk that the plan will be disqualified (with highly adverse tax consequences) due to the drafting of the plan (of course, failure to operate the plan in accordance with its terms could still lead to disqualification).  Since the IRS issued Notice 2007-44, five staggered annual "cycles" (A through E) have applied for determination letter filings, with the filing date based on the last digit of the plan sponsor’s employer identification number.  In addition, "off-cycle" filings have been permitted in certain circumstances.

Effect of New Guidance

Announcement 2015-19 includes the following key changes to the determination letter program:

  • The 5-year staggered application cycles will be eliminated effective as of January 1, 2017.  "Cycle E" filers (generally those with an employer identification number ending in 5 or 0) may file applications by January 31, 2016 under current rules, and the last annual filing cycle will be for "Cycle A" filers (generally those with an employer identification number ending in 1 or 6)  beginning February 1, 2016 and ending January 31, 2017.
  • Off-cycle filings are no longer accepted, effective immediately.
  • Going forward, determination letter applications will be accepted only for initial plan qualification, plan termination, and "in certain other limited circumstances that will be determined by Treasury and the IRS." 

The new program raises many issues and risks for employers, and we do expect that the IRS will receive many comments and suggestions.  Among other things, we expect that the IRS will consider providing more model plan amendments, allowing more voluntary plan document corrections under the Employee Plans Compliance Resolution System, and simplifying plan language requirements (e.g., allowing more incorporation by reference of Internal Revenue Code sections that currently must be spelled out in great detail in plan documents).  

Gibson, Dunn & Crutcher LLP

Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding these issues.  Please contact the Gibson Dunn lawyer with whom you usually work, or any of the following:

Stephen W. Fackler – Palo Alto/New York (650-849-5385/212-351-2392, [email protected])
Michael J. Collins – Washington, D.C. (202-887-3551, [email protected])
Sean C. Feller – Los Angeles (310-551-8746, [email protected])
Krista Hanvey – Dallas (214-698-3425, [email protected])

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