IRS Overhauls Employee Plan Determination Letters

The Internal Revenue Service has made several important changes to its determination letter program for employee retirement plans.

In Announcement 2011-82, the IRS said Friday that the changes, which will take effect in 2012, would eliminate features of the determination letter program that are of limited utility to benefit plan sponsors in comparison with the burdens they impose. The changes also are expected to improve the IRS’s efficiency by reducing the time it takes to process determination letter applications. Under these modified procedures, many employers will no longer need to apply for determination letters.

The changes to the determination letter filing procedures described in the new IRS announcement will be reflected in Revenue Procedure 2012-6, which will set forth the procedures for issuing determination letters on the qualified status of employee plans.

The changes to the determination letter filing procedures eliminate elective demonstrations regarding coverage and nondiscrimination requirements and provide that only employers that have made limited modifications to a pre-approved volume submitter plan may file Form 5307, "Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans." 

In conjunction with that last change, the IRS said it expects to revise the language of opinion and advisory letters to clarify the circumstances in which these letters are equivalent to a determination letter.