In a comment letter to the Internal Revenue Service (IRS) about its proposal to eliminate its determination letter program for individually designed plans, the ERISA Industry Committee (ERIC) asked the IRS to reconsider.
ERIC argues that most large employers do not use predetermined or “off the shelf” retirement plans, instead choosing to individually design plans that best benefit their workforces. “The IRS’s proposal to eliminate determination letters for these types of plans would disproportionately and unfairly affect large employers and their retirement plans. The inability to prove that a retirement plan is in compliance with current tax laws and plan provisions would create chaos,” ERIC said.
Annette Guarisco Fildes, president and CEO of ERIC, wrote, “Large employers routinely make changes to their retirement plans to conform to new laws or regulations, to reflect a merger, acquisition or spin-off, or to implement new and innovative changes that are in the participants’ best interest. Limiting the ability of large employers to receive the IRS’s ‘seal of approval’ regarding tax qualification status is potentially devastating, because it would create uncertainty for the plans and plan participants, as well as undermine the ability of companies to execute mergers, acquisitions and spin-offs.”
ERIC recommends that the IRS allow certain large plans to continue to apply for a favorable determination letter, similar to the approach currently in effect, but limiting the burden on the IRS resources by substantially reducing the pool of qualified applicants. “By limiting the determination letter approval program to extremely large employers, those with 15,000 or more participants, the IRS will not only ensure the smooth administration of large employer plans, but will also guarantee that it uses its limited resources efficiently,” said Guarisco Fildes.
ERIC’s comment letter can be read here.