A client alert written by Monica A. Novak, partner at Drinker Biddle & Reath, and K. Elise Norcini, an associate with the firm, goes into detail about the IRS’ recent expansion of its determination letter program.
In Revenue Procedure 2016-37, the agency closed the determination letter program except for initial plan qualification and for qualification upon plan termination. The IRS later issued Revenue Procedure 2019-4 to provide an “other circumstances” category for which determination letters can be requested. Though the category was added, the agency did not specify what “other circumstances” for which it applies.
In Revenue Procedure 2019-20, the IRS provides for a limited expansion of the determination letter program with respect to individually designed plans. Under this limited expansion, the IRS says it will accept determination letter applications for:
- individually designed statutory hybrid plans during a 12-month period beginning September 1, 2019, and
- individually designed merged plans (as defined in section 5.01(2) of the revenue procedure) on an ongoing basis.
The advisory recommends that sponsors of statutory hybrid plans consult with their benefits counsel to further discuss the impact of the expansion and the pros and cons of submitting a determination letter application for a statutory hybrid plan during the limited window. In addition, entities that have recently completed a corporate transaction, or that are in the process of completing a corporate transaction, should review with their benefits counsel whether there will be an opportunity to request a determination letter on behalf of any merged plan.
It also suggests that a plan sponsor that decides to submit a determination letter application for a statutory hybrid plan may want to consider submitting the application at the beginning of the 12-month window, as doing so may reduce the wait time for the IRS to complete its review.
Novak and Norcini note that the Revenue Procedure 2019-20 states that the IRS is still considering comments received in response to Notice 2018-24 regarding ways to expand the determination letter program for individually designed plans. Plan sponsors should consult with their benefits counsel periodically for updates on whether the IRS has further expanded the scope of the determination letter program.