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Benefits Notes Post

IRS and Treasury Department Seek Input on How Plan Sponsors Can Avoid Plan Document Problems

By Abigail Clark | September 21, 2016 in Fiduciary Guidance, Retirement Plans

On September 16, 2016, the IRS and the Department of the Treasury requested public comment on ways the IRS and Treasury “can improve compliance…by making it easier for plan sponsors to satisfy requirements for qualified plan documents” in the wake of the determination letter program changes (Announcement 2016-32). In June, the Internal Revenue Service announced significant reductions to the determination letter program including the end of the five-year remedial amendment cycle (Revenue Procedure 2016-37). Generally effective January 1, 2017, a plan sponsor may only request a determination letter if (1) the plan has never before received a letter, (2) the plan is terminating, or (3) the IRS makes a special exception. Though the IRS is still accepting Cycle A plan determination letter applications until the January 31, 2017 deadline for that cycle, as more time passes plan sponsors may begin feeling uneasy in the absence of IRS blessing of their plan document.

Recognizing the impact the determination letter program reduction and plan sponsors’ need for certainty, the Treasury and the IRS now specifically request comments on the following four topics:

(1)   Incorporation by reference. A limited set of Internal Revenue Code plan document requirements may be satisfied by incorporating the applicable Code requirement by reference. Should the list be expanded? If so, how and why?

(2)   Circumstances under which plan provisions may not be required. If a required provision isn’t currently applicable to the plan due to the type of benefits offered, etc., should the provision still be required? What if the provision becomes applicable at a later date?

(3)   Conversion to pre-approved plans. What prevents plan sponsors from using a pre-approved plan document (master or prototype plan or volume submitter plan)? How can the Treasury and IRS make conversion to a pre-approved plan a more attractive option?

(4)   Additional ways to facilitate compliance. What other guidance would assist with qualified plan document requirements?

Parties must submit comments in writing before the deadline of December 15, 2016.

Mail comments to the Internal Revenue Service, CC:PA:LPD:PR (Announcement 2016-32), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044. Alternatively, email comments to notice.comments@irscounsel.treas.gov (including “Announcement 2016-32” in the subject line). In preparing their comments, parties should keep in mind that submissions are available for public inspection.

The announcement also noted that Treasury and the IRS are working on an update for the IRS’s voluntary compliance program, the Employee Plans Compliance Resolution System contained in Revenue Procedure 2013-12, as the changes to the determination letter program also effect certain EPCRS corrections.