Compliance News | May 7, 2019

IRS Expands Determination Letter Program and Simplifies Certain Plan Corrections

On May 2, 2019, the Internal Revenue Service (IRS) announced in Revenue Procedure 2019-20 (Rev. Proc. 2019-20) the expansion of its determination letter program for statutory hybrid plans and plans merged after a corporate merger, acquisition or other similar business transaction among unrelated entities. Rev. Proc. 2019-20 also provides special reduced sanctions for those plans for mistakes found in the determination letter process.

Background

The IRS previously eliminated its cycle-based determination letter program regarding pension plan tax qualification status.* Effective in early 2017, the IRS limited its review of individually-designed plans to those requesting an initial plan qualification or for qualification upon plan termination. The Department of the Treasury and the IRS stated in guidance they would consider each year whether to accept determination letter applications for individually-designed plans in other circumstances.

The Expanded Determination Letter Program

Under the expanded program, plan sponsors of statutory hybrid plans may submit determination letter applications for a 12-month period beginning September 1, 2019.

Additionally, sponsors of plans merged pursuant to a corporate transaction may submit determination letter applications on an ongoing basis, beginning September 1, 2019, subject to certain restrictions. At this time, it appears that the plan resulting from the merger of two multiemployer plans would not be eligible to apply for a determination letter under this Rev. Proc.

Simplified Plan Corrections

Rev. Proc. 2019-20 also reduces the sanctions for plan administrators of statutory hybrid and plans merged pursuant to a corporate acquisition for plan document failures the IRS discovers during its review of the plan’s determination letter application. It does so by providing a limited extension of the remedial amendment period and penalties limited to the fee the plan would have paid under the IRS’s Voluntary Correction Program.

 

* See our July 7, 2016 hot topic.

Questions about this topic?

We can help. 

Speak With Us

See more insights

G Pharmacy 1070960270 Web

Medicare Part D 2021 Numbers: What You Need to Know

Medicare Part D 2021 drug benefit program changes may affect group health plans that cover retirees.
Young Lady Riding A Bike To Work

Independent Contractor or Employee? DOL Proposed Rule

Find out the implications of the proposed rule for your workers.
Young Lady Reading A Letter At Home

Guidance on ACA Reporting for 2020

Learn more about the ACA reporting requirements and how they affect your plans.

This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

Don't miss out. Join 16,000 others who already get the latest insights from Segal.