October 22, 2018 – Internal Revenue Service (IRS) Revenue Procedure 2016-37, which was effective January 1, 2017, makes significant changes to the IRS’s determination letter program. Most importantly, Rev. Proc. 2016-37 eliminates the ability for individually designed benefit plans to obtain periodic determination letters from the IRS. Plan administrators of individually-designed plans are now entirely responsible for ensuring that plan documents are updated to remain in compliance with revisions to the Internal Revenue Code (the Code), with no means for receiving periodic assurance of plans’ tax-exempt status from the IRS. In the event of revisions to the Code affecting employee benefit plans, the risk that individually designed plans may not be designed and operated in accordance with applicable sections of the Code is increased. To assist sponsors of individually-designed plans to ensure that all required amendments to plan documents are made, the IRS will publish a required amendments list on an annual basis (see https://www.irs.gov/retirement-plans/required-amendments-list). It is important that administrators and fiduciaries of individually-designed plans monitor this list, as the IRS regularly issues notices requiring amendments to certain benefit plan documents (for example, in 2017 the IRS issued guidance related to amendments to certain defined benefit and collectively-bargained plans).

The determination letter program remains available for pre-approved plans submitted for approval by providers or mass submitters. One way sponsors of individually designed plans can mitigate the risk of noncompliance with the Code is to switch to using a pre-approved plan document. In an effort to encourage plans to use pre-approved plan documents, the IRS issued Revenue Procedure 2017-41 in June 2017. This Revenue Procedure, which had an effective date of October 2017, increases the types of plans eligible for pre-approved status and allows greater flexibility in the design of pre-approved plans.

This article is an excerpt from Dopkins Employee Benefits Newsletter.  To read the complete content, please click here.

For more information, please contact Brendan Brady at bbrady@dopkins.com.

About the Author

Brendan P. Brady CPA, CVA

Brendan is responsible for managing client engagements, team scheduling, training and development. He leads general and specialized audits as well as internal control projects, and is one of the leaders of the Firm’s employee benefit plan audit practice. He uses his experience to offer management advice and suggestions for improving operational efficiency by obtaining a thorough understanding of a business, not just from the controller’s standpoint, but from management’s and the operational side.