IRS Expands Retirement Plan Determination Letter Program

The IRS has decided to expand a program that allows retirement plans to receive determination letters.  Revenue Procedure 2019-20 details the expansion in two specific areas for which retirement plans sponsors can request determination letters, including designed statutory hybrid plans (e.g., cash balance and pension equity plans) and certain individually designed merged plans. 

For merged plans, the newly expanded program will be available on September 1, 2019, and will continue on an ongoing basis.  Eligibility for the determination letter is based on the following requirements: 

  • The merged plan must be a combination of two or more qualified retirement plans maintained by previously unrelated entities.
  • The planned merger must occur no later than the last day of the first plan year that begins after the effective date of the corporate merger, acquisition or other similar business transaction; and
  • A determination letter application for the merged plan must be submitted by the last day of the first plan year that begins after the effective date of the planned merger.

For statutory hybrid plans, the program will be available during the 12-month period beginning on September 1, 2019, and ending on August 31, 2020. 

Obtaining determination letters are beneficial to plan sponsors as assessed penalties or sanctions for identified plan failures for noncompliance with regulations that are discovered during the determination letter review process can generally be rectified with no or reduced penalties than if the failures are identified during an IRS review process. 

The IRS Revenue Procedure 2019-20 is available here.