The IRS announced on July 21 that, generally effective for 2017 and future years, it will no longer accept determination letter (DL) requests under the current staggered five-year remedial amendment cycles for individually designed qualified plans.(Announcement 2015-19, issued July 21, 2015). Although the five-year cycle filing process instituted by the IRS in 2007 pursuant to Rev. Proc. 2007-44 seemed to be working reasonably well for plan sponsors, the IRS has determined that in order to “more efficiently direct its limited resources,” IRS involvement in the DL process must be materially reduced. Under the approach envisioned in the announcement, DL requests would be acted on by the IRS only for new plans and plan terminations.
This IRS policy change, although significant, is not unexpected, because IRS representatives had recently discussed fairly frequently at conferences what the IRS views as a resource shortage issue regarding plan reviewers’ availability and skill-sets. The approach taken in the announcement leaves plan sponsors in uncertain territory going forward, with the likely outcome being (a) greater reliance on law firm or other professional firm opinions or (b) a shift to prototype, volume submitter, or other “pre-approved” plan documents.