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Got the Determination Letter Program Blues?

Having heightened plan sponsor worries with changes to its determination letter program, the Internal Revenue Service now says it is looking for ways to make things easier.

In Announcement 2016-32 the IRS and Treasury Department put out a call for comments on how they can make it easier for sponsors to satisfy qualified plan document requirements.

The IRS notes that it has been suggested that expanding the use of incorporation by reference could help plan sponsors avoid inadvertent errors in plan documents. Noting that a list of Internal Revenue Code requirements that the IRS currently permits to be incorporated by reference for purposes of meeting the qualification requirements is provided here, the IRS is requesting comments on any additional qualification requirements plan sponsors believe should be permitted to incorporate by reference in their retirement plans and the areas in which guidance relating to incorporation by reference would provide the greatest assistance.

The IRS also notes that plan sponsors have raised concerns about being required to include certain plan provisions or amendments in situations in which the provisions or amendments are not applicable, or not yet applicable, to their plans. The IRS is asking for comments on whether certain plan provisions or amendments should be required to be included in a plan only if the underlying qualification requirements are applicable to that plan (for example, because of the type of plan, employer, or benefits offered).

The IRS says it (and the Treasury Department) “understand that some plan sponsors are considering a transition from sponsoring an individually designed plan to using a pre-approved plan document,” a plan document pre-approved by the IRS as a master or prototype plan or a volume submitter plan, in light of the changes to the determination letter program for individually designed plans. The IRS is seeking comments on any impediments to that process, and how Treasury and the IRS could reduce or eliminate those impediments. The announcement notes that comments are welcome on difficulties encountered in the process of conversion, “as well as on aspects of the pre-approved plan program that may cause the program to be unattractive to a plan sponsor.”

Finally, the IRS is requesting comments “on any additional guidance or other actions by Treasury and the IRS that would facilitate compliance with qualified plan document requirements, particularly in light of the changes to the determination letter program.”

Comments may be submitted in writing on or before Dec. 15, 2016.

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