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Final Opportunity for Certain Individually Designed Retirement Plans to Obtain Favorable IRS Determination Letter

By: Melody A. Simpson, Lynn S. Clarke, Jill E. Hall, Lenna R. Chambers, Emily R. Lambright
Employee Benefits Alert
November 12, 2015

Employee Benefits Alert

For any employer whose Federal Employee Identification Number (EIN) ends in 5 or 0, and who maintains an individually designed qualified retirement plan for its employees (e.g., pension plan or 401(k) plan), you have one last opportunity to file for and receive a favorable determination letter from the Internal Revenue Service. This opportunity expires on January 31, 2016.

The IRS has announced that, after January 1, 2017, it will no longer accept applications for favorable determination letters from individually designed plans, except on creation and termination. A favorable determination letter provides significant protection to the plan from disqualification, and also makes available certain voluntary correction procedures that might not be available in the absence of a favorable letter. This means that employers with EINs ending in 5 or 0 (known as Cycle E filers) have their last opportunity to file by January 31, 2016. In order to file for an updated letter, the employer must restate its plan document, incorporating all amendments adopted since the last restatement, and file the restated plan document with related forms and a filing fee no later than January 31, 2016.

Employers with EINs ending in 1 or 6 who sponsor individually designed plans (known as Cycle A filers) will have their last filing opportunity between February 1, 2016 and January 31, 2017. All other employers will no longer be able to seek determination letters for their existing individually designed plans, except upon termination.

In light of this significant reduction in the IRS's determination letter procedures, employers with individually designed plans may wish to consider whether to convert their plans to a prototype or volume submitter plan document. Such plans will continue to be able to apply for favorable IRS letters, on which adopting employers may then rely. 

The Bowles Rice Benefits team is available to assist clients with their Cycle E filing, or with evaluating whether a prototype or volume submitter plan document is right for their plan.