Firm Announces its Plan Compliance Checkup for Employers
The IRS recently revised its Employee Plans determination letter program for individually designed qualified plans. With this revision, the IRS is no longer providing determination letters for the mandatory periodic amendments that will continue to be required by the IRS for changes in the law. This significant change to the determination letter program is causing concern with some employers.
To help assure employers that their plan remains in compliance with the qualification requirements of the Internal Revenue Code, the Employee Benefits Practice Group at Friday, Eldredge & Clark, LLP is announcing its Plan Compliance Checkup.
The Plan Compliance Checkup will assist employers with ensuring that certain benefits are maintained as well as include a documented opinion for the employers to provide to the service providers of the plan (e.g., auditors, third party administrators, investment managers, etc.). These benefits include:
- Employers continuing to take advantage of the tax deductible employer contributions;
- Participants continuing to make pre-tax contributions;
- Participants enjoying the tax deferment on the contributions to and earnings in the plan’s trust; and
- Participants maintaining the ability to rollover the funds in these plans without being subject to taxation.
The Plan Compliance Checkup will also review the operational changes to the plan that are required by the mandatory amendments in the annual IRS Required Amendments List. This is important because the sponsoring employers must operate their plans in compliance with any changes in qualification requirements from the effective date of any required amendment.
Change in Employee Plans Determination Letter
As of January 1, 2017, the IRS will generally only provide a determination letter for individually designed plans if the plan has never received a determination letter or the plan is terminating.
However, these individually designed plans are still required to be amended for the various changes in the law that are listed in the annual Required Amendments List published by the IRS. The Required Amendments List will list all of the amendments for which an individually designed plan must be amended to retain its qualified status.
Sunita Lough, the Commissioner of the Tax Exempt and Government Entities Division of the IRS, which oversees the qualified plan division, stated that employers would be responsible for determining if their plans continue to meet the qualification requirements of the Internal Revenue Code. Lough compared this new determination process to the current process whereby the issuer of municipal bonds receives an opinion from an attorney that specializes in municipal bonds opining that the bonds meets all the legal requirements under the Code.
The Employee Benefits Practice Group at Friday, Eldredge, & Clark has extensive experience with all types of qualified plans. The group is led by Joseph B. Hurst, Jr. and includes David M. Graf, Alexandra A. Ifrah, A. Wyckliff Nisbet, Joshua M. Osborne, Brian C. Smith, and Jeremiah D. Wood. If you would like to discuss the Plan Compliance Checkup, please contact one of these attorneys.
This news alert is created by the attorneys in the Employee Benefits Practice Group at Friday, Eldredge & Clark, LLP. The information provided is not a substitute for legal advice and should be considered for general guidance only. Please contact one of our attorneys for specific legal advice regarding this matter.