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Contributed by Kimberly Flett and Jenny Ludwig

Effective January 1, 2017, plan amendment requirements as well as the determination letter program for individually designed plans will undergo some significant changes. The Internal Revenue Service (IRS) provided much-anticipated guidance on these changes with the release of Revenue Procedure (Rev. Proc.) 2016-37 in June 2016.

Under the new system, the accustomed 5-year remedial amendment cycle for individually designed plans (Rev. Proc. 2007-44) will cease to exist once Cycle A concludes under the current model on January 31, 2017. Going forward under the new system, a Required Amendment List (RA List) will be published on an annual basis, which will contain all the necessary regulatory amendments a plan must adopt in order to maintain its qualified status. All amendments on the list must be adopted by the end of the second calendar year following the date the list is published (the list is expected to be made available shortly after October 1st of each year).

With Rev. Proc. 2016-37, individually designed plans may only apply for a determination letter for initial plan qualification and plan termination, as detailed further below:

  • Initial Qualification – If a plan has never received a favorable determination letter then an application can be submitted in association with Form 5300.
  • Plan Termination – An application for a favorable determination letter may be submitted with Form 5310 when a plan is being terminated. The filing must be received no later than the later of one year of the effective date of the plan termination or one year from the date on which the action terminating the plan is taken. The application to the IRS must not be filed any later than 12 months after the distribution of all plan assets.

The IRS is still considering whether applications will be accepted for other reasons (in particular, future law changes or plans that may not be able to adopt pre-approved documents). While Rev. Proc. 2016-37 brings changes to the requirement that a plan operate under the appropriate compliance standards, any plan-specific operational plan amendments are still required by the end of the plan year the amendment is put into effect. An Operational Compliance List identifying compliance issues will be issued by the IRS to assist sponsors.

Additional guidance in Rev. Proc. 2016-51 modifies the Employee Plans Compliance Resolution System (EPCRS) correction program for these changes to the determination letter program. Opinion and advisory letter for pre-approved plans will still maintain the current six-year cycle.

This article originally appeared in BDO USA, LLP’s “EBP Commentator” blog (Fall 2016). Copyright © 2016 BDO USA, LLP. All rights reserved.

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