Under the IRS’s determination letter program, all individually designed plans (i.e., those that are not maintained on either a prototype or volume submitter document) are on a five-year cycle for renewing their determination letters. Plans in “Cycle C” may now file their determination letter applications. The deadline for filing these applications is January 31, 2009.
Two main categories of plans fall within Cycle C. The first consists of all individually designed plans sponsored by employers whose employer identification number ends with either “3” or “8.” The other category consists of all such plans sponsored by governmental employers.
Though this filing deadline may seem a long way off, keep in mind that several steps must be completed in order to file. In addition to the actual application, a determination letter filing now requires a complete restatement of the plan document. At a minimum, all ammendments adopted since the prior restatement of the plan must be incorporated into the plan document, which must then be formally approved and executed on behalf of the sponsor.
In addition, this restatement must reflect all of the relevant changes listed on the 2007 “List of Cumulative Changes,” as issued by the IRS in late 2007. It will take some time to review the plan document against this list, and then to make the necessary revisions. Moreover, the IRS has repeatedly advised sponsors that plans filing their applications early in a cycle will receive a more prompt response.
If a Cycle C plan fails to file a determination letter application by the January 31st deadline, the plan’s existing determination letter will become obsolete. This could be a problem if the IRS were to audit the plan and determine that any of its provisions fail to comply with the requirements of the Tax Code. Although the sponsor of a Cycle C plan could still file a determination letter application after this deadline, such an application would be treated as an “offcycle” filing. Such filings receive the lowest priority from the IRS –and might never even be considered.
Given the importance of meeting this filing deadline –as well as the effort involved in reviewing and restating the plan document –sponsors of Cycle C plans would be well-advised to initiate this process without delay.