Rounding out the final year of its first five-year cycle, the IRS has now opened its determination letter program for individually designed retirement plans to those plans falling within “Cycle E.” These are plans sponsored by employers whose employer identification number ends with either “5” or “0.”
The deadline for Cycle E plans to submit an application for an updated determination letter is January 31, 2011. Governmental plans that chose to wait until Cycle E (rather than filing in Cycle C, where they normally fall) must also file by this deadline. Any existing determination letter will become obsolete on this date, so the failure to file by this deadline would leave the plan with no determination letter whatsoever.
Before submitting a determination letter application, a number of other steps must first be completed. These include the following:
- The plan must be reviewed for changes required by the IRS’s “2009 Cumulative List of Changes,” which was issued in December of 2009.
- Any required changes must be incorporated into a complete restatement of the plan document, along with any changes made by amendments to the prior restatement and any additional plan-design changes.
- Finally, the application must be prepared and participants must be given advance notice of its filing.
In order to accomplish all of these steps by the deadline of January 31, 2011, work should begin now. This is particularly true for those sponsors who wish to receive a favorable determination letter without an extended delay. The IRS has made clear that applications filed early within a filing cycle will be considered before any later-filed applications.
Although these rules apply only to individually designed plans, adopters of prototype and volume submitter plans face an even tighter deadline. All such defined contribution plans must be restated to reflect changes required by the Economic Growth and Tax Relief Reconciliation Act (“EGTRRA”) by April 30, 2010. If such an EGTRRA restatement has not yet been adopted, any employer relying on this type of plan should contact the sponsor of their prototype or volume submitter document to initiate this process without delay.