IRS Updates Procedures for Determination Letter Requests

The IRS has updated the procedures for determination letter requests. The new procedures are outlined in Revenue Procedure (Rev. Proc.) 2020-04.

Rev. Proc. 2020-04 is a general update of Rev. Proc. 2019-04,  which sets forth:

• general information about the types of advice provided by the IRS Employee Plans Office of Rulings and Agreements;
• general procedures for letter ruling and determination letter requests; specific procedures for determination letter requests; and
• user fees associated with advice requested from Employee Plans Rulings and Agreements.

Rev. Proc. 2020-04 explains how the IRS provides advice to taxpayers on issues under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division, Employee Plans Rulings and Agreements Office (Employee Plans Rulings and Agreements). It also details the types of advice available to taxpayers, and the manner in which such advice is requested and provided.

Changes made to Revenue Procedure 2019-04

Substantive changes that Rev. Proc. 2020-04 makes to Rev. Proc. 2019-04 include the following.

Section 3.04 is revised to provide that a determination letter issued on the qualified status of a plan will include the status for exemption of any related trusts or custodial accounts under Internal Revenue Code Section 501(a). The exception is a determination letter submitted by an adopting employer of a pre-approved plan regarding the third (and subsequent) six-year remedial amendment cycles applicable to pre-approved plans, as described in section 12B.

Section 3.06(2) is revised to change “Appeals Office” to “Internal Revenue Service Office of Appeals (Independent Office of Appeals).” Corresponding name changes are made throughout Rev. Proc. 2020-04.

Section 6.02 is modified to provide a list of applicable documents that should be submitted to enable the Service to more efficiently process determination letter request applications.

Section 8.02 is modified to add a category of determination requests submitted by an adopting employer (or a controlling member of a multiple employer plan, if applicable) of a pre-approved plan regarding the third (and subsequent) remedial amendment cycles under Rev. Proc. 2017-4.

Section 8.02 also is modified to reflect that the IRS will accept determination letter applications for certain statutory hybrid plans from Sept. 1, 2019, to Aug. 31, 2020, and certain individually designed merged plans on an ongoing basis.

Section 9.07 is revised to delete a sentence providing that a favorable determination letter does not constitute a determination with respect to the federal tax consequences of a lump sum risk transferring program, since Notice 2019-18 provides that the IRS will no longer include a caveat in a determination letter expressing no opinion regarding the tax consequences of such lump sum windows.

Section 10.06(2) is added, and Section 11.01 is revised, to provide that the IRS will accept determination letter applications for certain individually designed merged plans on an ongoing basis, in accordance with Rev. Proc. 2019-20. Section 11.01 is also revised to provide that the IRS will accept determination letter applications for certain statutory hybrid plans from Sept. 1, 2019, to Aug. 31, 2020.

Section 12 is reorganized into section 12A and section 12B, setting forth procedures for an adopting employer of a pre-approved plan (or the controlling member, in the case of a multiple employer plan) to submit an application for a determination letter. Section 12A sets forth application procedures for defined benefit master and prototype and volume submitter pre-approved plans regarding the second six-year remedial amendment cycle. Section 12B is added to provide application procedures for determination letters regarding the third (and subsequent) six-year remedial amendment cycles.

Section 13 is revised to provide procedures for an adopting employer of a pre-approved plan that is eligible to submit on Form 5307 to request a determination letter with respect to the second and the third six-year remedial amendment cycles.

Sections 30.07 and 31.03 are updated to reflect that user fees under the Voluntary Correction Program (VCP) of the  IRS Employee Plans Compliance Resolution System must be paid using http://www.pay.gov and that the IRS no longer accepts paper VCP submissions.

Section 31 is revised to update mailing addresses.

Appendix A is modified to delete categories that applied to pre-approved plan sponsors and practitioners filing on-cycle during the second six-year remedial amendment cycle, since that on-cycle period has expired.

Revenue Procedure Available

Rev. Proc. 2020-04 begins at page 148 of the Internal Revenue Bulletin of Jan. 2, 2020.