Compliance January 5, 2016

Guidance Issued About IRS Determination Letter Program

The IRS is making changes to the program in anticipation of its elimination.
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In anticipation of the elimination, effective January 1, 2017, of the five-year remedial amendment cycle system for individually designed plans under the Internal Revenue Service (IRS) Employee Plans determination letter program, the IRS issued a notice of changes.

The changes described in Notice 2016-03 will be reflected in an update to Revenue Procedure 2007-44, but the agency said employers may rely on the notice until the update is issued.

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According to the notice, the Department of the Treasury IRS will issue guidance providing that:

  • controlled groups and affiliated service groups that have previously made a Cycle A election are permitted to submit determination letter applications during the Cycle A submission period beginning February 1, 2016, and ending  January 31, 2017;
  • expiration dates on determination letters issued prior to January 4, 2016, are no longer operative; and
  • the period during which certain employers may, on or after January 1, 2016, establish or adopt a defined contribution pre-approved plan and, if permissible, apply for a determination letter, is extended from April 30, 2016, to April 30, 2017. 

The IRS announced in July 2015 its intent to eliminate the staggered five-year determination letter remedial amendment cycles for individually designed retirement plans and limit the scope of the determination letter program to initial plan qualification and qualification upon plan termination.

Ask the Experts January 5, 2016

(b)lines Ask the Experts – Can SPDs Be Provided for Church Plans?

“I recently commenced employment at a church plan sponsor, and noticed that a Summary Plan Description (SPD) is not provided to participants in our 403(b) retirement plan.  

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“Is an SPD not required for church plans? Can an SPD be provided?” 

Michael A. Webb, vice president, Cammack Retirement Group, answers:   

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The term “Summary Plan Description” (SPD) is an Employee Retirement Income Security Act (ERISA) term; all plans that are subject to the reporting and disclosure requirements of ERISA are required to provide SPDs to participants (see this Internal Revenue Service (IRS) webpage for an excellent summary of the SPD requirements). Since church plans are not subject to ERISA unless they elect such coverage (a rare event), the delivery of an SPD to participants is not required. Presuming that your plan has not elected ERISA coverage, an SPD is not required. Note that governmental plans are also not required to provide an SPD, since such plans are also not subject to ERISA.

Having said this, some church/governmental plans elect to provide a summary of the plan document to plan participants, since plan documents can often be difficult/impossible for a participant to read. Some sponsors will call the document an SPD, though it is subject to none of the SPD requirements for content or timing of delivery to participants. Others will call the document a “Summary Plan Document” or a similar name so that it is not confused with an ERISA Summary Plan Description, though a church/governmental plan that elects to satisfy all of the ERISA SPD requirements will NOT subject its plan to ERISA.

Thank you for your question!

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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