Prior to 2006, employers were required to submit determination letter requests to the IRS during certain periods. These periods – during which plans were required to be amended for various tax acts, such as the Economic Growth and Tax Relief Reconciliation Act of 2001 – are referred to as the remedial amendment periods. In Revenue Procedure 2005-66, as modified by Revenue Procedure 2007-44, the IRS created a staggered determination letter program. This process was established to spread the IRS’ work over a period of years, thus freeing up resources to perform retirement plan audits. The periods to submit qualified retirement plans for determination letters are based upon a plan sponsor’s employer identification number.
The original five-year-cycled program for individually designed retirement plans ended on Jan. 31, 2011. Although practitioners thought the IRS might change the determination-letter program and/or delay starting a new cycle, the new five-year program opened for individually designed plans with employer EINs ending in 1 or 6 on Feb. 1, 2011. The IRS user fee for individually designed plans increased to $2,500 for a basic Form 5300, and to $4,500 for a Form 5300 with additional demonstrations. This cost should be compared with the cost of a prototype plan document being filed on IRS Form 5307, which requires a user fee of $300, and $1,800 for a Form 5307 with additional demonstrations.
