Each January, the IRS updates several revenue procedures that prescribe the process for requesting determination letters for qualified retirement plans. For the most part, these have changed very little from one year to the next, except for increases in user fees charged. This year, the IRS made significant changes, which purportedly are intended to improve its efficiency. To understand why the new guidance involves both good news and bad news for plan sponsors necessitates a bit of background.
Several years ago, with the objective of leveling its workload, the IRS instituted a cyclical compliance system, with individually designed plans being assigned to a five-year remedial amendment cycle, based on the last digit of the plan sponsor’s taxpayer identification number. When requesting a determination letter for such a plan, a Form 5300 application is submitted, and a user fee of $2,500 must be paid.
