The New Rev. Proc. The IRS has issued Rev. Proc. 2016-37, its periodic update on the determination letter program for qualified retirement plans. But this year there is a twist-as announced last year, in IRS Announcement 2015-19, the IRS is curtailing the program for individually designed plans. Rev. Proc. 2016-37 summarizes the new rules for individually designed plans as follows.
The New Rules.
–Consistent with IRS Announcement 2015-19, this revenue procedure eliminates, as of January 1, 2017, the staggered five-year remedial amendment cycle system for individually designed plans, currently set forth in Rev. Proc. 2007-44. However, sponsors of Cycle A plans (that is, generally, plan sponsors with employer identification numbers ending in 1 or 6) will continue to be permitted to submit determination letter applications during the period beginning February 1, 2016, and ending January 31, 2017.
— A sponsor of an individually designed plan will be permitted to submit a determination letter application for initial plan qualification, for qualification upon termination, and in other circumstances. See section 4.03 of this revenue procedure. A crucial point is the “other circumstances” under which an application may be filed. According to the revenue procedure in section 4.03(3), these will be considered and announced in the future.
— Effective January 1, 2017, the interim amendment requirement set forth in section 5.04 of Rev. Proc. 2007-44 (adopting amendments to reflect regulatory and statutory changes) will no longer apply to individually designed plans. See section 4.02 of this revenue procedure. But also see the next point.
–For disqualifying provisions that arise as a result of a change in qualification requirements, the IRS intends to publish annually a Required Amendments List, which will establish the deadline for a plan to be amended to comply with requirements, described in section 5.03 of this revenue procedure, that are identified on the list. The deadline (that is, the end of the remedial amendment period for a change to a qualification requirement included on a particular Required Amendments List) will be, unless otherwise provided, the end of the second calendar year following the year in which the list is issued. In general, a change to the qualification requirements will not appear on a Required Amendments List until guidance with respect to such change (including model amendments, if any) has been provided in regulations or in other guidance published in the Internal Revenue Bulletin. The first Required Amendments List generally will apply to changes in qualification requirements first effective during the 2016 calendar year. See sections 4, 5, and 9 of this revenue procedure.
— This revenue procedure extends the remedial amendment period for individually designed plans to correct disqualifying provisions: (i) that are in new plans, (ii) that arise as a result of amendments made to existing plans, and (iii) that arise as a result of a change in qualification requirements. See section 5 of this revenue procedure.
–A transition rule extends the remedial amendment period for certain disqualifying provisions to December 31, 2017. See section 6 of this revenue procedure.
— The scope of review of an individually designed plan submitted for a determination letter is described in section 12 of this revenue procedure.
–The effect of subsequent changes in law and plan amendments on the reliance by the sponsor of an individually designed plan on a prior determination letter is described in section 13 of this revenue procedure.