On May 1, the Internal Revenue Service (IRS) announced an expansion of the existing determination letter submission program. Previously the IRS has only allowed submissions of initial retirement plan qualifications and plan terminations for the program, but beginning September 1, 2019, the IRS will accept applications for both individually designed merged plans on an ongoing basis and statutory hybrid plans temporarily.
A merged plan, one that occurs in connection with a corporate merger or acquisition (or a similar business transaction between unrelated entities), will be eligible for the program when the plan merger occurs by the end of the first plan year beginning after the corporate transaction. The determination letter application must then be filed by the end of the first plan year beginning after the plan merger. Statutory hybrid plans, such as cash balance defined benefit plans, may also submit determination letter applications during a limited 12-month period from September 1, 2019 to August 31, 2020.
In its announcement, the IRS stated that while no sanctions will be imposed for any plan document failure in connection with effectuating the plan merger, other errors in the plan document could trigger fines up to twice the applicable Voluntary Correction Program fee.
Should you have questions about the IRS’s new determination letter opportunities or any other matter, please contact Allison Jacobsen or any other member of our employee benefits team.