The IRS determination letter program has allowed plan sponsors using an individually designed plan document to apply to the IRS for written confirmation that the plan’s provisions meet the criteria necessary to ensure the plan retains its “qualified” status (and remains eligible for all the benefits associated with that status).
Effective January 1, 2017, the IRS is eliminating this program except upon initial implementation and plan termination. The IRS is to release future guidance as to how each plan is to prove its tax qualification status during the interim. In the meantime, the IRS has also extended the time an individually designed plan can adopt a pre-approved plan document until April 30, 2017. Plans that use a prototype or volume submitter document are not affected by this change as these plans are “pre-approved” by the IRS.