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IRS Expands Determination Letter Program for Individually Designed Plans

At the end of April, the IRS released Rev. Proc. 2019-20 providing for a limited expansion of the determination letter program w ith respect to individually designed plans. Under the new procedures, the IRS will accept determination letter applications beginning later this year for statutory hybrid plans and merged plans. Statutory hybrid plans are defined benefit plans that use a cash balance or pension equity formula.


In 2016, the IRS ended the 5-year remedial amendment cycle process for requesting determination letters for individually designed plans. Since January 1, 2017, plan sponsors of individually designed plans have only been permitted to request a determination letter in the follow ing circumstances:

The plan has never received a favorable determination letter.
The plan is terminating.
The IRS makes a special exception (The IRS will consider additional circumstances based on program capacity and other factors each year).

Based on comments and other factors, the IRS released Rev. Proc. 2019-20 which expands the determination letter program for individually designed statutory hybrid plans and merged plans, as discussed below.

Statutory Hybrid Plans

Under the new Rev. Proc. 2019-20, Plan sponsors may submit determination letter applications for individually designed statutory hybrid plans to the IRS during the 12 month period beginning on September 1, 2019 and ending on August 31, 2020. The IRS's scope of review of the statutory hybrid plans as part of the determination letter process w ill cover the Required Amendments Lists issued through 2017 and Cumulative Lists issued prior to 2016.

Merged Plans

Further, Rev. Proc. 2019-20 also provides that the IRS will accept determination letter applications for merged plans beginning September 1, 2019, and on an on-going basis w ith no current end date. In order for a merged plan to be eligible for submission to the IRS, it must meet all of the follow ing requirements:

The plan merger must combine two or more plans maintained by previously unrelated entities.
The plan merger date must be no later than last day of the first plan year that begins after the date of the corporate merger, acquisition, or transaction involving the entities.
The determination letter application is made to the IRS no sooner than the plan merger date and no later than last day of the first plan year that begins after the plan merger date.

The IRS's scope of review of merged plans will cover the Required Amendments List that was issued during the second full calendar year preceding the submission and all prior required amendments lists and cumulative lists.

Should Plan Sponsors Take Advantage of the Newly Expanded Determination Letter Program?

Plans sponsors of statutory hybrid plans and merged plans are not required to submit their plans for IRS determination letters under the new procedures. How ever, plan sponsors with existing statutory hybrid plans with determination letters may not rely upon them with respect to plan provisions that have subsequently been amended or affected by a change in the law. Additionally, while two existing plans that are merged together may have had determination letters prior to the merger, the plan sponsor of the merged plan may not be able to rely on those letters, particularly with respect to any provisions changed as part of the merger. Further, the IRS has provided for a more favorable penalty structure to the extent that document failures are discovered through a determination letter application submitted under Rev. Proc. 2019-20.

The decision to submit may depend on the number and significance of amendments to the plan since the last IRS determination letter, the degree to w hich plan provisions w ere amended to effectuate a plan merger, the form of the plan being merged in, as w ell as other variables. Sponsors of plans covered by the new procedures should consult w ith counsel to determine whether to submit their plans for review.

© 2007-2022 Hill Ward Henderson, All Rights ReservedNational Law Review, Volume IX, Number 241

About this Author

Al Ward Executive Compensation Hill Ward Henderson

Al is Co-Chair of the firm's Executive Compensation & Employee Benefits practice. Al is recognized throughout the professional community for his depth of experience and knowledge in the employee benefits area. Prior to entering the practice of law, Al was an actuarial and employee benefits consultant for over eight years.

Al has focused for over four decades on executive compensation, employee benefits, trusts and taxation. He represents many clients including publicly traded and privately held, taxable or tax-...

Kirsten Vignec Employee Benefits Attorney HIll Ward Henderson

Kirsten is a Shareholder in the firm's Corporate & Tax Group and practice co-chair of the Executive Compensation & Employee Benefits Group. Kirsten’s practice involves employee benefit matters associated with the design and ongoing administration of executive deferred compensation plans, welfare benefit plans, Section 401(k) plans, profit sharing plans, and pension plans. Kirsten represents tax-exempt entities, for-profit, private, and publicly-traded companies.

Kirsten represents clients before the IRS, DOL, and the PBGC with respect to employee benefits matters.


Bret Hamlin employee benefit lawyer Hill Ward Henderson

Bret is a Shareholder in the firm’s Executive Compensation & Employee Benefits Group. He practices primarily in the areas of employee benefits, deferred compensation and trusts. Prior to entering the private practice of law, he provided plan design and consulting, third-party administration and investment, as well as retirement plan education services for clients. 

Bret represents large, medium and small employers with respect to many employee benefit matters, including both single employer and multiple employer qualified retirement plans, deferred...

Timothy P Zehnder employee lawyer Hill Ward Henderson

Tim is an Associate in the firm’s Executive Compensation & Employee Benefits Group. His practice focuses primarily on advising client employers (private and public, tax-exempt and for-profit) on a wide variety of compensation and benefits matters, including plan design, administration and termination, compliance with applicable laws (including the Internal Revenue Code, ERISA, HIPAA, and the Affordable Care Act), and resolution of compliance issues with the Internal Revenue Service, Department of Labor and Pension Benefit Guaranty Corporation.  Tim has experience assisting...

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