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Gov Plan Determination Letter Required?


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I'm a TPA working with a governmental plan that's been restated on a new individually designed document. Their lawyer is saying the per Rev Proc. 2007-44 they are required to file for a determination letter. I'm not sure if this is greed or ignorance.

Surely no one is required to file for a determination letter are they? Especially governmental plans.

Thanks in advance for clarification.

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Whether to file is a question that should be answered by the plan sponsor, not the TPA.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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No plan is required to file for a determination letter. However, given the complexity of the law today, no lawyer I know is ever willing to give an opinion that a plan is qualified. And the consequences of disqualification are potentially serious, even in the case of a governmental plan. (Although deductions and trust taxation are not an issue, they still need to worry about employer withholding obligations and tax consequences to participants.)

I suspect that what the lawyer meant to say is, a) it is highly advisable to have a determination letter, and b) if they are going to get a determination letter, Rev Proc. 2007-44 requires them either to get it in Cycle C (before January 31 of this year) or during Cycle E.

But why is this question on the 403(b) Plans, Accounts or Annuities board? A determination letter would apply to a 401(a) plan, not a 403(b)?

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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Are they going to file under Cycle E for this cycle? In Rev. Proc. 2012-50, it says the election to delay to Cycle E is made by filing for a determination letter under Cycle E timing. To me, that reads as requiring a determination letter submission if you want to delay restatement until cycle E.

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In addition to others' observations, a mention of "required" could refer to something other than public law. Just to pick two quick examples: An employer might have an obligation under a collective-bargaining agreement. A plan or its trust might have an obligation under a participation agreement with an investment issuer or manager.

Or there could be a requirement or condition under non-tax law, including State or local law concerning the acts of the governmental person that establishes or maintains a plan.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Since this thread is in the 403(b) forum, by "govt plan" do you mean 403(b)?

Per Announcement 2009-89: "Accordingly, employers should not request ruling or determination letters on the form of their § 403(b) plans at this time, pending publication of the revenue procedure for pre-approved § 403(b) plans and additional procedures on applying for individual determination letters for § 403(b) plans."

http://www.irs.gov/irb/2009-52_IRB/ar25.html

http://www.irs.gov/Retirement-Plans/IRC-403(b)-Tax-Sheltered-Annuity-Plans-%E2%80%93-Guidance-Affecting-403(b)-Plans

EDIT:

even better....

http://www.irs.gov/Retirement-Plans/Apply-for-an-Opinion-or-Advisory-Letter--Pre-Approved-403(b)-Plans

"Please note that the IRS does not intend to establish a determination letter program for individually designed 403(b) plans at this time."

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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