Exemption of User Fees

[MBCarey]

Could someone clarify for me the Exemption from User Fee for Determination letters.

I have an individually designed age weighted p/s plan that was initially effective 7/1/1982, but was restated as an age weighted plan effective 1/1/91 at which time a submission for Determination was filed and a approval letter was issued.

This plan has less than 10 employees, 8 of which are NCHE.

[Blinky the 3-eyed Fish]

See the instructions to the new Form 8717. You can access them at the irs.gov web site. One thing I do know is that the original effective date of the plan needs to be on or after 12/9/89, as well as other qualifications, to be exempt.

[Guest rhp]

IRS Notice 2002-1 fleshes out the elimination of user fee rules. Q&A 12 states that the user fee does not apply (assuming the other requirements are met) for a plan that was first in existence on or after 12/8/89. I read this to mean that the plan was initially adopted on or after that date, even if the effective date was earlier.

[Blinky the 3-eyed Fish]

Rhp, see question 4 from the same promulgation. It clearly indicates that the effective date controls.

Q-4: When is a plan "in existence" for this purpose?

A-4: In general, a plan is in existence on the first day the plan was in effect. Thus, payment of a user fee generally will not be required for any determination letter request filed by an eligible employer before the first day of a plan's sixth plan year. However, a plan established as a result of a spin-off from another plan will be treated as in existence on the first day the plan from which it was spun off was in effect. Also, a plan established as the result of a merger of two or more plans will be treated as in existence on the earliest date any of the merged plans was in effect.

[Guest rhp]

Thanks Blinky