Is it necessary to apply for a determination letter?

[katieinny]

I understand that submitting prototype plans, either standardized or nonstandardized, for an IRS determination letter is no longer recommended or suggested. But is submitting still the recommended course of action for volume submitter plans?

[Tom Poje]

actually, submitting is still recommended.

supposedly the IRS has changed their tune.

The reason being, if, for example, things ended up in bankruptcy court or something, and you changed even just one word in the document, then the plan's qualification status could be challenged.

[mbozek]

I thought that the IRS now allows employers who adopt either standardized or non standardized p type plans to rely on the sponsors determinaton letter without having to file a separate determinaton request. (There are some exceptions such as where the er maintains two plans). If the ER can rely on the sponsors determinaton letter what addtional protection is gained by applying for a separate determinaton letter for a nonstandardized plan(Since determination letters are not available for standardized plans)? Or were you referring only to volume plans needing to apply for a det letter?

[Tom Poje]

actually the document guru in the office here says the Dems blocked the bankruptcy bill a few days ago, so now its back to square one of not applying for determination letters. gotta luv it.

[R. Butler]

This is news to me. When did the poisition set forth in Announcement 2001-77 change? Is there written guidance on this somewhere?

[Belgarath]

The information in 2001-77 hasn't changed, at least to my knowledge. The IRS said, subject to certain restrictions listed in 2001-77, that the employer could rely on the document sponsor's opinion or advisory letter as a letter of determination.

However, I don't read this as carte blanche to never file. You may have situations where it is still advisable. Suppose, for example, you have a plan that credits service with prior employers. I see this with things like medical practices quite often. Depending upon the document specifics and census information, you might want to consider a determination letter to get IRS assurance that you aren't doing anything discriminatory in your methodology. I'm sure there may be other, probably better examples. Say they are using a doc other than standardized prototype, and missed their GUST deadline (not having satisfied the requirements for the extended deadline) - the way I see it, they have to submit under VCO which REQUIRES a concurrent filing for a determination letter.

Having said that, I'm of the opinion that the vast majority of the cases I see using proto or VS documents do NOT need to file for determination letter.

[mbozek]

Tom: I am still confused as to the connection between the bankruptcy law and the need for a p type plan to get an individual determination letter.

[Tom Poje]

The example I was given worked something like this:

we go down the checklist, and suppose the choices for entry dates were : first day of the year, monthly or dual.

we modify the document to be quarterly, and upon printing the document, you get a page that lists modifications that were made.

At that point, according to talk given at one of the enrolled actuary meetings, you might not be able to rely on the opinion letter.

[Belgarath]

Tom - it sounds like you are talking about a Volume Submitter plan. And yes, I agree - if you modify anything (other than allowing already pre-approved elections/choices in the adoption agreement) then you no longer have automatic reliance. Modification to a prototype throws it out of prototype status anyway.

But it seems to me it's quite a stretch to go from that to worrying about a valid challenge to plan's qualified status in bankruptcy court. I'm not saying that a challenge is unlikely, but I do think a successful challenge is unlikely.