Determination Letter Request Prevalence

[Guest Lloyd Dickinson]

Does anyone have any information on the percentage of 401(a) government plans that request IRS determination letters? Based on your experience, do you have any guess?

[mbozek]

The only reason for a govt entity to get a det letter is for the benefit of the employees since there is no tax deduction. But there are few rules that affect govt plans other than the exclusive benefit rule, 415 limits, 401(a)(9), comp limits and there is no IRS program to audit govt plans. (govt plans do not file 5500.) So many govt employers forgo the cost of getting a det letter. Also many govt employers have 457 plans which have fewer rules and no disqualfication risk.