A favorable IRS determination letter certifies that the terms of a plan satisfy Code criteria for qualification. A determination letter may also opine that a plan satisfies in form or operation certain nondiscrimination and coverage requirements based upon information and demonstrations provided by the applicant.
A favorable determination letter does not guarantee that a plan is or will remain qualified. Determination letters do not consider all the terms of a plan that may impact qualification. Changes to the plan and (most commmonly) operational failures can cause a plan to lose its qualified status despite a favorable determination letter.
When to File
Every individually designed plan qualified under Code section 401(a) has a regular, five-year remedial amendment cycle. The cycles are staggered and spread over five-year periods. That is, the cycles commence in different years for different plans within a five-year period, so that different plans have different cycles. The effect of this system is that plan sponsors need to apply for new determination letters generally only once every five years. See Cyclical Remedial Amendment Period for links to guidance.
How to File
For information on how to file a determination letter, see Form 5300.
Plan amendments are often required to receive a favorable determination letter ruling. The remedial amendment period after a favorable ruling extends for 91 days after the date of the letter.
Links and Guidance
- IRS Publication 794 provides a useful overview of determination letters.
- Rev Proc 2012-6 sets forth the procedure for determination letter applications and other letter rulings.
- Rev Proc 2012-8 lists the applicable fees for a determination letter and other rulings. See also Form 8717.
- Notice 2011-86 describes user fee exemption rules for determination letter requests.
Use Form 5316 to request a determination letter on a group or pooled trust.