IRS Changes Plan Qualification Procedures, Returns, Other Procedures

By: Cynthia Marcotte Stamer

Budget limitations continue to drive the Internal Revenue Service (IRS) to change its procedures for approving qualified plans, annual reporting returns and other key qualified plan forms and processes.  Along with these changes in administrative and reporting procedures, the IRS also continues to tinker with rules for qualified plans relating to domestic partners and other plan requirements.  In the process, the IRS continually is issuing additional guidance including a slew of recent guidance that has material impact upon employer and other plan sponsors and fiduciaries of qualified plans Employer and other plan fiduciaries should consult counsel about how these changes impact the protection provided by IRS  qualified plan approval, options and expenses for obtaining approval and other changes impacting their qualified 401k and other defined contribution and defined benefit plans.

  • Determinations

Revisions to the Employee Plans Determination Letter Program: (Notice 2016-3) will

  • update Revenue Procedure 2007-44 and:
  • allow controlled groups and affiliated service groups that previously made a Cycle A election to submit determination letter applications during the third Cycle A submission period (February 1, 2016 – January 31, 2017);
  • revoke any expiration dates on determination letters issued prior to January 4, 2016; and
  • extend the period from April 30, 2016, to April 30, 2017, during which certain employers may establish or adopt a defined contribution pre-approved plan on or after January 1, 2016, and may, if eligible, apply for a determination letter.
  • New Guidance

In addition to the changes in the qualification procedures and reporting forms, the IRS also announced other changes and clarifications of its qualified plan rules on its interpretation of domestic partner equality requirementsfor retirement plans (Notice 2015-86).  It also has published interim guidance on the deadline for adoption of discretionary plan amendments. (TEGE-07-1215-0026).  In addition it published guidance on when certain retirement plan and IRA deadlines may be extended for disaster affected taxpayers

  • New Form 5500s & Other Forms

The IRS also has released new form 5500 forms for use in filing returns required for 2015 and 2016 plan years and associated guidance including:

  • 2015 Form 5500-EZ, Return of One-Participant (Owners and Their Spouses) Retirement Plan (instructions)
  • Publication 560 (01/2016), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)
  • Publication 590-A (01/2016), Contributions to Individual Retirement Arrangements (IRAs)
  • 2016 Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc.
  • 2016 Form 5498, IRA Contribution Information
  • 2016 instructions for Forms 5498 and 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc., and IRA Contribution Information
  • Corrected mailing address for Form 5308, Request for Change in Plan/Trust Year (Under section 412(d)(1) of the Internal Revenue Code) to: Internal Revenue Service, Attn: EP Letter Rulings, Stop 31, P.O. Box 12192, Covington, KY 41012-0192.

Staying atop these and other IRS qualified plan rules and development is important for retirement plan sponsors and their service providers and fiduciaries.  Employer and other plan sponsors and their leaders in particular should try to stay ahead of these changes to ensure they avoid expensive correction procedures and penalties, exposures to fiduciary breeches that can arise under the employee retirement income security act out of defects, budget appropriately to for fill responsibilities and project plan cost as part of the overall compensation costs, and minimize the administrative and financial expense of complying with reporting and other requirements by collecting necessary data and documentation more efficiently throughout the process.

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