July 29, 2015
Authored by: benefitsbclp
Last week, at the Western Benefits Conference, IRS Commissioner of the Tax Exempt and Government Entities Division, Sunita B. Lough, addressed the conference minutes after the IRS released Ann. 2015-19, 2015-32 IRB. This is the announcement reforming the determination letter process primarily for individually designed plans.
Commissioner Lough explained the rationale for elimination of the determination letter process for individually designed plans other than on plan adoption and termination. She stated that the average time a reviewer takes to determine that a plan is compliant is three hours. This limited time results from the significant number of applications and the shortage of qualified IRS personnel due to budget limitations. Based on a three hour review, the IRS has been issuing, in her view, an opinion letter that would take a law firm tens of hours to review and re-review before a partner’s signature was applied. She finds it to be inappropriate for the IRS to be on the absolute risk when it is hamstrung in this fashion. In other words, the demise of the determination letter program results from a cost/benefit analysis where the Service has determined that it is best to shift the risk of having a compliant plan document to the plan sponsor.
To lessen the risk for the plan sponsor, Commissioner Lough stated that the Service will promulgate model language for all needed qualification amendments. The IRS will also