When the IRS announced that it would virtually eliminate the determination letter program for individually designed retirement plans, many practitioners moved through the classic Kübler-Ross five stages of grief (see the picture at the right). Some have yet to finish. In Announcement 2016-32, the IRS requested comments on how these plans can maintain compliance going forward since determination letters are no longer available.
As a general rule, the IRS used to deny plans the ability to incorporate tax code provisions by reference (rather than reciting them wholesale in the plan), except for a very short list available here. The IRS is asking if there are additional provisions that would also be appropriate to incorporate by reference. This would avoid the need to reproduce these provisions wholesale and run the risk of a minor foot fault if the language did not line up. It would also help avoid the need to update plans for law changes, in some cases.
Additionally, much to the anger of many practitioners, the IRS has historically sometimes required a plan to include provisions that were not applicable to the plan. For example, there are special diversification requirements for plans that hold publicly-traded employer stock, yet the IRS has required them even for private companies. One wonders if the IRS actually observed numerous situations where privately held corporations became public companies and then failed to amend those of