Notice Regarding ERISA Interim Amendments and Non-amenders

In 2005, the IRS established a determination letter program that provides cyclical remedial amendment periods for tax qualified plans.  Under the program, individually designed plans have a 5-year remedial amendment cycle.  Thus, plan sponsors only need to apply for IRS determination letters once every five years.  The first determination letter cycle for individually designed plans opened February 1, 2006, which began the initial remedial amendment cycle (i.e., the EGTRRA remedial amendment period).  Individually designed plans are assigned to a specific cycle (Cycle A, B, C, D or E) based on the last digit of the sponsoring employer's tax identification number (TIN).  The cycles and last dates to submit initial determination letter requests under the system are:

•    Cycle A: January 31, 2017, for TIN's ending in 1 or 6.
•    Cycle B: January 31, 2018, for TIN's ending in 2 or 7.
•    Cycle C: January 31, 2014, for TIN's ending in 3 or 8.
•    Cycle D: January 31, 2015, for TIN's ending in 4 or 9.
•    Cycle E: January 31, 2016, for TIN's ending in 5 or 0.

A determination letter application is considered off-cycle when it is submitted before or after the last 12-month period of the plan's remedial amendment cycle (i.e., the 12-month period beginning on February 1 and ending on January 31 of the last year of the cycle).  The IRS will accept determination letter applications for individually designed plans that are considered to be filed off-cycle but it generally does not review an off-cycle application until all on-cycle plans have been reviewed and processed.  However, an off-cycle application is given the same review priority as on-cycle applications if: (1) it is for a terminating plan; (2) it is for a new plan whose next regular on-cycle submission period ends at least two years after the end of the off-cycle submission period during which the application is submitted; (3) published IRS guidance specifies that a determination letter must be submitted in connection with a particular event; or (4) the IRS determines that exceptional circumstances exist and consents to a plan sponsor's request for on-cycle priority review due to urgent business need.

The law requires that a plan must be operated in accordance with its written documents. When plan qualification requirements change (e.g., new legislation), therefore, a timely adopted interim amendment generally is required.  The IRS identifies whether an interim amendment is needed at the same time guidance regarding the change(s) is issued.  The deadline for adopting an interim amendment with respect to a disqualifying provision generally is the later of: (1) the due date (including extensions) for filing the income tax return for the employer's taxable year that includes the date on which the remedial amendment period begins; or (2) the last day of the plan year that includes the date on which the remedial amendment period begins.

These remedial amendments deadlines are often extended by the IRS, but whenever a cycle filing for a determination letter is completed, the employer must demonstrate that timely adoption of all interim amendments has been made during the 5 year cycle.  The IRS publishes annually a cumulative list of required amendments which must be reviewed each year and the requisite interim amendments adopted as new requirements are added.

Failure to timely adopt interim amendments can be costly if discovered either in the determination letter process or during an IRS examination of the plan.  This is considered a disqualification event the correction of which is possible under Employee Plan Correction Resolution System (EPCRS) published in IRS rulings.  However, the correction sanctions can be enormous unless the corrections are made under a voluntary correction program (VCP) before discovery by the IRS. 

Employers are finding that maintaining plan compliance under this cyclical amendment system is a daunting and costly endeavor because of a myriad of complex rules and procedures.  Furthermore, it is easy to miss an interim amendment deadline and become a “non-amender” under the IRS guidelines.  Again, if a “non-amender” is detected upon audit, the costs are substantial, so every sponsoring employer should consider filing under VCP as soon as possible. 

Our office has developed a substantial expertise in ERISA interim amendment compliance and we have instituted what we believe is a cost effective system for maintaining compliance and for curing non-compliance through the VCP process.  You may currently be finding this cost very burdensome which is why we have developed what we believe to be a cost effective system of compliance that you should consider.