Expanded Determination Letter Program for Hybrid and Merged Plans Effective

On September 1, 2019, the IRS’ determination letter program expansion took effect. As background, back in 2016, the IRS changed the determination letter program to only require individually designed retirement plans to seek determination letters upon plan creation/qualification and termination (instead of at certain intervals, as in the past). However, on May 1, 2019, the IRS released Revenue Procedure 2019-20, which expanded the determination letter program to allow statutory hybrid plans and merged plans to request a determination letter outside of initial qualification and plan termination. (See our May 14, 2019, Compliance Corner article for more information.)

As of September 1, 2019, employers that sponsor statutory hybrid plans (which are plans that have a feature that pays out a lump sum, like a cash-balance plan) can apply for a determination letter even if the plan sponsor has already received one. Employers merging plans may also request a determination letter as long as the application is completed no later than the end of the plan year that includes the date of the transaction.

Pursuant to this guidance, employers sponsoring these types of plans (hybrid or merged) should consider whether they should avail themselves of the opportunity to confirm the compliance of their plan documents. Most defined contribution plans that have not merged will not need to take advantage of this guidance; plan sponsors to which this guidance could apply should consult with their advisors.

Rev. Proc 2019-20 »