IRS Simplifies User Fee Exemptions for Small Employers Submitting Determination Letter Applications

On Dec. 16, 2016, the IRS issued Notice 2017-1, simplifying the requirements for certain small employers to avoid paying a user fee when submitting a recently established retirement plan for a determination letter. IRC Section 7528(b)(2) provides a user fee exemption for certain requests to the IRS for determination letters with respect to the qualified status of small employer pension, profit-sharing, stock bonus, annuity, and employee stock ownership (ESOP) plans. Originally, the exemption was not available to requests made after the plan’s first five years of existence (the remedial amendment period).

In light of changes to the remedial amendment period, as set forth in Revenue Procedure 2016-37, the IRS will treat an application for a determination letter as being filed within a qualifying open remedial amendment period (typically the five-year period) if the plan meets the 10-year rule (the plan was first in existence no earlier than January 1 of the 10th calendar year in which the determination letter application is filed).

Small employers with pension, profit-sharing, stock bonus, annuity, and ESOPs should be aware of this change when filing for a determination letter.

Notice 2017-1 »