Monday, July 9, 2007

IRS Revenue Procedure 2007-44 – Rulings and determination letters

Part III --Administrative, Procedural, and Miscellaneous

26 CFR 601.201: Rulings and determination letters.

(Also, Part I, §§ 401; 1.401(b)-1.)

IRS Revenue Procedure 2007-44 – Rulings and determination letters

Qualification; determination letters; staggered remedial amendment periods. Rev. Proc. 2005-66, containing the Service's procedures for issuing determination letters pursuant to section 401(a) of the Code with respect to a staggered remedial amendment period system both for plans that are and are not pre-approved, is clarified, modified, and superseded. Rev. Proc. 2005-16 modified.

Purpose:

  • Rev. Proc. 2005-66, 2005-2 C.B. 509, established a system of cyclical remedial amendment periods under § 401(b) of the Internal Revenue Code (Code) for individually designed and pre-approved qualified plans. This revenue procedure updates and supersedes Rev. Proc. 2005-66. Section 3 describes the changes to Rev. Proc. 2005-66 in this revenue procedure.
  • Under this system, every individually designed plan qualified under § 401(a) has a regular, five-year remedial amendment cycle. The cycles are staggered and spread over five-year periods. That is, the cycles commence in different years for different plans within a five-year period, so that different plans have different cycles. The effect of this system is that plan sponsors need to apply for new determination letters generally only once every five years in order to continue to have a letter on which to rely.
  • In addition, under this system, every pre-approved plan (that is, every master and prototype (M&P) and volume submitter (VS) plan), generally has a regular, six-year remedial amendment cycle. As a result, sponsors, practitioners (including mass submitters and national sponsors), as defined in Rev. Proc. 2005-16, 2005-1 C.B. 674, and generally referred to collectively in this revenue procedure as "sponsors or practitioners" unless otherwise noted, as well as adopters of pre-approved plans, generally need to apply for new opinion, advisory, or determination letters only once every six years. Preapproved defined contribution plans have different six-year remedial amendment cycles than pre-approved defined benefit plans. Thus, the same six-year remedial amendment cycle applies with respect to all pre-approved defined contribution plans, and a separate six-year remedial amendment cycle applies with respect to all pre-approved defined benefit plans. Also, this revenue procedure provides rules for adopting employers to adopt a preapproved plan after the review process is completed.
  • The system for staggered five-year remedial amendment cycles and the system for six-year amendment/approval cycles are established pursuant to the Commissioner's authority under § 401(b) of the Code and its underlying regulations to extend the remedial amendment period, and pursuant to the Commissioner's authority under § 7805(b) to establish the effective date of any rule or regulation. As a result, sponsors, practitioners, and plan sponsors submit their plan only once for an opinion, advisory, or determination letter that rules on all amendments adopted and made effective within the applicable remedial amendment cycle.
  • These remedial amendment cycles are coordinated with the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107-16 (EGTRRA) remedial amendment period, as defined further in section 2.07 of this revenue procedure, for both individually designed and pre-approved plans.
  • The EGTRRA remedial amendment period for individually designed plans extends to the end of the initial applicable five-year remedial amendment cycle as provided in the chart found in section 12.01. Therefore, plan sponsors may avoid unnecessarily filing two determination letter applications by waiting to file their EGTRRA determination letter applications until the twelve-month period preceding the end of the plan's initial applicable five-year remedial amendment cycle.
  • The EGTRRA remedial amendment period for pre-approved plans extends to the end of the initial applicable six-year remedial amendment cycle as provided in section 18.01.

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