IRS Determination Letters
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The Subject:
The importance of determination letters is that they provide the employer and employee with certainty against any position changes that may be initiated by the IRS. If a determination letter has been received, the employer or employee will not face any penalties as the determination letter will be construed as the IRS's original position when the letter has been proven factual and correct.
Another certainty that is provided with determination letters involves the fact that auditing agencies are likely to accept the determination letter as evidence that the employer or employee is qualified under the IRS's requirements. Therefore, the employer and employee should obtain a determination letter to limit their liability for any benefit claims that are denied by the IRS. The employer should ensure that.
A contractual limitations period is included along with any final adverse benefit determination that has been included within the limitations period that the determination plan has outlined. The ultimate purpose of the determination letter is to protect retirement plan sponsors from facing IRS penalties because their plan would qualify for eligible tax benefits.
The importance of determination letters has greatly diminished because of the IRS's elimination of the majority of determination letters, which began on December 31, 2016.
Reference
http://benefitsattorney.com/governmental-plan-determination-letters-last-chance/
The Question is:
Q1- With the IRS eliminating the majority of determination letters, do you think the IRS should rethink its position and begin issuing determination letters again?
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This posting gives you a step-by-step explanation of IRS eliminating majority of determination letters . The response also contains the sources used.
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The IRS should rethink its position and begin issuing determination letters again. The determination letters were useful. There are a sizeable number of employers with individually designed plans who will now be compelled to switch to pre-approved plans by the IRS. These can be prototype and volume-submitter plans. These plans limit design and are not flexible and can be unsuitable for large employers that have complex benefits schedules for employee segments(a). Further, investment managers and auditors rely on qualified plan's tax-qualified status that the plans in compliance. The determination letter provides them with this assurance. In addition, during mergers and acquisitions, the ...
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