IRS Rev. Proc. 2021-4 Updates the Determination Letter Program

Practical Law Legal Update w-029-0839 (Approx. 5 pages)

IRS Rev. Proc. 2021-4 Updates the Determination Letter Program

by Practical Law Employee Benefits & Executive Compensation

Changes to Rev. Proc. 2020-4

Rev. Proc. 2021-4 includes substantive changes to Rev. Proc. 2020-4 and provides:

General information about the types of advice provided by the IRS Tax Exempt and Government Entities Division, Employee Plans Rulings and Agreements Office (Employee Plans Rulings and Agreements).
General procedures for letter ruling and determination letter requests.
Specific procedures for determination letter requests.
The user fees for advice requested from Employee Plans Rulings and Agreements.

Requesting Determination Letters

Rev. Proc. 2021-4 includes the following changes to the determination letter program:

Section 6.02 has been revised to provide that Form 5310 may be submitted electronically beginning on April 16, 2021, and must be submitted electronically as of August 1, 2021. Revised Section 6.02 also describes the submission procedures for Form 5310.
Sections 8.02(4) and 8.04 have been revised to remove language indicating that the IRS would accept determination letter applications for certain statutory hybrid plans from September 1, 2019, to August 31, 2020, as that period has expired.
Section 8 has been modified to remove master and prototype (M&P) and volume submitter (VS) pre-approved plans submitted under Rev. Proc. 2015-36 regarding cycles before the third six-year remedial amendment cycle from the list of plans for which a determination letter application may be submitted, as the deadline for submitting a determination letter application for the second six-year remedial amendment cycle has passed.
Section 9.08 has been revised to direct taxpayers requesting a determination concerning leased employees to attach a cover letter to Form 5300 along with the information specified in Section 17.
Section 10.06(1) has been modified to provide that if a plan submitted for a determination letter is the result of merged plans, the applicant must include:
- copies of each plan's prior determination letters;
- copies of each plan's prior plan document or adoption agreement and each plan's opinion or advisory letter; and
- any required amendments.
Section 12A, which included application procedures for an adopting employer of a pre-approved plan with respect to remedial amendment cycles before the third six-year remedial amendment cycle, has been deleted, as the submission deadlines for those cycles have passed.
Section 12B.01 (redesignated as Section 12.01) has been revised to provide that there will be no adoption period for pre-approved defined benefit plans regarding the third six-year remedial amendment cycle in 2021.
Sections 12B.02 through 12B.04 (redesignated as Sections 12.02 through 12.04) have been modified to add a category for a determination request for a governmental pension plan that does not satisfy the safe harbors in Section 1.401(a)-1(b)(2) of the proposed Treasury regulations (81 Fed. Reg. 4599-01 (Jan. 27, 2016)), and requests reliance, including the conditions under which such a request may be submitted, the applicable form, and the scope of review.
Section 12B.03(a)(1) (redesignated as Section 12.03(1)) has been modified to clarify that the controlling member of a multiple employer plan (MEP) is the adopting employer for purposes of submitting the determination letter application (see Practice Note, Multiple Employer Retirement Plans (MEPs)). Section 14 is also revised to clarify that the applicant for a MEP must request a letter for the plan in the controlling member's name.
Section 13.03 has been revised to add information concerning applications for employee stock ownership plans (ESOPs) submitted on Form 5307 (see Practice Note, Employee Stock Ownership Plans (ESOPs)).
Sections 16.01 and 16.02 have been modified to include references to the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) (Pub. L. 114-113 (Dec. 15, 2015)).

VCP User Fees and Other User Fees

Regarding user fees, Rev. Proc. 2021-4 makes the following changes to Rev. Proc. 2020-4:

Section 30.11 has been modified to provide that requests for reconsideration of user fees related to requests under Rev. Proc. 2015-36 and Rev. Proc. 2017-41 must be submitted to the Area Manager, EP Determinations (see Practice Note, Pre-Approved Plans: Design Choices, Tax-Qualification Rules, and Best Practices: Overview of Revenue Procedure 2017-41).
Appendix A, which provides a schedule of user fees, has been modified to:
- update user fees for letter ruling requests and determination letters; and
- add user fees for opinion letters relating to assumption of sponsorship of a pre-approved plan without amendment to the plan document and a change in a pre-approved plan provider's name or address.

Other Changes

Rev. Proc. 2021-4 also updates Section 31.03 to clarify that EP Determinations accepts requests for "M&P word-for-word opinion letters" and "VS word-for-word advisory letters" regarding pre-approved defined benefit plans for the second six-year remedial amendment cycle.

Practical Implications

Retirement plan sponsors and practitioners should be aware of the changes to the determination letter procedures and IRS fees instituted by Rev. Proc. 2021-4. Rev. Proc. 2021-4 took effect on January 4, 2021.

IRS Rev. Proc. 2021-4 Updates the Determination Letter Program | Practical Law