IRS Issues 2021 Procedures for Letter Rulings, Determination Letters, and Other Guidance

The IRS has updated and restated its revenue procedures governing letter rulings, determination letters, and other guidance, including guidance about employee benefit plans. These revenue procedures supersede their 2020 counterparts (see our Checkpoint article) and are generally effective as of their issuance date. Here are highlights for employee benefit plans:

• Revenue Procedure 2020-1. This procedure explains the forms of advice that the various IRS counsel offices provide and how taxpayers can request that advice. For 2021, the procedure permanently incorporates IRS guidance that temporarily authorized electronic submission of requests for letter rulings and other guidance by email instead of by fax. (Most submissions may also be made on paper.) Email submissions must be compressed and encrypted using an authorized method, and they must be accompanied by signed memoranda acknowledging the risks of email transmission and agreeing to the terms for using the chosen method of encryption. New appendices H and I provide language for the memoranda. Other changes include revisions to the schedule of user fees (the standard fee for most letter rulings and closing agreements increases nearly 27% to $38,000), and changes in the signature requirements for electronic and paper submissions.
• Revenue Procedure 2020-4. This procedure explains how the IRS provides guidance on issues under the jurisdiction of the Employee Plans Rulings and Agreements Office in its Tax Exempt and Government Entities Division. The procedure applies to determination letters for various types of employee benefit plans (including 401(k) plans) and transactions, and for letter rulings on a limited range of issues. Significant changes include—

  • Form 5310. Electronic submission of determination letter requests on Form 5310 (Application for Determination for Terminating Plan) will be available beginning April 16, 2021, and mandatory beginning August 1, 2021. During the transition period, electronic payment of the user fee is optional if Form 5310 is submitted on paper but mandatory for electronic submissions. Electronic payment and submissions will be made through the www.pay.gov website. Rules for electronic submissions are provided.
  • Pre-Approved Plans. Procedures for the submission of pre-approved plans for remedial amendment cycles prior to the third cycle have been deleted. (The deadlines for adopting employers to make such submissions expired on April 30, 2016, for defined contribution plans and April 30, 2020, for defined benefit plans.)
  • Merged Plans. Determination letter requests for plans that result from a plan merger must include the most recent determination letter for each predecessor plan. (An explanation is no longer required when a letter is not available for a predecessor plan.) Only amendments to a predecessor plan that were adopted or effective after a submitted determination letter should be included with the request.
  • User Fees. The user fee for determination letter requests filed on Form 5300 increased to $2,700, the fee for determination requests filed on Form 5307 by adopters of modified volume submitter plans rose to $1,000, and the fee for requests on Form 5310 for terminating plans rose to $3,500.
  • Leased Employees. Requests for determinations as to whether leased employees are deemed employees should include a cover letter requesting the determination and the additional information described in the procedure.

EBIA Comment: These updates do not include any surprises. But the devil—as always—is in the details, so submitters should carefully review the relevant parts of these updated procedures when preparing requests for letter rulings, determination letters, or other covered submissions. For more information, see EBIA’s 401(k) Plans manual at Sections III.C.4 (“IRS Rulings and Other Guidance”), XXVII.I (“Individually Designed Plans: Limited Determination Letter Program”), and XXVII.L (“Pre-Approved Plan: Opinion Letter Program”). See also EBIA’s Cafeteria Plans manual at Section IV.B.5 (“IRS Guidance”), and EBIA’s Self-Insured Health Plans manual at Section V.B.4 (“IRS Rulings and Other Guidance”).

Contributing Editors: EBIA Staff.