IRS Updates 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 2018 counterparts (see our Checkpoint article). Here are highlights for employee benefit plans:

• Rev. Proc. 2019-1. This procedure explains the forms of advice that the various IRS counsel offices provide and how taxpayers can request that advice. Relatively few changes have been made for 2019. The procedure can no longer be used to request waivers of the excise tax for failure to give timely notice of a significant reduction in the rate of future benefit accruals (rarely applicable to 401(k) plans), because those requests are now made under Rev. Proc. 2019-4 when the error is ineligible for EPCRS. Some user fees have also increased. For example, the standard fee for a private letter ruling has risen to $30,000. (Note that the user fee schedule in this revenue procedure applies for certain types of ruling requests, but fees for retirement plan submissions appear in Rev. Proc. 2019-4.) Other changes are largely editorial or technical—for example, Appendix E (Church Plan Ruling Checklist), now asks if the submission indicates whether a Code § 410(d) election has ever been made with respect to the plan. And references to “Associate Chief Counsel (Tax Exempt and Government Entities)” have been changed to “Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes).”
• Rev. Proc. 2019-4. 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. Revisions to the procedure reflect changes to the IRS’s Voluntary Correction Program (VCP), including required use of pay.gov for submissions and user fee payments beginning April 1, 2019 (see our Checkpoint article). Code §§ 414(b), (c), and (m) (i.e., the controlled group rules) have been added to the list of topics not covered by determination letters. And determinations regarding certain design-based safe harbors will not be issued unless the plan document provides a definition of compensation that satisfies Treasury Regulations § 1.414(s)–1(c) (i.e., the safe harbor definitions that do not require numerical testing). An “Other Circumstances” category has been added to the list of determination letter types, but there is no description of the situations that may fall under this category. Other revisions include increased user fees for terminating plan determinations, elimination of the suggestion to provide a “reference list” that shows the location in the plan document of items set forth in applicable Required Amendment Lists and Cumulative Lists, and changes relating to the procedures for incomplete filings.

EBIA Comment: These revenue procedures are an essential resource for anyone seeking plan-specific guidance from the IRS. They specify current procedures, describe how the 2019 procedures differ from their 2018 counterparts, and provide practical tools such as sample formats, checklists, and user fee schedules. Notably, they make no changes to the VCP user fee structure or amounts. We find the new, catch-all determination letter type promising in light of the IRS’s previous request for comments about expanding the determination letter program (see our Checkpoint article), but any real expansion will require more explicit revisions to the controlling guidance. For more information, see EBIA’s 401(k) Plans manual at Sections III.C.4 (“IRS Rulings and Other Guidance”) and XXVII.I (“Individually Designed Plan: Limited Determination Letter Program”). See also EBIA’s Cafeteria Plans manual at Section IV.B.5 (“IRS Guidance”), EBIA’s Self-Insured Health Plans manual at Section V.B.4 (“IRS Rulings and Other Guidance”), and EBIA’s ERISA Compliance manual at Section V.D (“Exemption for Churches”).

Contributing Editors: EBIA Staff.