7.11.1  Employee Plans Determination Letter Program (Cont. 1)

7.11.1.18  (09-23-2014)
Voluntary Compliance Cases

  1. If the application contains documentation that the plan was submitted to Voluntary Compliance (VC), but the compliance statement is missing, contact the taxpayer and request a copy.

  2. If it is determined that the case was never submitted to VC but it should have been, secure the hard copy of the case file, remove the original documents for the VC submission (include a copy of the Form 8717 if the compliance fee was included as a user fee). Mail the copy of the Form 8717 and the VC documents via a Form 3210 to the CSPC at the address listed in Exhibit 7.11.1-1, Mailing Address List.

  3. Return the hard copy of the case submission to files and suspense the case in TEDS until the VC application has been completed and a compliance statement issued.

    Note:

    If the case is being worked in TEDS, update the case to status 74 and email manager to update the case to status 37.

  4. For any case where VC did receive the application but the compliance statement has not been issued, contact a specialist who has access to TRAC to request a status update and the name of the VC specialist working the case. The email should also include the following information:

    • Complete plan name.

    • Plan number.

    • EIN.

    • EDS case number.

    • Control date.

    • Amount of any compliance fee paid.

      Note:

      The subject line of the email should NOT contain the name of the employer or the plan. All emails should be sent secured.

    Place the case in suspense until the VC submission is complete.

  5. If additional defects are found in the application that are not covered in the VC Compliance Statement, contact the Closing Agreement Program (CAP) Coordinator for further instructions.

7.11.1.18.1  (09-23-2014)
Protecting VCP Eligibility

  1. Employers may protect their eligibility to enter into VCP through the disclosure of an issue in their determination letter application. This is most commonly done within the cover letter accompanying the initial submission for a determination letter. In order to make the disclosure effective, the cover letter must contain specific details regarding the relief sought. A broad, generic reservation will not be effective.

  2. Examples of an effective reservation include:

    1. "In section 4.4 of the plan we added language XYZ. We believe the use of this language is acceptable under current tax law. However, in the event that you disagree we reserve the right to submit this issue to VCP."

    2. "We are looking for the good faith EGTRRA amendment but, as of the date of this submission, have been unable to locate it."

  3. An example of an ineffective reservation is:

    1. "In the event that this plan is found to have a qualification issue we reserve the right to enter into the Voluntary Correction Program."

  4. If it is determined that the issue raised in the cover letter is a qualification issue, inform the taxpayer and tell them to submit an application to VCP. Follow the procedures in IRM 7.11.1.18, Voluntary Compliance Cases.

7.11.1.19  (09-23-2014)
Suspense Cases

  1. Cases should be suspended when:

    1. Management orders that action should be suspended on a case

    2. There is a VCP application

    3. The plan is under examination by the Service, DOL or PBGC

    and communication with VCP, Exam, DOL or PBGC indicates that issuing a determination letter would impact the outcome of the VCP, Exam, DOL or PBGC case or where the outcome of any of these cases may result in a plan qualification failure where issuance of a favorable determination letter would not be appropriate.

  2. If a case should be suspended, complete the following steps:

    1. Work the case to the point of closing.

    2. If the case is under exam, contact the examination agent to verify if the case should be placed in suspense.

    3. Generate Letter 1938 (DO/CG) on EDS and send to the taxpayer.

    4. Update the case to suspense status. Status 37 for TEDS and status 39 - Technical Screening Suspense or 37 Group Suspense for EDS cases.

7.11.1.20  (09-23-2014)
Terminating Plans

  1. Applications for a DL upon termination of a plan are filed on Form 5310, Application for Determination for Terminating Plan. See IRM 7.12.1, Employee Plans Guidelines, Plan Terminations.

7.11.1.21  (09-23-2014)
Individually Designed Plans

  1. An analysis of a Form 5300 application should include an analysis of the entire application package including but not limited to the application, plan language, amendments, if any, cover letter and all other supporting documentation. Other issues include:

    1. Code Sections which may be Incorporated by Reference.

    2. Part-Time Employee Exclusions.

    3. Fail Safe Provisions for Coverage and Nondiscrimination.

  2. Also use the "Recurring Error Reports" produced by EP Determinations QAS. These are found at: http://tege.web.irs.gov/article.asp?title=3_case-closing&path=/my-job/1_revenue-agent/3_case-closing under the "Determinations and Determinations Quality Assurance" section.

7.11.1.21.1  (09-23-2014)
Code Sections which may be Incorporated by Reference

  1. Incorporation by reference of sections of the Code and Regulations into a plan document is not permitted unless such incorporation specifically authorized by the Code, Regulations or other authority. See Announcement 75-110.

  2. If there is a choice to be made, (for example, a plan can use either the current or prior year testing method under IRC 401(k)) that portion of the section may not be incorporated by reference, as it would lead either to a non-determinable accrual or benefit, or to an impermissible use of discretion.

  3. See Exhibit 7.11.1-3, Code Sections which may be Incorporated by Reference, for a list of permitted incorporations.

7.11.1.21.2  (09-23-2014)
Part-Time Employee Exclusions

  1. A plan provision will be treated as violating IRC 401(a) if the plan provision could result in the exclusion, by reason of a minimum service requirement, of an employee who has completed a year of service.

  2. This issue is typically encountered with plans attempting to exclude part-time or seasonal employees. Part-time or seasonal employees are commonly defined as employees who are expected to work less than 1,000 hours of service during a plan year or employees who do not customarily work more than “x” number of hours per week. This is a service requirement that could result in the exclusion of an employee who may complete more than 1,000 hours of service, in violation of IRC 410(a)(1).

  3. Any exclusion classification, whether it be part-time, seasonal, temporary, or any other classification of employees, should be closely scrutinized. Any such classification must be clearly defined and an amendment may be required.

  4. A plan with indirect service requirements must be amended to either:

    1. Define the exclusion classification in such a way as to avoid imposing an indirect service requirement in violation of IRC 410(a)(1), or

    2. Include "fail-safe" language which provides that, notwithstanding any exclusion classifications, any employee that completes at least 1,000 hours of service in an eligibility computation period will be an eligible employee.

7.11.1.21.3  (09-23-2014)
Fail Safe Provisions for Coverage and Nondiscrimination

  1. As a result of the corrective amendment procedures contained in Treas. Reg. 1.401(a)(4)-11(g), plans may contain fail-safe provisions designed to ensure automatic satisfaction of:

    1. IRC 401(a)(4), nondiscrimination.

    2. IRC 410(b), coverage.

    3. IRC 401(a)(26), participation.

  2. When reviewing a fail-safe provision, determine how it impacts compliance with the following IRC and Treas. Reg. sections:

    Code or Regulation Section Rule
    Treas. Reg. 1.401-1(a)(2) Provides that a qualified pension, profit sharing, or stock bonus plan must be a definite written program which is established and maintained by the employer.
    Treas. Reg. 1.401-(b)(1)(i) Provides that a pension plan must systematically provide for the payment of definitely determinable benefits to employees over a period of years, usually for life, after retirement.
    Treas. Reg. 1.401-1(b)(1)(ii) Provides that a profit sharing plan must provide a definite predetermined formula for allocating the contributions made to the plan among the participants.
    IRC 411(d)(6) Provides that the accrued benefit of a participant under a qualified plan may not be decreased as a result of an amendment to the plan.
    Treas. Reg. 1.401(a)(4)-11(g) Provides that where certain rules set forth in such section are satisfied, a corrective amendment adopted after the end of a plan year will be treated as adopted and effective as of the first day of such plan year enabling such plan to satisfy IRC 401(a).
  3. In order for a fail-safe provision to satisfy these code sections, the following criteria must be met:

    1. A fail-safe provision cannot give the employer discretion in determining whether the provisions require additional allocations or accruals. In other words, an employer cannot have discretion over which test it will utilize to satisfy the nondiscrimination and/or coverage requirements. To satisfy this requirement, the test (e.g., the average benefit test for coverage or the general test for nondiscrimination) which will be used to satisfy coverage and/or nondiscrimination must be specified along with the methods or optional rules (e.g., cross-testing) which will be used in running the test. The test and any optional rules cannot be incorporated by reference. In addition, any definitions of terms necessary in running the test and the optional rules utilized for the test must be set forth.

    2. The plan language must assure that a participant's rights under the fail-safe provision are fixed as of the last day of the relevant plan year. No other part of the plan may override these rights or take them away.

    3. A fail-safe provision cannot give the employer discretion over which employees receive additional allocations or accruals. It must be known from the terms of the provision which employees will receive the additional allocations or accruals.

    4. A fail-safe provision must provide a formula for the additional allocations or accruals, keeping in mind IRC 411(d)(6). Under Treas. Reg. 1.401(a)(4)-11(g)(3)( ii), a fail-safe provision cannot reduce a participant’s previous accrual or allocation for a plan year. This would include the reduction of a highly compensated employee’s previous allocation or accrual. For example, a fail-safe provision implemented by a defined contribution plan after the end of the plan year could not provide for the re-allocation of a contribution so that the added employees share in such contribution. Sometimes it may not be necessary for a fail-safe to provide a formula for the additional allocations or accruals. This would be true of a fail-safe which is built into a plan’s normal allocation or benefit formula.

  4. A fail-safe provision that does not satisfy the above criteria should be corrected to satisfy the above requirements or deleted. If the employer refuses to correct or delete the provision, an adverse letter should be proposed.

  5. It should also be noted that the corrective amendment procedures under Treas. Reg. 1.401(a)(4)-11(g) can be utilized more efficiently if the plan does not contain fail-safe language. In other words, by deleting the provision, employers have more flexibility each year when deciding which test and optional rules to use in satisfying the nondiscrimination or coverage requirement. The use of a fail-safe provision eliminates all flexibility and may lead to the use of a method in satisfying IRC 401(a)(4) or IRC 410(b) that is not the most cost effective to the employer and the plan.

7.11.1.22  (09-23-2014)
Pre-Approved Plans

  1. The Pre-Approved Plan Program is described in IRM 7.11.4. Once a pre-approved plan practitioner receives an opinion or advisory letter under IRM 7.11.4, taxpayers who adopt a VS plan and make minor modifications may submit them to the Service for review. Pre-approved plans are usually submitted on a Form 5307 but in some instances, they must be submitted on a Form 5300.

  2. Issues/important topics involving pre-approved plans are:

    1. RAC exceptions for pre-approved plans.

    2. Pre-approved plans with power to amend.

    3. Correction of pre-approved plans language.

    4. Listing of required modifications (LRM).

7.11.1.22.1  (09-23-2014)
RAC Exceptions for Pre-Approved Plans

  1. DC pre-approved plans may be submitted to the Service using the following forms:

    • Form 5300 or Form 5307 when the plan is modified yet still eligible for the six- year cycle on a continuing basis (See Rev. Proc. 2007-44, section 19.02).

    • Form 5300 when the plan is eligible for the six-year cycle on a temporary basis (See Rev. Proc. 2007-44, section 19.03).

    • Form 5300 when the plan is ineligible for the six- year cycle and are switched to a five- year cycle immediately (See Rev. Proc. 2007-44, section 19.04).

      Exception:

      Pre-approved plans will also be submitted on a Form 5300 if the plan is a multiple employer VS plan or the plan is requesting a partial termination, affiliated service group, or leased employee ruling.

7.11.1.22.2  (09-23-2014)
Pre-Approved Plan With Power to Amend

  1. Announcement 2008-23 modified the submission requirements for pre-approved plans. VS plans that give the practitioner the power to amend are not required to submit interim amendments with the Form 5307 application. Discretionary amendments should still be submitted for consideration.

    Note:

    Any VS plan where the practitioner does not have the power to amend are still required to submit interim amendments.

    1. To determine if a VS practitioner has the power to amend, go to the spreadsheet of VS practitioners on the shared server in the pre-approved plans folder titled: Pre-App, EGTRRA DC Spreadsheet (for Internal Use Only). The spreadsheet indicates whether the practitioner made the election to amend on behalf of adopting employers and also includes several key pieces of information which specialists may find helpful.

    2. For plans that give the practitioner the power to amend, if an unsigned interim amendment is included with the application, it is not necessary to secure the executed amendment (since it is assumed the M&P or VS practitioner still adopted a timely amendment). The adoption date for the unsigned interim amendments will not be included on the DL.

    3. If the employer submits an interim or discretionary amendment which was adopted late, a closing agreement should be pursued to correct the late amendment (even if the practitioner has the power to amend on behalf).

7.11.1.22.3  (09-23-2014)
Correction of Pre-Approved Plans Language

  1. If a specialist working a Form 5307, Application for Determination for Adopters of Modified Volume Submitter Plans or other pre-approved plan finds what appears to be an error in the pre-approved plan language, do not request amendments to such language. Instead, take the following steps:

    1. Accept the language as previously approved.

    2. Complete a referral. Sample found in the pre-approved folder on the shared server.

    3. Sign the referral. Be sure to provide appropriate citations.

    4. Obtain your manager's signature.

    5. Email the signed referral, along with a copy of the plan language in question, to the Pre-Approved Plans Coordinator or mail it to them at the following address:

    Internal Revenue Service
    Attn: Pre-Approved Plans Coordinator
    P.O. Box 2508, Room 5106
    Cincinnati, OH 45202

  2. The coordinator will review the information to determine if further action is necessary.

7.11.1.22.4  (09-23-2014)
Listing of Required Modifications (LRM)

  1. These information packages assist sponsors of Master & Prototype plans draft plans to conform to applicable law and regulations. An LRM is updated for each major set of law changes, and for defined contribution and defined benefit plans separately. The LRMs are located at: http://www.irs.gov/Retirement-Plans/Listing-of-Required-Modifications-LRMs.

7.11.1.22.5  (09-23-2014)
Pre-Approved Plan with Revoked Opinion/Advisory Letter

  1. An opinion or advisory letter found to be in error or in violation of current IRS rules may be revoked. Revocation may be effected by:

    • A notice to the M&P sponsor or VS practitioner to which the letter was originally issued.

    • Regulation.

    • Revenue ruling.

    • Other statement published in the Internal Revenue Bulletin.

    Note:

    See Rev. Proc. 2011-49, section 22, for more information.

  2. If a specialist working a determination case finds that the employer has an advisory or opinion letter which has been revoked, then contact the pre-approved coordinator to verify.

  3. Generally, the specialist will return the case using the procedures in IRM 7.11.1.15, Incomplete or Grossly Deficient Application. The taxpayer may resubmit as an individually designed plan using a Form 5300.

7.11.1.23  (09-23-2014)
Delayed Determination Letter Conference

  1. If an application for a determination letter has been pending for at least 270 days, the taxpayer has the right to a conference with the EP Determinations Manager concerning the status of the application.

  2. The conference may be by phone or in person. During the conference, the discussion will be limited to processing procedures only.

  3. A request for a conference with the EP Determinations Manager is to be made in writing and is to be sent to the specialist assigned to review the application or, if the taxpayer does not know who is reviewing the application, to the EP Determinations Manager at the appropriate address listed in Exhibit 7.11.1-1.

  4. No tape, stenographic, or other verbatim recording of a status conference may be made by any party. Subsequent conferences may also be requested if at least 90 days have passed since the last preceding conference.

  5. For more details, see Rev. Proc. 2014-6 (revised annually), section 6.21.

7.11.1.23.1  (09-23-2014)
Determination Letters not Issued Within 270 Days

  1. A plan sponsor requesting a determination letter may seek a declaratory judgment by the Tax Court if the Service fails to issue a DL within 270 days after the case's control date. IRC 7476(a).

  2. IRC 7476(b)(3) requires the taxpayer to exhaust all administrative remedies before a declaratory judgment will be made. Three of these remedies include:

    • Filing a complete application under Rev. Proc. 2014-6 (revised annually).

    • Properly filing the notice to interested parties as set forth in Rev. Proc. 2014-6 (revised annually), section 18 and Treas. Reg. 1.7476-2.

    • Appealing to the appropriate appeals office pursuant Treas. Reg. 601.201(o)(6) in the event a notice of proposed adverse determination is issued by EP Determinations.

  3. Consideration of relief under IRC 7805(b) will be included as one of the taxpayer's steps in exhausting administrative remedies. This is the case only if the taxpayer requests EP Determinations to seek technical advice from EP Technical on the applicability of such relief. The taxpayer's request must be made in writing. See IRM 7.11.12, Preparing Technical Advice Requests.

7.11.1.24  (09-23-2014)
60-Day Period

  1. Cases can be closed off of EDS and DLs issued without any holding period for the following types of plans, which are NOT subject to comments by Interested Parties, DOL and PBGC:

    1. A plan which has not at any time after September 2, 1974, provided for employer contributions

    2. A plan established and maintained by a society, order, or association described in IRC 501(c)(8) or (9) if no part of the contributions to, or under, such plan are made by employers of participants in such plan

    3. Specimen plans or basic plan documents of practitioners requesting advisory/opinion letters (not the plan of any specific employer)

  2. All other plans must be held for 60 days from the control date to allow for interested party comments.

  3. When interested party comments arrive after the analysis of the plan, but prior to issuance of a FDL, give appropriate consideration to the comments. See IRM 7.11.1.28, Interested Party Comments.

7.11.1.25  (09-23-2014)
Abusive Transactions/Listed Transactions

  1. The Abusive Tax Avoidance Transactions (ATATs) group handles tax schemes that promise large deductions, divert reportable income, or promise tax free distributions. When a possible transaction or scheme is detected, discuss with the manager and then, if appropriate, contact the EP ATAT coordinator.

  2. A specialist may encounter plan types that appear abusive or are novel in design. Specialists, with managerial approval, should complete and email the following form to the ATAT group: http://tege.web.irs.gov/lib/my-job/EP_Emerging_Issues_Form.pdf

  3. The ATAT group has jurisdiction over several listed transactions including but not limited to:

    • IRC 401(k) accelerated deductions.

    • S Corporations ESOPs.

    • Abusive use of insurance in retirement plans - IRC 412(i).

7.11.1.25.1  (09-23-2014)
Procedures for Listed Transactions

  1. A listed transaction is a transaction that is the same as or substantially similar to a type of transaction identified as a tax avoidance transaction. Treas. Reg. 1.6011-4(b)(2). A transaction is "substantially similar" to a listed transaction when it is “expected to obtain the same or similar types of tax consequences” and is either factually similar to a listed transaction or is based on the same or similar tax strategy.

  2. When a Listed Transaction is identified during a determination letter request, the issue should be developed in accordance with the procedures below:

    1. Discuss the case with manager.

    2. Complete a Form 5666, TE/GE Information Report in accordance with IRM 7.11.10, EP Examination and Fraud Referral Procedures and forward to the EP Tax Shelter Coordinator by one of the methods below:

      1. Send a secure email to tegeepsheltercoord@irs.gov
      2. Mail to:
      Internal Revenue Service
      EP Classification Unit: Tax Shelter Coordinator
      9350 Flair Drive
      El Monte, CA 91731-2828
      3. EFax form to 1-877-801-3614
    3. Contact the EP Technical Consultant for the listed transaction regarding the current enforcement strategy.

7.11.1.26  (09-23-2014)
International Issues

  1. Specialists are required to complete the International Worksheet (rev. July 2014) only if the Form 5300 series application includes one or more of the following issues:

    • The sponsor is a non-U.S. company or non-U.S. Territory.

    • The trust is a foreign trust or U.S. Territory trust.

    • The plan has dual qualification under IRC 401(a) and the Puerto Rico Internal Revenue Code (P.R. IRC).

    • The Puerto Rican plan makes an ERISA section 1022(i)(2) election.

  2. The worksheet is found on the shared sever in the "International Issues" folder. A copy of the worksheet is also in Exhibit 7.11.1-4, International Worksheet.

  3. After filling out an electronic worksheet, the specialist should forward the form to the group manager for their digital signature. The completed form should be emailed to the appropriate EP QAS reviewer. The worksheet will help decide which reviewer it should be emailed to depending on the issues brought up.

  4. If either of the following potential qualification issues are discovered, an examination referral under IRM 7.11.10 , EP Examination and Fraud Referral Procedures is required:

    • Foreign trust with a group trust, Rev. Rul. 2011-1 exempts Puerto Rican trusts that participated in group trusts as of January 10, 2011.

    • Transfer of assets and/or liabilities to or from a U.S. qualified trust to or from a foreign trust, Notice 2012-6 exempts transfers to a separate Puerto Rican trust before January 1, 2013.

  5. Any time spent working on potential international issues should be reported on Web-Based Employee Technical Time System (WebETS) using activity code 301 and project code 0060. This includes both direct case time and any ancillary time spent working on customer inquiries.

7.11.1.27  (09-23-2014)
Qualification issues for Certain Plans of Puerto Rico

  1. There are two types of retirement plans that benefit Puerto Rico participants that may submit an application for determination letter:

    1. Dual-qualified plans (Domestic sponsor and trust that also operates in Puerto Rico and intends to satisfy both Puerto Rican and U.S. laws)

    2. Plans described in ERISA § 1022(i)(2) (Trust established in Puerto Rico for which an election is made to qualify under U.S. law).

7.11.1.27.1  (09-23-2014)
Dual-Qualified Plans

  1. Dual-qualified plans have trusts sited in the U.S. but are intended to qualify under the P.R. IRC as well as IRC 401(a).

  2. The provisions that apply for Puerto Rican employees may not be included in the plan document but should be incorporated in a separate addendum.

  3. The determination letters should include the following custom caveat: "The favorable determination letter provides reliance to the plan provisions that comply with the requirements of IRC 401(a). This determination letter does not apply to the addendum that is intended to comply with the Puerto Rico Internal Revenue Code."

7.11.1.27.2  (09-23-2014)
Puerto Rican Plan Election Under ERISA section 1022(i)(2)

  1. In order to be a qualified plan under IRC 401(a), a trust must be created/established in the United States. ERISA section 1022(i)(2) provides an exception that trusts created/established in Puerto Rico are to be treated as trusts created/established in the United States (if they make a written election to be treated as such).

  2. Treas. Reg. 1.401(a)-50(b) adds that the election can be made in one of the following ways:

    1. Register the election with the Director's Representative (currently the Senior Commissioner's Representative) of the Service in Puerto Rico.

    2. File the election as part of an application for a determination letter from the Service.

  3. If a specialist reviewing a DL application discovers an ERISA section 1022(i)(2) election, they must process the election as follows:

    1. Review the plan document to determine if the requirements of IRC 401(a) are satisfied.

    2. If qualified, make a copy of the Form 5300/5307 and the written election and mail along with a Form 3210 or fax to QAS. QAS will forward the documents to the EP Determinations Staff Assistant.

    3. Issue favorable determination letter and close case.

  4. The Staff Assistant, EP Determinations will maintain copies of all elections received in the EP Determinations Functional Files. The staff assistant must also acknowledge receipt of all elections.

    Note:

    If the trust is registered with the Director's Representative (currently the Senior Commissioner's Representative) of the Service in Puerto Rico as described above, the Commissioner's Representative is required to send the election to the staff assistant. If this happens, the staff assistant must establish the plan on EDS, close the plan on EDS using code "30" , and make a copy of the written election which should be held in EP Functional Files. The original election along with any other related documents should be sent to Federal Records.

7.11.1.28  (09-23-2014)
Interested Party Comments

  1. A plan sponsor is required to give notice to interested parties prior to submission of an application for determination of a plan's qualified status in accordance with the provisions of Rev. Proc. 2014-6 (revised annually).

  2. Interested parties are defined in Treas. Reg. 1.7476-1(b) and generally include all present employees of the employer who are eligible to participate in the plan and all other present employees of the employer whose principal place of employment is the same as that of the employees eligible to participate in the plan. In cases involving plan terminations, interested parties also include former employees with accrued benefits under the plan and beneficiaries of deceased former employees with vested benefits under the plan.

  3. Interested parties may submit their comments to the DOL or directly to the Service. If an interested party or group of interested parties submits their comments to DOL, the interested parties may request DOL to comment on the application to the Service. The DOL then forwards the interested party comments to the Service with comments of its own, if appropriate.

  4. Interested party comments should be associated with the determination application as soon as administratively possible. Comments must be submitted by the 45th day after the date the application for determination is received by EP Determinations to be considered during the review of the plan. Comments that have been submitted to DOL are subject to additional rules, see Rev. Proc. 2014-6 (revised annually), section 17 for further explanation.

  5. The following steps should be taken when the specialist receives an interested party comment:

    1. Immediately send an Acknowledgement letter to the interested party.

    2. Consider the comments as part of the DL review and clearly document the Form 5621 of the effect the comments had on the final determination.

  6. Interested parties are not entitled to confidentiality. Anonymous comments will not be considered interested party comments. If an interested party contacts the specialist and indicates that he wishes to submit anonymous comments, the specialist should explain the non-confidentiality aspect and also advise the party that we will be unable to notify him of our final decision on the application submitted. While we will not provide a copy of the anonymous comments to the employer, it is still possible that the employer may view the comments if the application is subject to public disclosure. This IRM does not attempt to address this issue, so the specialist should contact a disclosure specialist if the situation arises.

  7. If the determination is favorable, prepare a Pattern Letter 1935 for each participant that submitted an interested party comment in addition to the normal closing procedures. Each interested party that submitted comments should receive a Pattern Letter 1935 which thanks the individual for their comment and provides 92 days to petition the U.S. Tax Court if they disagree with the determination. The plan sponsor should receive a Pattern Letter 1939 which notifies them that interested party comments were submitted. A copy of the favorable letter should be attached to each Letter 1935. The letters will not be mailed by the specialist; they will remain in the case file to be ultimately mailed by QAS.

  8. If the determination is unfavorable, follow the normal adverse procedures. The specialist should also prepare a Pattern Letter 1935 on EDS for each interested party that submitted comments but not a Pattern Letter 1939. A copy of the adverse letter should be attached to each Letter 1935. The letters will not be mailed by the specialist; they will remain in the case file to be ultimately mailed by QAS.

  9. Care should be taken to avoid improper disclosures to the interested party. Information regarding the interested party comments can be solicited from the interested party. However, actions taken with regard to the determination application should not be disclosed to the interested party. QAS will review the case and mail the appropriate letter(s) and close the case. The case will remain in QAS for at least 92 days as outlined in Letter 1935.

  10. Interested party comments make the case Mandatory Review. A Form 3198, TE/GE Special Handling Notice should be prepared. Mark the Form 3198 "Mandatory Review - Interested Party Comments" .

  11. If litigation by an interested party may be reasonably anticipated, QAS may forward the case for pre-issuance review by Counsel.

  12. See Rev. Proc. 2014-6 (revised annually), sections 17 and 18 for additional information

  13. The Code of Federal Regulations (CFR) specifically provides that all interested party comments will be made available to the plan sponsor. See Reg. 601.201(o)(5)(v). If a plan sponsor, upon receipt of Pattern Letter 1939, contacts the specialist to request copies of the comments, contact QAS to obtain copies of the comments.

  14. To find template copies of each of the required letters:

    • Go to the shared server.

    • Click on the Letters and Forms folder.

    • Click on the Letters and Faxes folder.

    • Click on the Int Party Comments folder.

7.11.1.29  (09-23-2014)
Affiliated Service Groups and Leased Employees

  1. A DL will cover IRC 414(m) (Affiliated Service Groups) and/or IRC 414(n) (Leased Employees) only if the employer specifically requests such a determination. The information required by Rev. Proc. 2014-6 (revised annually), sections 14.09 and/or 14.10 must be attached.

  2. The DL must be requested using a Form 5300. A Form 5307 cannot be used for this purpose even if the retirement plan is a pre-approved document.

  3. If the employer requests one of these rulings, the DL issued to the employer will state that questions arising under IRC 414(m) or 414(n) have been considered, and that the plan satisfies qualification requirements relating to that section. Absent such a statement, a DL does not apply to any qualification issue arising by reason of such provisions. See IRM 7.11.5, Proper Use of Determination Letter Caveats, for which caveats to include on the DL.

7.11.1.30  (09-23-2014)
Church Plans

  1. Church plans are normally exempt from Title I of ERISA, commonly referred to as a non-electing church plan under IRC 414(e). However if they elect coverage under Title I of ERISA they would be subject to the qualification requirements of 401(a).

  2. Notice 2001-46 provides that non-electing church plans will be deemed to satisfy the regulations under IRC 401(a)(4), 401(a)(5), 401(l) and 414(s) until further notice, but in no case earlier than the first plan year beginning on or after January 1, 2003. For plan years beginning before that effective date, non-electing church plans must be operated in accordance with a reasonable, good faith interpretation of these statutory provisions until the time such notice is provided.

7.11.1.31  (09-23-2014)
Application Involving Plan Merger or Consolidation, Spinoff, or Transfer of Plan Assets or Liabilities

  1. EP Determinations does not rule directly on any plan mergers, consolidations, spinoffs or transfers, however, the Service frequently encounters DL applications for ongoing and terminating plans which were previously involved in mergers, etc.

    1. "Merger" or "Consolidation" means the combining of two or more plans into a single plan. A merger or consolidation will not occur merely because one or more corporations undergo reorganization (whether or not taxable). Furthermore, a merger or consolidation will not occur if two plans are not combined into a single plan, such as by using one trust which limits the availability of assets of one plan to provide benefits to participants and beneficiaries of only that plan. Treas. Reg. 1.414(l)-1(b)(2)

    2. "Spinoff" means the splitting of a single plan into two or more plans. Treas. Reg. 1.414(l)-1(b)(4)

    3. A "transfer of assets or liabilities" occurs when there is a diminution of assets or liabilities with respect to one plan and the acquisition of these assets or the assumption of these liabilities by another plan. Treas. Reg. 1.414(l)-1(b)(3)

  2. Plans involved in these types of transactions require special considerations during a determination letter review. For these types a cases, the normal case review procedures still apply; however, the following is also required:

    1. Verification of prior law compliance for ALL plans. (See IRM 7.11.1.9, Determining the Scope/Verifying Prior Law.)

    2. Verification that protected benefits are still available.

    3. Verification that the merger agreement/amendment was timely adopted.

  3. To verify prior law compliance for applications involving a merger, consolidation, or spinoff, obtain verification that all involved plans were updated for all law at the time of the merger/spinoff. Also, verify that the surviving plan has continued to be updated for all law. See IRM 7.11.1.9, Determining the Scope/Verifying Prior Law.

  4. IRC 401(a)(12) and IRC 414(l) provide that participants must be entitled to benefits after the merger, consolidation, or transfer that are equal to or greater than the benefits immediately prior to the merger, consolidation, or transfer (if the plan then terminated). The specialist should:

    1. Ensure that vesting benefits are not reduced.

    2. Ensure that special benefits, rights, and features have not been reduced.

    3. If a pension plan merges with a non-pension plan, ensure that benefits from the pension plan may still be distributed using Joint and Survivor Annuities.

  5. When reviewing an application with a spin-off, special consideration should be made to see if a "spinoff/termination" or "termination/reestablishment" transaction has occurred. Under a typical "spinoff/termination" transaction, an employer:

    1. Splits an overfunded defined benefit plan into two defined benefit plans, one for its active employees and one covering its retirees.

    2. Allocates the excess assets to the plan covering the retirees.

    3. Terminates the retirees' plan and receives the excess assets.

    4. Continues to maintain the defined benefit plan for the active employees after the transaction.

    Under a "termination/reestablishment" an employer typically terminates an overfunded defined benefit plan, receives the excess assets, and then establishes a new defined benefit plan covering the active employees. In the event a specialist encounters a determination letter request involving a defined benefit plan where a "termination/reestablishment" or "spinoff/termination" has occurred, see IRM 7.12.1.20.1, Overfunded DB Plan at Termination.

  6. The effective date of a merger or spinoff shall be determined on the basis of the facts and circumstances of the particular situation. For purposes of this determination, the following factors, none of which is necessarily controlling, are relevant:

    1. The date on which the affected employees stop accruing benefits under one plan and begin coverage and benefit accruals under another plan.

    2. The date as of which the amount of assets to be eventually transferred is calculated.

    3. If the merger or spinoff agreement provides that interest is to accrue from a certain date to the date of actual transfer, the date from which such interest will accrue.

  7. A favorable determination letter for the surviving plan may be relied upon with respect to whether the merged plans were timely and correctly amended for new tax law. It is for this reason that only the amendments for the surviving plan will be included on the favorable determination letter.

  8. If any issues are discovered in the case, an examination referral may be required. See IRM 7.11.10, EP Examination and Fraud Referral Procedures.

7.11.1.32  (09-23-2014)
Multiple Employer Plans

  1. A multiple employer plan is a plan maintained by two or more employers who are not related under IRC 414(b) (controlled groups), IRC 414(c) (trades or businesses under common control), or IRC 414(m) (affiliated service groups). Employers related under sections IRC 414(b), (c), or (m) of the Code are treated as a single employer for determining the number of employers maintaining a multiple employer plan. Multiple employer plans are governed by the rules in IRC 413(c). See IRM 7.11.7, Multiple Employer Plans.

    Caution:

    The rules of IRC 413(c) do not apply to collectively bargained multiemployer plans described in Treas. Reg. 1.413-1(a). See IRM 7.11.6, Multiemployer Plans.

7.11.1.33  (09-23-2014)
Government Plans

  1. Governmental Plans are defined in IRC 414(d). These plans are exempt from several IRC 401(a) qualification requirements and are therefore worked under special procedures. See the Government Plan Info folder on the shared server (internal use only) for helpful job aids.

7.11.1.34  (09-23-2014)
Group Trust (Pooled Investment)

  1. A request for a DL on the status of a group trust is made by submitting a Form 5316, Application for Group or Pooled Trust Ruling.

  2. The following documents must be included in the request:

    1. A check for the appropriate user fee and Form 8717.

    2. A completed Form 5316.

    3. A copy of the trust’s latest determination letter, if applicable.

    4. The trust instrument and related documents.

    5. A written request demonstrating how the group trust satisfies the five criteria listed in Rev. Rul. 81-100 as clarified and modified by Rev. Rul. 2004-67 and Rev. Rul. 2011-1.

  3. Review the request to ensure that the five criteria were properly met.

  4. Use Pattern Letter 1520 (DO/CG), Letter for Group Trust Arrangement, to issue a FDL.

  5. See Rev. Proc. 2014-6 (revised annually), section 13 for more information.

7.11.1.35  (09-23-2014)
Administrative File

  1. The administrative file is the physical case established for each complete DL application received. It contains all accumulated documents associated with the processing of the application.

  2. The administrative file contains two types of documents:

    1. Administrative record (disclosable files)

    2. All other documents in the administrative file, such as the Form 5464-A, workpapers, or reviewer's memoranda (non-disclosable files)

  3. The case file, consisting of the initial submission material and all correspondence between the Service and the taxpayer, comprises the "administrative record" . These documents are placed on the right (disclosable) side of the case folder. All other documents are placed on the left side (non-disclosable) of the folder. (See Exhibit 7.11.1-2, Case File Assembly Guide)

    Note:

    When working a TEDS case, documents must still be organized in the correct folder (disclosable vs. non-disclosable). However, the exact order may vary.

  4. Each administrative file may be subject to review and consideration by Headquarters (Washington D.C.), Appeals, or the USTC (Tax Court).

  5. Only written communications between the parties are included in the administrative record considered in court cases. See 26 CFR 601.201(o)(8).

7.11.1.35.1  (09-23-2014)
Public Inspection Procedures

  1. Since September 2, 1974 (ERISA), the public has been able to inspect and obtain copies of disclosable parts of the administrative file.

  2. If a specialist receives a request for public inspection, forward the request to the address listed in Number 3 of Exhibit 7.11.1-1, Mailing Addresses. Assistance with requesting copies of employee plans related information, can be obtained by calling the toll-free telephone number 877-829-5500.

  3. EP Determinations coordinates with the requestor’s local Disclosure Office to arrange for copies.

  4. If the plan has 25 or fewer participants, the entire record is non-disclosable. Only properly identified plan participants may inspect these files.

  5. The procedures for public disclosure are found in IRC 6104(a)(1)(B), (C), and (D), IRM 11.3.10, and Treas. Reg. 26 CFR 301.6104.

7.11.1.35.2  (09-23-2014)
Federal Records Center

  1. Federal Records Center retains the administrative files of ongoing and terminated plans for ten years.

  2. Administrative files may be retired to the Federal Record Center immediately after closing the DL case and purging unnecessary materials, unless:

    1. A final adverse letter has been issued.

    2. Interested party comments have been received.

    3. Specialist or manager believes there is a potential for litigation.

  3. Manager, EP Determinations, may decide that:

    1. Certain information will be retained from administrative files to efficiently respond to taxpayer requests for corrected determination letters.

    2. The entire file will be held for a designated period (e.g., 60 to 90 days) before retiring it to the Federal Records Center.

  4. To obtain a copy of the administrative file from the Federal Records Center complete the request form (internal use only) that can be found in the Forms folder within the Letters & Forms folder on the shared server.

  5. For all cases processed on TEDS, electronic copy is held indefinitely.

7.11.1.36  (09-23-2014)
Plan Document Failures/Qualification Issues

  1. If a plan has a Plan Document Failure or Qualification Issue as described in Rev. Proc. 2013-12, the taxpayer should be offered an opportunity to correct the failure(s) under the Employee Plans Compliance Resolution System (EPCRS). See IRM 7.2.2, EPCRS.

  2. The EPCRS correction method for EP Determinations is the Closing Agreement Program. EP Determinations is represented by two Areas. Each of the two areas has a QAS designated Closing Agreement Coordinator.

  3. The procedures for this program are located in IRM 7.11.8, Employee Plans Determination Letter Program, EP Determination Closing Agreement Program.

7.11.1.37  (09-23-2014)
Normal Retirement Age for Pension Plans - Final Regulations

  1. On May 22, 2007, Final Regulations were issued under IRC 401(a) that addressed the definition of normal retirement age (NRA) for a qualified pension plans.

  2. Under the new rules, the following procedures apply:

    If: Then:
    On or after May 22, 2007, the plan, including Money Purchase Pension Plans (MPPP) and Profit Sharing Plans which maintain money from a merged MPPP had either a) or b):
    1. a NRA of 62 or greater

    2. if substantially all of the participants are qualified safety employees and the NRA is at least 50

    the plan is deemed to be in compliance with the Final Regulations; therefore the determination letter may be issued without further consideration.
    On or after May 22, 2007, the plan, including Money Purchase Pension Plans (MPPP) and Profit Sharing Plans which maintain money from a merged MPPP had either a) or b):
    1. an NRA less that 62 (even if later amended)

    2. if substantially all of the participants are qualified public safety employees and their NRA was less than 50 (even if later amended)

    complete NRA Checksheet located on the shared server in the "NRA Final Regulations" folder and send to QAS who will help determine whether the plan was in compliance with the Final Regulations.

Exhibit 7.11.1-1 
Mailing Address List

Application Forms 5300, 5307, 5309, 5310, and 5316 should be sent to the Cincinnati Service Processing Center at the following address:

  Internal Revenue Service
  PO Box 12192
  Covington, KY 41012-0192

Express mail or delivery service should be sent to:

  Internal Revenue Service
  201 West Rivercenter Blvd
  Attn: Extracting Stop 312
  Covington, KY 41011

The mailing address for the EP Determinations centralized site is as follows:

  Internal Revenue Service
  PO Box 2508
  Cincinnati, OH 45201

Express mail or delivery service should be sent to;

  Internal Revenue Service
  550 Main Street
  Cincinnati, OH 45202
The following additional identifiers should be added to the above addresses for the Centralized site:
Volume Submitter Coordinator - VSC - Room 5106
Master & Prototype Coordinator - M&PC - Room 5106
Records Unit - Room 4010
Manager, EP Determinations - Room 5120
Manager, EP Determinations Quality Assurance - Room 7008
Staff Assistant, EP Determinations - Room 5021
EP User Fee Issues - Room 2405
EP User Fee Adjustments Clerk - Room 4024F
EP Determination Letter Corrections - Room 4024

Exhibit 7.11.1-2 
Case File Assembly Guide

1- In unagreed/adverse letter cases, or in cases where a request for public inspection is received, an index must be prepared. This index should list all of the pertinent material on the right side of the folder. The material on the right side should be tabbed in accordance with the index and fastened to the folder.

2- For all unagreed/adverse letter cases a report (Attachment A) should be prepared explaining why the plan does not qualify. This report should contain sections covering FACTS, LAW, CONCLUSION and the TAXPAYER’S POSITION. The original plus one copy should be left loose in the file. A file copy should be initialed by the group manager and fastened in the file.

4- All material to be purged should be clearly labeled as such and will be placed as the last item on the right side of the folder. Original Forms should not be purged. Nothing should be marked "purge" on unagreed/adverse letter cases. NOTE: The case should not be purged at the group level.

5- If a Form 3198-A, Special Handling Notice, is required, it should be stapled to the outside of the folder.

6- Note to TEDS users, generally it is not necessary to rearrange items that are inconsistent with these instructions until such time the mechanism is done instantaneously. However, if non-disclosable items are on the “right side” of the “folder” these items should be moved to the left side most preferably in their correct order. In addition, items added to the file should be placed in the proper order if it makes sense. Finally, if important items are so out of order that a future user would not be able to find the item readily, for the right side, a note should be added to the file as an index to the case file. For the left side a note in the 5621 would suffice.

Left Side/ Top to Bottom Right Side/ Top to Bottom
Form 5666, EP/EO Referral and attachments, if applicable. Original and file copy. File copy of the unagreed report, if applicable.
Form 5464-A, Case Chronology Record (chronological, most recent on top). Most recent case closing sheet (Form 8671).
Form 6088, Distributable Benefits from Employee Pension Benefit Plans. Determination letters for the current application. There should be a copy for the taxpayer, and POA (if applicable) and a file copy for both, if applicable.
Form 5621, Technical Analysis Control Sheet. The final letter to Interested Parties and the final letter to the employer regarding interested party comments.
A copy of the official report when the Service makes an investigation regarding the facts as submitted by the taxpayer or in comments submitted by interested parties. Form 8717, User Fee Request for Determination Application.
Worksheets prepared by the specialist, and any Alert Guideline Worksheets or locally developed workpapers, notes and any internal communication regarding the case. Form 2848, Power of Attorney and Declaration of Representation or Form 8821, Tax Information Authorization
Form 5456, Reviewer’s Memorandum and Form 5457, Response to Reviewer’s Memorandum. See Treas. Reg. 301.6104(a)-1(g) Last favorable determination letter.
Form 5402, Appeals Transmittal Memorandum, and supporting statements along with any Appeals workpapers, if applicable. See Treas. Reg. 301.6104(a)-1(g). Opinion letter (Master/Prototype, Regional Prototype, or Volume Submitter).
Other miscellaneous materials not disclosable as identified by disclosure regulation and IRM 11.3.10, Disclosure of Official Information - Employee Plans Information, including examination and deduction referral information or closing letters from prior audit. Form 8905, Certification of Intent To Adopt a Pre-approved Plan.
Plan amendments which contain employee identifying return and return information as described in IRC 6103(b) Application Form and all attachments.

Exception:

Any confidential information described in IRC 6103(b) (i.e., compensation information) should be placed on the left side of the folder due to disclosure issues.

Closing agreements, including related documents (workpapers, correspondence, etc.). Written correspondence between the Service and the taxpayer with respect to the request for determination (chronological, most recent on top).
Any demonstrations or documents that contain employee return and return information as described in IRC 6103(b) including but not limited to information on terminated participants and any internal faxes or emails. Any other documentation issued by the Service to the taxpayer regarding qualification.
  Interested Party Comments.
  Correspondence with Interested Parties with respect to their written Interested Party Comments.
  Amendments (chronological, most recent on top). The amendments may be marked in pencil for purpose, date effective, date adopted, why in or not included in the proposed closing letter.
  Plan and/or group annuity contract including any supplements to negotiated pension plans.
  Trust Instrument.
  Notice to interested parties.
  Supplemental data supporting the application (This includes statistical analysis, such as turnover data, coverage, balance sheets, etc.).
  Miscellaneous materials and correspondence relating to the application, such as copies of insurance contracts.
  Purge material, mark items as "Purge" in pencil. (Only applicable for Agreed/Favorable Letter Cases) Purge material includes: duplicates, blank forms, envelopes (unless postmark date has 401(b) significance), Summary Plan Descriptions, Collective Bargaining Agreements, except those that are supplements to negotiated pension plans, plans/amendments pre-dating the LFDL unless they are being used to verify RAP.

Exhibit 7.11.1-3 
Code Sections which may be Incorporated by Reference

PERMITTED SECTIONS (some or all incorporation by reference allowed) AUTHORITY
IRC 401(a)(9) - Notwithstanding any other provision of law, except as provided in the Regulations, a plan may incorporate by reference the requirements of 401(a)(9). However, Treas. Reg. 1.401(a)(9)-1, A-3, states: "In order to satisfy 401(a)(9), the plan must include the provisions described in this paragraph reflecting 401(a)(9). First, the plan must generally set forth the statutory rules of section 401(a)(9), including the incidental death benefit requirement in 401(a)(9)(G). Second, the plan must provide that distributions will be made in accordance with this section and 1.401(a)(9)-2 through 1.401(a)(9)-9. The plan document must also provide that the provisions reflecting 401(a)(9) override any distribution options in the plan inconsistent with 401(a)(9). The plan also must include any other provisions reflecting 401(a)(9) that are prescribed by the Commissioner in revenue rulings, notices, and other guidance published in the Internal Revenue Bulletin." P.L. 99-514, 1121(d)(3)-(5), as amended by P.L. 100-647, 1011A(a)(3)-(4), and Treas. Reg. 1.401(a)(9)-1, A-3
IRC 401(a)(17) - Governmental Plans - annual compensation limits Treas. Reg. 1.401(a)(17)-1(d)(4)(ii)(C).
IRC 401(a)(17)(B) - Cost of Living Increases Treas. Reg. 1.401(a)(17)-1(a)(3)
IRC 401(a)(30) - Limit on Elective Deferrals - A plan may incorporate the applicable limits by reference. Treas. Reg. 1.401(a)-30(a)
IRC 401(k)(3), Treas. Reg. 1.401(k)-2 - ADP test generally may be incorporated by reference, except as provided under 1.401(k)-1(e)(7). Treas. Reg. 1.401(k)-1(e)(7)
IRC 401(m)(2), Treas. Reg. 1.401(m)-2 - ACP test may be incorporated by reference, except as provided under Treas. Reg. 1.401(m)-1(c)(2). Treas. Reg. 1.401(m)-1(c)(2)
IRC 402(g) - Annual Limit - The dollar limitation under IRC 402(g) may be incorporated by reference. Treas. Reg. 1.401(a)-30(a) and P.L. 100-647, 1011(c)(10).
IRC 410(a)(3), IRC 411(a)(5), DOL Regulation 2530.200b-2(b) & (c) - The definition of hours of service must be in the plan document, but the rules for determining hours of service for reasons other than the performance of duties and crediting hours of service to computation periods may be incorporated by reference. DOL Regulation 2530.200b-2(f).
IRC 414(u) - USERRA P.L. 103-353 (USERRA), P.L. 104-188 (SBJPA), sec. 1704(n) Rev. Proc. 96-49, (Oct. 21, 1996)
IRC 415 - Limitations may be incorporated. Plan provisions must preclude the possibility that the limit under 415 will be exceeded. If a requirement can be applied in more than one manner, the plan must specify the manner in which the requirement will be met unless the Code or the regulations provide a default rule which the plan will follow. For example, the plan must include the following: Notice 87-21, Q&A 11 (Feb. 9, 1987) and Treas. Reg. 1.415(a)-1(d)(3).
IRC 415(b) - how adjustments are made if there are two or more DB plans.
IRC 415(c) - how adjustments are made if there are two or more DC plans.
IRC 415(c)(3) - Treas. Reg. 1.415(c)-2(a) provides that compensation from the employer within the meaning of section 415(c)(3), which is used for purposes of section 415 and regulations promulgated under section 415, means all items of remuneration described in 1.415(c)-2(b), but excludes the items of remuneration described in 1.415(c)-2(c). Section 415 compensation does not require any additional language if the plan intends to use the general definition in 1.415(c)-2(a). However, if the plan intends to use one of the safe harbors in 1.415(c)-2(d), then it must specify which safe harbor definitions in 1.415(c)-2(d)(2), (3), or (4) it intends to use.
415(d) - A plan may incorporate by reference the annual adjustments to the limitations of 415 that are made pursuant to 415(d).
Treas. Reg. 1.415(a)-1(d)(3)(v)
IRC 416 - If the employer has only one plan, a single benefit structure that will always satisfy 416, and the vesting schedule will always satisfy 416, then NO 416 language is required. Treas. Reg. 1.416-1 Q&A T-36(a) & (c)
IRC 416(i) - Criteria for determining key employees and non-key employees, but the definition of compensation must be specified in the plan. Treas. Reg. 1.416-1, Q&A T-36(b)
IRC 416(g) - description of how the top-heavy ratio is computed may be incorporated by reference. Treas. Reg. 1.416-1, Q&A T-36(b)
IRC 417(e)(3) - Applicable Mortality Table for Purposes of 417(e) and 415(b) - A plan amendment may incorporate by reference the applicable mortality table under IRC 417(e)(3). Rev. Rul. 2007-67 (November 6, 2007). Effective for plan years that begin after December 31, 2007.

Exhibit 7.11.1-4 
International Worksheet

EP DETERMINATIONS INTERNATIONAL WORKSHEET Rev. July 2014
   
Plan Sponsor: _____________________ EIN: __________________
TEDS #: _____________________ Specialist Name/Date: ___________________
Manager’s Approval/Digital Signature:_______________ Group #: ________________
Refer to IRM 7.11.1.26
 
Determination specialists are required to complete this International Worksheet only if the Form 5300 series application includes one or more of the following issues:  
1. The sponsor is a non U.S. company;
2. The trust is a foreign trust or U.S. Territory trust;
3. The sponsor is in Puerto Rico. (The application is an ERISA section 1022(i)(2) election);
4. The plan is dual qualified under the IRC and Puerto Rico Internal Revenue Code.
 
 
The worksheet should be digitally signed by the group manager and sent via secure email to EP Quality Assurance. The worksheet should be included on the (non-disclosable) left side of the case file.  
Time applied to complete the International Worksheet and address related international issues should be charged to International Project - Code 0060, with approval from the group manager.  
The following qualification failures must be coordinated with EP Examinations:
Transfer of assets and/or liabilities to or from a U.S. qualified trust to a foreign trust;
Revenue Ruling 2008-40 provides that a transfer of assets and liabilities to or from a qualified trust to a nonqualified foreign trust organized anywhere outside the U.S. is a taxable distribution that will disqualify the transferor plan.
 
Send supporting documentation to EP Quality Assurance. EP QA will assist with preparation of the Form 5666 and coordinate with EP Examinations. Suspend the case pending guidance from EP Examinations.  
   
PART I: Foreign sponsors other than in the U.S. Territories:
1. Does the plan have a foreign plan sponsor?
Yes__ No__ Plan section(s)_______
 
2. Is the trust a foreign trust? Yes__ No__
If yes; the letters 2002 should include the caveats 29 and 30; and the 1132 letter should include the caveats 36 and 37.
 
3. Does the foreign trust invest in a group trust? Yes__ No__Trust section(s)______
If yes and the foreign trust is other than a Puerto Rico trust and invest in group trust, submit the Form 5666 to EP QA and suspend the determination letter.
 
4. Has or does the plan intend to transfer of assets or liabilities to or from a U.S. trust or a foreign trust? Yes__ No__
If yes, and the transfer is to other than to a Puerto Rican trust or to Puerto Rico trust after 1/1/13, submit the Form 5666 to EP QA and suspend the determination letter.
 
   
PART II: U.S. Territory Plan Issues:  
There are two types of retirement plans that benefit Puerto Rico participants that may submit an application for determination letter:
1: Plans described in ERISA § 1022(i)(2) (Trust established in Puerto Rico for which an election is made to qualify under U.S. law); and
2: Dual-qualified plans (Domestic sponsor and trust that also operates in Puerto Rico and intends to satisfy both Puerto Rican and U.S. law).
 

1. Is the sponsor located in a U.S. territory? Yes__ No__Territory______
The U.S. territories include American Samoa, the Commonwealth of Northern Mariana Islands (CNMI), Guam, Puerto Rico, and the U.S. Virgin Islands (USVI).
 
2. Is the plan sponsor and trust located in the U.S. and the plan includes an addendum with provisions to comply with the Puerto Rico Internal Revenue Code that applies for employees located in Puerto Rico? Yes__ No__  
Dual qualified plans have trusts sited in the U.S. but are intended to qualify under the Puerto Rico IRC as well as IRC § 401(a). The provisions that apply for Puerto Rico employees may not be included in the plan document but should be incorporated in a separate addendum. If yes, the determination letters should include the following caveat:
The favorable determination letter provides reliance on the plan provisions that comply with the requirements of IRC § 401(a). This determination letter does not apply to the addendum that is intended to comply with the Puerto Rico Internal Revenue Code.
 
3. Is the plan sponsor and trust located in Puerto Rico? Yes__ No__  
Section 1022(i)(2) of ERISA provides that trusts created or organized in Puerto Rico may make an election to be treated as a trusts created or organized in the United States for purposes of § 401(a). The Form 5300 application for a determination letter from the IRS filed by a plan with a trust created or organized in Puerto Rico is treated as an irrevocable §1022(i)(2) election.  
Puerto Rico Trust Exemptions:
1) Rev. Rul. 2011-1 exempts U.S. qualified Puerto Rico plans and trusts that participated in group trusts as of Jan. 10, 2011 will continue to qualify.
2) Notice 2012-6 exempts a transfer to a separate Puerto Rico plan and trust by January 1, 2013.
 
Upon closing the case, forward a copy of the 5300 series application and the favorable determination letter to EP Quality Assurance. QAS will forward this to the EP Staff Assistant who will coordinate the election with the Puerto Rico Tax Authority.  

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