7.11.1 Employee Plans Determination Letter Program

Manual Transmittal

June 28, 2018

Purpose

(1) This transmits revised IRM 7.11.1, Employee Plans Determination Letter Program, Employee Plans Determination Letter Program.

Material Changes

(1) Updated and renamed IRM 7.11.11.1, Overview, to Program Scope and Objectives. Also added IRM 7.11.1.1.1, Background, IRM 7.11.1.1.2, Acronyms, as required by IRM 1.11.2.2.5.

(2) Updated IRM to reflect current versions of annual revenue procedures.

(3) Updated IRM 7.11.1.6, Ordering Cases, to eliminate the bucket system for ordering cases and remove the restriction on ordering cases on Mondays.

(4) Updated IRM 7.11.1.7.1, Incorrect Determination Letters, is renamed to Letter Reprint and Correction and updated to give more detailed instructions and to provide a new fax number (855-224-1311) for plan sponsors to request re-printed or corrected determination letters.

(5) Updated IRM 7.11.1.10.2, Specialist User Fee Responsibilities, to provide procedures when a plan sponsor paid a user fee and has a second application that the user fee should apply toward and also that the secretary emails the refund forms to the Adjustments clerk.

(6) Updated IRM 7.11.1.13, When Plans May Apply for a Determination Letter, and IRM 7.11.1.14, Procedural Completeness Review, to remove all references to Letter 5535, Open RAC Letter. The last Remedial Amendment Cycle (RAC) closed on January 31, 2017 so this letter is not used after that date.

(7) Updated IRM 7.11.1.14, Procedural Completeness Review, to show that the procedural and technical reviews are combined for Form 5310 applications and cases submitted under the post-RAC rules of Rev. Proc. 2016-37.

(8) Updated IRM 7.11.1.15.1, Technically Incomplete Cases, to add that the Letter 5888 is sent to a sponsor when they respond late, or not at all, to a Letter 5544 during a Form 5310 application review. This letter is also used for cases submitted on or after January 1, 2017 under the rules in Rev. Proc. 2016-37.

(9) Updated IRM 7.11.1.20, DL Cases with Related Voluntary Correction Submissions, and IRM 7.11.1.21, Suspense Cases, to clarify that cases with pending VCP applications should only be suspended if the VCP application is correcting failures that relate to the form of the plan. The DL application may be closed if the VCP application is only correcting operational issues.

(10) Updated IRM 7.11.1.21, Suspense Cases, to clarify that all cases that are suspended due to an EP Examination should be taken out of suspense after 6 months if they haven’t discovered issues that affect the determination case.

(11) Updated IRM 7.11.1.22, How to Close Case to Manager, to show that specialists should add the statement “Refund to be processed” to the final closing email if a refund is due to the plan sponsor.

(12) Updated IRM 7.11.1.29, Interested Party Comments, to clarify that QA will hold an interested party case for at least 91 days per IRC 7476(b)(5) and the Letter 1935.

Effect on Other Documents

IRM 7.11.1 dated June 19, 2017 is superseded.
Interim Guidance Memorandum #TEGE 04-0417-0014, dated April 7, 2017 is superseded.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(06-28-2018)

Robert S. Choi
Director, Employee Plans
Tax Exempt and Government Entities

Program Scope and Objectives

  1. Purpose: provides procedures and technical guidance to employees reviewing Determination Letter (DL) applications.

  2. Audience: Employee Plans (EP) Determinations and Quality Assurance (QA) staff

  3. Policy Owner: Director, EP

  4. Program Owner: EP

  5. Program Goals: EP Determinations’s goals are:

    1. Ensure that plans are in compliance with the tax laws by reviewing applications for DLs and opinion letters.

    2. Protect the public interest by applying the tax law with integrity and fairness to all.

Background

  1. Plan sponsors may submit requests for a DL using any of the application forms listed under IRM 7.11.1.3, Application Forms for EP Determination Letters.

  2. Plan sponsors may also submit requests for "pre-approved" opinion and advisory letters. EP Determinations reviews applications for opinion and advisory letters using the procedures in IRM 7.11.4, IRC Section 401(a) Pre-Approved Plans Program.

  3. The IRS Restructuring and Reform Act of 1998 (RRA ’98), Section 3705(a), provides identification requirements for all IRS employees working tax related matters.

    Note:

    In June of 2014 the IRS adopted the Taxpayer Bill of Rights (TBOR) therefore, consider these rights in every interaction you have with taxpayers, and embrace them as part of your work life every day. Even if you don’t work directly with the public, you support the overall mission of the IRS and it’s important to know these rights and how they apply. When we respect taxpayer rights, it’s good for tax administration, good for voluntary compliance with the tax law and most importantly, good for taxpayers. Find additional information on the IRS.gov website at - taxpayer bill of rights.

Acronyms

  1. These acronyms are used in this IRM:

    Acronym Term
    ASG Affiliated Service Groups
    CAP Audit Closing Agreement Program.
    CL Cumulative List
    DL Determination Letters
    DB Defined Benefit
    DC Defined Contribution
    EDS Employee Plans/Exempt Organizations Determination System
    EP Employee Plans
    EIN Employer Identification Number
    LFDL Last Favorable Determination Letter
    LGS Letter Generation Subsystem
    POA Power of Attorney
    QA Quality Assurance
    RAC Remedial Amendment Cycle
    RA List Required Amendment List
    SSN Social Security Number
    TEDS Tax Exempt Determination System
    TE/GE Tax Exempt and Government Entities
    VC Voluntary Compliance

Description of the EP Determinations Program

  1. The Tax Exempt and Government Entities (TE/GE) Director, Employee Plans has the authority to issue DLs and, when necessary, notices of proposed adverse determination. (Delegation Order 7-1 (formerly DO-112, Rev. 11)). The Director uses the current revenue procedures that list procedures for the IRS to issue DLs on the:

    1. Qualified status of pension, profit-sharing, stock bonus, and employee stock ownership plans (ESOPs) under IRC 401, IRC 403(a), IRC 409, and IRC 4975(e)(7).

    2. Status for exemption of any related trusts or custodial accounts under IRC 501(a).

      Exception:

      The Director doesn’t issue DLs involving application of IRC 502 (feeder organizations) or IRC 511 (unrelated business income).

  2. The Director may re-delegate this authority to Internal Revenue agents or tax law specialists at GS-11 or higher (collectively referred to as specialists). See IRM 1.2.46, Delegations of Authorities for the Rulings and Agreements Process.

    Note:

    See Delegation Orders by Process for a complete list of delegation orders governing EP Rulings and Agreements.

    Note:

    See IRM 7.1.1, Exhibit 7.1.1-1 for the major EP revenue procedures currently in effect.

  3. EP Determinations is part of EP Rulings and Agreements within TE/GE.

  4. DLs are generally issued in the name of the Director, EP Rulings and Agreements.

  5. EP Determinations Program is structured as follows:

    1. The Director, EP Rulings and Agreements oversees the EP Determinations Letter Program.

    2. Two area managers report directly to the Director, EP Rulings and Agreements.

    3. Frontline managers report to one of the two area managers and are responsible for a group of EP Determinations specialists.

    4. The Manager, EP Determinations Quality Assurance, with a staff of senior determination specialists, independently oversees the review of cases and ensures case quality.

      Note:

      QA reviews EP Determinations mandatory review cases or those selected for Tax Exempt Quality Measurement System (TEQMS) review. See IRM 7.11.3, Tax Exempt Quality Measurement System (TEQMS) and IRM 7.11.9, Mandatory and TEQMS Case Reviews. Complete Form 3198-A, TE/GE Special Handling Notice and attach it to the front of any case file you forward it to QA.

  6. Rev. Proc. 2018-4 (revised annually) provides directions on how to submit an application while Rev. Proc. 2016-37 provides directions on when to submit an application.

  7. In general, IRS reviews tax qualified plans for:

    1. Compliance with the form requirements (stated in IRC 401(a)).

    2. Whether a plan meets the safe-harbor nondiscrimination requirements if the plan sponsor specifically requests that they be considered.

Application Forms for EP Determination Letters

  1. Plan sponsors request DLs on these forms:

    Form # Form Title Purpose
    Form 5300 Application for Determination for Employee Benefit Plan Use for individually designed plans and for adopters of pre-approved plans under certain circumstances.
    Form 5307 Application for Determination for Adopters of Modified Volume Submitter Plans Use for volume submitter plans where the plan sponsor has made limited modification to the language of the approved specimen plan.
    Form 5309 Application for Determination of Employee Stock Ownership Plan Submit as an attachment to Form 5300 for ESOPs.
    Form 5310 Application for Determination for Terminating Plans Use for terminating plans, however, you must request a partial termination DL on Form 5300.
    Form 5316 Application for Group or Pooled Trust Ruling See IRM 7.11.1.32, Group Trust (Pooled Investment).
  2. See Rev. Proc. 2018-4 (revised annually) for more information on what plan sponsors must submit with the application.

Procedures When Not Authorized to Issue a DL

  1. Rev. Proc. 2018-4 (revised annually) sections 8.02 and 8.03 lists the plans types and issues that EP Determinations is/isn’t authorized to rule on.

  2. If EP Determinations isn’t authorized to issue a DL for the type of plan or issue submitted, return the case to the plan sponsor using these procedures:

    1. Complete Form 5621, Technical Analysis Control Sheet and add explanation of why not authorized to rule in the Notes section.

    2. Refund any user fee paid with the application. See IRM 7.11.1.10.2, Specialist User Fee Responsibilities.

    3. Prepare a Letter 1924 (DO/CG), Letter to Return Application if not Authorized to Rule. Use caveat 1 to show authority for returning case. See IRM 7.13.5, Letter Generation.

    4. Close case using closing code "03," Returned Incomplete.

    5. Complete the law indicator. If the plan has a prior DL, use the same law indicator as before. However, if the last law indicator for the prior law was anything but K, M, or J or if the plan has no prior DL, use "Z."

Computer Systems

  1. To process DL applications, EP Determinations uses two computer systems:

    • Employee Plans and Exempt Organization Determination System (EDS).

    • Tax Exempt Determination System (TEDS).

Employee Plans/Exempt Organizations Determination System (EDS)

  1. EDS is the system to process and control DL applications.

  2. EDS is used to close all cases. Cases flow to this system for final closure and creation of the DL for all cases except Auto Closures. The TEQMS selection process is also done in this system.

  3. TE/GE and EP management use EDS data to plan and make decisions.

  4. EDS guidance is listed in IRM 7.14.1, Employee Plans Determination System (EDS) User Manual - Introduction.

Tax Exempt Determination System (TEDS)

  1. TEDS is a paperless system. Documents are scanned into the system allowing specialists immediate access to case data.

  2. TEDS electronically stores the DL applications and subsequent related documents as images and case data in the Records Repository.

  3. DL applications can be processed in TEDS up to their closing, however all applications are closed and DLs generated on EDS.

  4. TEDS guidance is in IRM 7.15.1, Tax Exempt Determination System (TEDS), Employee Plans User Manual Introduction.

Initial Processing Procedures

  1. All EP application forms are sent to the Cincinnati Service Processing Center (CSPC) at the address listed in Rev. Proc. 2018-4, section 31.02.

    Exception:

    Form 4461, Application for Approval of Master or Prototype or Volume Submitter Defined Contribution Plans, Form 4461-A, Application for Approval of Master or Prototype or Volume Submitter Defined Benefit Plan, Form 4461-B, Application for Approval of Master or Prototype or Volume Submitter Plans are processed per IRM 7.11.4.

  2. Upon receipt, each DL application receives a control date, usually the postmark or received date, which starts the 270-day period under IRC 7476 for declaratory judgments for qualification of certain retirement plans. Correspondex creates an Acknowledgment Notice 3335C and it’s sent to the plan sponsor/POA.

    Note:

    DLs may not be issued until at least 60 days after the control date to permit time for interested parties, Department of Labor (DOL) and PBGC to submit comments. See IRM 7.11.1.26, 60-Day Period.

  3. CSPC employees process the user fee and establish the application into TEDS using the procedures in IRM 3.45.1, Processing Employee Plan and Exempt Organization Determination Applications and User Fees. This information is then rolled over to EDS.

  4. After an application is established on TEDS (usually in status 51 or 61), a specialist reviews it for procedural and technical correctness per IRM 7.11.1.14, Procedural Completeness Review and IRM 7.11.1.15, Technical Review.

    Exception:

    See IRM 7.11.1.16, Voluntary Correction and pre-February 1, 2015 Cases, for exceptions to this type of review.

Ordering Cases

  1. You (the specialist) are responsible for managing your own inventory. To order cases:

    1. Email the secretary of group 7525 and copy your manager, the manager of group 7526, the secretary of group 7536, and the clerks of groups 7530 and 7531

    2. Type in the subject line: Case Order

    3. Type in the email body: Please assign (number of cases requested) cases to me. I am a grade xx specialist in group xxxx.

    4. You may request cases any day of the week.

  2. Secretaries may take up to 24 hours to assign cases. They assign cases by grade in control date order.

  3. To the extent possible, a specialist should not review a plan sponsor's plan more than two times in a row. This minimizes the possibility of overlooking errors in plan design. This doesn’t mean that you couldn’t review several plans of a plan sponsor at the same time.

Favorable Determination Letters

  1. When you determine that the form of the plan is in compliance with IRC 401(a), create a favorable DL on EDS and close the case to the manager.

  2. You’re accountable for the DL’s accuracy. Use the information entered on the Form 5621, Technical Analysis Control Sheet, to enter the DL information into EDS. Also refer to these sources to help you generate the DL:

    1. IRM 7.11.5, Proper Use of Determination Letter Caveats.

    2. IRM 7.13.5, EP Automated Processing, Letter Generation.

    3. The application.

    4. Plan document(s) and amendment(s).

  3. After printing the DL, review the application package to ensure the names, addresses, and caveats are accurate before submitting the case to your group manager for approval.

  4. Group managers or their delegates may review each case to ensure:

    1. The DL is correct.

    2. All procedural requirements are satisfied.

  5. When the group manager/delegate finishes reviewing the case, they forward it to the secretary for final closure. At that time, the case may be randomly selected for TEQMS and/or mandatory review. Cases designated as "Mandatory" by EDS only apply to Form 5310. Complete Form 3198-A, TE/GE Special Handling Notice, and attach it to the front of any case file before you forward it to QA.

  6. The group manager closes TEDS cases in status 57.

  7. The secretary mails the DL via regular mail unless DOL, PBGC or interested parties comments were submitted. In that case, mail the DL using certified or registered mail. Don’t mail letters for cases selected for mandatory review. QA mails the letter after they review the case.

Letter Reprint and Correction

  1. You aren’t permitted to issue corrected DLs if you receive a call from a POA or plan sponsor when the prior issued letter was incorrect. If a DL contains incorrect information the caller may request correction from the letter correction unit. See IRM 7.11.1.7.1 (3).

  2. General requests for a copy of a letter take approximately three weeks. A corrected letter takes approximately 45 days.

  3. Plan sponsors/POAs may fax or mail requests for correction to the letter correction unit. The request should contain:

    • Copy of the letter that needs correction

    • Fax Number (if no fax number is given, the letter will be mailed to the address on record)

    • Form 2848

    • Phone Number

    • Detailed explanation of the error in the original DL (include copies of any amendments in question).

      Note:

      If the original DL references a proposed amendment, the plan sponsor must sign the proposed amendment within 91 days of the original DL date unless the error is directly related to the proposed amendment.

  4. Requests for a copy of a previously issued DL should contain:

    • Name of the plan sponsor

    • Plan sponsor’s EIN

    • Plan Number

    • Plan Name

    • Year the letter was issued (not required, but helpful)

    • Form 2848, if applicable

    • Phone Number

    • Fax Number (if no fax number is given, the letter will be mailed to the address on record)

    • Statement that the original letter was never received.

  5. The requester may fax their request to 855-224-1311 or mail it the Customer Service manager at the EP Determinations centralized site in Room 5-120. See Exhibit 7.11.1-1, Mailing Address List.

Case File Requirements

  1. Document the case file to support the conclusion you reached. You can use cycle worksheets, deficiency check sheets and individually designed work papers to meet this requirement. See the "Case Processing" folder on the shared server and discuss with your manager to determine which worksheets to complete for your cases.

  2. Electronically complete your work papers whenever possible. All work papers must contain:

    1. An explanation of non-routine abbreviations.

    2. The specialist name and date each work paper was prepared.

  3. For hardcopy cases, you may pencil adoption dates on plan and amendment documents. However, never deface the application. If you need to use the application as documentation, make a copy and use the copy as a work paper. Properly organize the case file per IRM 7.11.1.33, Administrative File. In addition to the above requirements, the work papers for hardcopy cases must be:

    1. Neat and legible.

    2. Organized and numbered for ease of review.

    3. Indexed and tabbed for cases not routinely closed with a favorable DL (such as, adverse letter).

  4. For TEDS cases, properly import work papers into TEDS per IRM 7.15, TEDS Manual.

Form 5621, Technical Analysis Control Sheet

  1. Complete a Form 5621 for every case. Use the appropriate version from the "Case Processing" folder on the shared server.

Form 5464-A, Case Chronology Record

  1. For TEDS cases, use the Case Chronology Record (CCR) on TEDS, not the Form 5464-A. Update the CCR as you work on the case. See IRM 7.15.7.10, Case Chronology Record.

  2. For hardcopy cases, use Form 5464-A, Case Chronology Record (CCR), to log all case actions and to assess case progress.

    Note:

    Management may use the form to monitor case management and your use of time.

  3. Don’t include technical or procedural issues and conclusions on Form 5464-A. Note them on Form 5621, or other work papers.

  4. Enter actions you perform on the case on the Form 5464-A:

    1. Action date.

    2. Time charged.

    3. Action code.

    4. Brief explanation, if the action code is insufficient.

    5. All names, titles and phone numbers for representatives, plan sponsors, and interested parties contacted.

    6. Follow-up dates for all actions.

Avoiding Inflammatory Language in Case Files

  1. Your internal and external communications in all case files should use a tone that reflects positively or neutrally on the IRS if correctly quoted by the media or the plan sponsor.

  2. In general, our written products should include:

    1. A respectful tone.

    2. Tactful wording.

    3. Positive words.

    4. Courteous, reasonable and helpful writing.

    5. Objective, clear, and dignified language.

  3. Don’t include these in your written products:

    1. Irrelevant information, especially on controversial topics.

    2. Direct or implied criticism of the plan sponsor.

    3. Negative or discourteous words or connotations.

    4. Flippant tone.

    5. Implications of doubt as to plan sponsor’s honesty or intelligence.

Determining the Scope/Verifying Prior Law

  1. Always verify that the plan was properly amended for prior legislation.

  2. For pre-approved plans and individually designed plans submitted under the Remedial Amendment Cycle (RAC) system described in Rev. Proc. 2007-44, verify the plan complied with the applicable Cumulative List (CL) for the plan sponsor’s on-cycle Remedial Amendment Cycle (RAC) immediately before the cycle in which they submitted the application.

    Example:

    A plan sponsor with an Employer Identification Number (EIN) ending in 2 submits a Form 5310 application on March 15, 2016. Since the EIN ends in 2, the plan sponsor would normally fall under Cycle B. Therefore, your review scope must begin with the preceding Cycle B RAC. The applicable CL for prior "B2" cycle is the 2011 CL. Start your review by verifying the plan was timely amended for all items on the 2011 CL. Include all laws that become effective up to the date of termination since the plan’s remedial amendment period closes upon termination.

    Example:

    A plan sponsor with an EIN ending in 6 submits a Form 5300 application on January 31, 2017. Since the application is an on-cycle A3 case, your review scope must begin with the prior cycle A2 RAC (2010 CL), and include all laws up to the A3 RAC (2015 CL).

  3. Effective January 1, 2017, the RAC system is eliminated for individually designed plans except for Cycle A submitters for the period ending January 31, 2017. However, the same rules apply for verifying prior law compliance. Your review scope will still begin with the preceding on-cycle RAC for the plan sponsor. You must also review all laws up to the Required Amendments List (RA List) that is issued during the second calendar year before the DL application was submitted. See Rev. Proc. 2016-37, section 12.

    Example:

    A plan sponsor adopts a new plan and submits for a DL during the calendar year beginning January 1, 2020. The review is based on the RA List issued in 2018, regardless of the fact that the plan otherwise would not be required to be amended for items on the 2018 RA List until December 31, 2020.

    Exception:

    Plans submitted for initial qualification during the 2017 calendar year are reviewed based on the 2015 Cumulative List (Notice 2015-84) because there is no RA List for that year.

  4. For new plans, verify that the plan was timely adopted in its initial plan year.

  5. If you can’t verify prior law, ask the plan sponsor to provide either a:

    1. Copy of a prior DL.

    2. The plan document or adoption agreement (including any applicable opinion or advisory letters) and all discretionary, interim or required amendments adopted or effective during the prior RAC, and all interim amendments adopted to comply with the prior RAC’s CL.

    Note:

    If you’re not requesting other information or if the POA/plan sponsor can’t find the prior DL, review EDS & TEDS to determine if a DL was issued to the plan for the prior RAC.

  6. If a plan sponsor is not able to prove that the plan was timely amended for prior law, the plan is considered to have a Plan Document Failure defined in Rev. Proc. 2016-51 and may need to enter into a closing agreement to correct the failure. Consult with your manager and see IRM 7.11.8, EP Determinations Closing Agreement Program.

User Fee Requirements

  1. Plan sponsors must submit a Form 8717, User Fee for EP Determination Letter Request, and if applicable, a payment confirmation from pay.gov.

  2. Specialists are responsible for ensuring that the plan sponsor submitted the correct user fee with each application. See IRM 7.11.1.10.2, Specialist User Fee Responsibilities.

  3. Rev. Proc. 2018-4, Appendix A, (revised annually) lists the fee amounts for DL requests.

  4. Some applications may be exempt from the user fee. See IRM 7.11.1.10.1, User Fee Exemptions. However, user fees are always required for:

    1. Group trusts.

    2. Advisory (Volume Submitter) and opinion (Master & Prototype) letters.

User Fee Exemptions

  1. For all applications filed after January 31, 2011 and before January 1, 2017 (January 31, 2017 for cycle A3 plans and April 30, 2017 for DC pre-approved plans), an "eligible employer's" application is exempt from the user fee if:

    • It is filed by the last day of the plan’s current RAC submission period.

    • The plan isn’t more than 10 years old as of January 1 of the year in which the plan’s current RAC submission period starts. Notice 2011-86.

      Exception:

      Some applications filed within an open RAP wouldn’t meet the rule described above (for example, where a RAP beginning within the first five plan years ends on the last day of a submission period that begins more than 10 years after the year in which the plan is first in existence) However, if the plan sponsor meets the other requirements for exemption from user fees, they shouldn’t pay a user fee with the application but should explain in a cover letter how the application meets the requirements for exemption. If the IRS determines that the application is not exempt, we’ll ask the plan sponsor will to submit them.

  2. For all applications filed on or after January 1, 2017 (except see below for applications filed before January 31, 2017 under the rules cycle A3 and before April 30, 2017 for pre-approved DC plans based on the 2010 CL), an "eligible employer's" application is exempt from the user fee if the plan is first in existence no earlier than January 1 of the tenth calendar year immediately preceding the year in which the application is filed. Notice 2017-1.

    Example:

    An employer is eligible for the user fee exemption if they are an eligible employer, the plan started January 1, 2007, and they file a DL application on December 1, 2017. This is because the plan isn’t more than 10 years old at January 1, 2017, the year they file their application.

    Example:

    In contrast, the employer wouldn’t be exempt from the user fee if the plan started January 1, 2006 and they file their DL application December 1, 2017. This is because the plan is more than 10 years old at January 1 of the year they filed their application.

  3. For purposes of being exempt from the DL application user fees, a plan sponsor is an "eligible employer" for the year if the employer had:

    • No more than 100 employees who received at least $5,000 compensation from the employer for the preceding year.

    • At least one non-highly compensated employee participating in the plan (see IRC 7528(b)(C)(ii) and Notice 2002-1, Q&A 6, as amplified by Notice 2003-49).

Specialist User Fee Responsibilities

  1. If you determine that the plan sponsor didn’t pay a sufficient user fee, notate the deficiency on Form 5621 and request the user fee per IRM 7.11.1.14, Procedural Completeness Review.

  2. For cycle case, if IRS receives any late user fee payments after the Letter 5543 deadline, refund them when the incomplete case is closed. Be alert for an indication of a late user fee when closing incomplete cases that were missing user fees (e.g., review TEDS user fee status at closing, look for potential user fee reference in any submitted Letter 5543 response, etc.).

  3. If you determine that a refund is due:

    1. Secure a properly executed Form 8717, if necessary.

    2. Change the user fee payment code in TEDS/EDS - "C" or "V" . For TEDS cases, see IRM 7.15.7.3.9, Receipt and Handling Tab.

    3. Prepare an electronic Form 1725 (CG), Routing Slip which should include the EIN, sponsors name, plan number, the specialist name and telephone number, the amount of the refund and the reason for the refund.

    4. Complete a User Fee Refund Form.

      Note:

      Find the forms listed in (c) and (d), on the shared server. Go to "Case Processing" , then "User Fees" , then "electronic refund forms" .

    5. E-mail the forms listed in (c) and (d) to your manager for signature and ask manager to return them to you.

    6. Once the forms are signed, import them into non-disclosable folder on TEDS.

    7. Send the forms with the Form 8717 and the first page of Form 53xx to the manager in the final “Case for Closure” email. Put this statement in the closing email to inform your secretary of the refund: “Refund to be processed”.

    8. When the case is closed, your secretary emails the Form 1725, split dollar user fee form, Form 8717 & first page of Form 53xx to the User Fee Adjustments Unit at *TE/GE-EO-Adjustments.

  4. If a plan sponsor paid a user fee and has a second application that the user fee should apply towards:

    1. E-mail your group secretary and request that the user fee be transferred from the one application to the other when preparing to close the case.

    2. Provide the EIN, sponsors name, plan number, the DLN for the application which has been credited with user fee, and the DLN for the application to which the user fee shall be transferred.

    3. The group secretary will e-mail the user fee clerk and request that the user fee be transferred to the appropriate application.

      Caution:

      Do not be send the email until you are ready to close the case in order to prevent an EDS block.

Taxpayer Representatives

  1. Specialists must prevent unauthorized disclosure. Generally, only disclose sensitive information to authorized persons such as the plan sponsor/taxpayer. See IRM 11.3.10, Disclosure of Official Information - Employee Plans Information.

  2. Plan sponsors often seek professionals to help navigate the DL application process. They may enclose Form 2848, Power of Attorney and Declaration of Representation or Form 8821, Tax Information Authorization, in the application to allow you to speak with third party representatives.

  3. Any authorized representative, whether under a Form 8821 or 2848, must comply with the requirements of the Statement of Procedural Rules in 26 CFR 601.501-601.509.

  4. Rules for the Form 2848 and Form 8821 vary. See IRM 7.11.1.11.1, Form 2848 - Authorized Representatives, and IRM 7.11.1.11.2, Form 8821- Unenrolled Preparer.

  5. If you need to discuss the application with a third party contact, first send notification to the taxpayer. See IRM 7.11.1.11.3, Notice of Third Party Contacts.

Form 2848 - Authorized Representatives

  1. The Form 2848 allows an individual to practice before the IRS. This includes all matters connected with a presentation to the IRS about a client’s rights, privileges, or liabilities under laws or regulations administered by the IRS, including:

    1. Preparing and filing necessary documents.

    2. Corresponding and communicating with the IRS.

    3. Representing a client at conferences, hearings, and meetings.

  2. An individual is only eligible to become an authorized representative on a Form 2848 if they meet one of these designations listed on the Form 2848 Part II:

    • CPAs

    • Attorneys

    • Enrolled Agents

    • Enrolled Actuaries

    • Enrolled Retirement Plan Agents

    Note:

    Enrolled Actuaries are limited to pension issues.

  3. Unenrolled preparers, such as third-party pension administrators and consultants, aren’t authorized to practice before the IRS and so, they may not represent or advocate for a plan sponsor. If you receive a Form 2848 with (h) listed on Part II, the Form 2848 isn’t valid and can’t be used. Request the taxpayer to provide a completed Form 8821 if they still wish to have the unenrolled preparer represent them for the DL application.

  4. Always verify that the Form 2848 is filled out correctly.

    1. The name of the person signing Part I of Form 2848 should also be typed or printed on this form. A stamped signature is not permitted.

    2. An original, a copy, or a fax of the power of attorney is acceptable so long as you don’t reasonably dispute its authenticity.

    3. If the Form 2848 appears incomplete, notify the taxpayer the first time you send correspondence. Don’t copy the Form 2848 individual(s) since the form was not properly completed.

  5. Individuals named on a valid Form 2848 are entitled to copies of the correspondence and the DL if the taxpayer checks the applicable boxes next to their names.

  6. Find additional information on Form 2848 in Treasury Dept. Circular No. 230 and Rev. Proc. 2018-4 (revised annually).

  7. If you suspect an individual is violating any of the requirements or rules described in Treasury Dept. Circular No. 230, submit a referral to the Office of Professional Responsibility (OPR). Find directions on how to make a referral in IRM 1.25.1.3, Referral to the Office of Professional Responsibility.

Form 8821 - Unenrolled Preparer

  1. Unenrolled individuals who represent plan sponsors for DL applications have very limited authority because DL applications are not tax returns.

  2. Unlike attorneys, CPAs, enrolled agents and enrolled actuaries, unenrolled preparers may not:

    1. Sign documents on behalf of the plan sponsor.

    2. Represent (act as an advocate for) the sponsor.

    3. Practice before the IRS.

  3. A properly executed Form 8821, Tax Information Authorization, allows an unenrolled preparer to:

    1. Provide and receive plan information to and from the IRS.

    2. Receive copies of correspondence from the IRS and submit information requested by the IRS (such as participant data, asset information, etc.) as part of the review of a DL application.

    3. Discuss matters raised about a DL application (but not as an advocate) with EP employees as long as the plan sponsor makes the decisions. Contact may be made by telephone, in person, or in writing.

    Caution:

    If box 5a of Form 8821 isn’t checked, you can’t send correspondence (including a copy of the DL) to individual(s) listed on the Form 8821.

Notice of Third Party Contacts

  1. IRS employees may not contact third parties for determining or collecting tax liability without providing reasonable notice in advance that we may contact persons other than the taxpayer (IRC 7602(c)). You must document these contacts and provide taxpayers with this record upon request (IRC 7602(c) as amended by The IRS Restructuring and Reform Act of 1998 (RRA ’98) section 3417).

  2. If the plan sponsor hasn’t received a notice within the last 12 months and it is reasonably expected that we’ll make a third party contact, send a Letter 3164-K (DO) (TE/GE), Third Party Contact Letter, to notify the taxpayer and POA, if applicable, about the potential contact.

  3. Complete these items on the Letter 3164-K:

    1. Plan sponsor’s name, address and taxpayer identification number.

    2. Specialist's name, telephone number and badge ID number.

  4. Ensure that the address is current and mail the letter first class.

  5. Document the CCR indicating the mail date and method of delivery. Keep a copy of the letter in the case file.

  6. See IRM 25.27.1, Third Party Contact Program for more information.

IRC 401(b) Period

  1. Under the IRC 401(b) Remedial Amendment Period (RAP), a plan may be amended retroactively to comply with the IRC qualification requirements. Regulations under 26 CFR 1.401(b)-1:

    1. Describe the disqualification requirements that plan sponsors may amend retroactively and the RAP during which retroactive amendments may be adopted.

    2. Grant the IRS Commissioner the discretion to designate certain plan provisions as disqualifying provisions and to extend the remedial amendment period.

  2. See Rev. Proc. 2016-37, section 5, for the rules to extend the RAP for disqualifying provisions that are first effective on or after January 1, 2016. These rules are different from the rules described in Rev. Proc. 2007-44 for cases submitted under their Remedial Amendment Cycle (RAC).

    Note:

    To determine the RAP for cases submitted under the RAC system, see Rev. Proc. 2007-44. The first cycle A started February 1, 2006 and the last cycle A3 ended January 31, 2017.

  3. The general deadline to adopt discretionary amendments is the end of the plan year in which the plan amendment is effective. Rev. Proc. 2016-37, section 8.02

    Exception:

    Discretionary amendments that increase accrued benefits based on service during the immediately prior plan year and that are adopted within the first 2½ months of the current plan year (described in IRC section 412(d)(2)) don’t adversely affect the plan’s qualification.

When Plans May Apply for a Determination Letter

  1. Rev. Proc. 2016-37, section 4.03 provides that, effective January 1, 2017, a sponsor of an individually designed plan will only be permitted to submit a DL application for

    • Initial plan qualification

    • Qualification upon termination

    • Other circumstances that the IRS announces.

  2. See Rev. Proc. 2016-37, sections 19 and 20, for the rules for pre-approved plans.

  3. If an application isn’t eligible to apply for a DL, close the case incomplete (do not return the hardcopy of the case), issue a refund (if applicable), and issue a 1924 letter using these caveats:

    • Caveat 10 with variable: "Rev. Proc. 2016-37"

    • Caveat 9001 with variable: "Effective July 21, 2015, the IRS will no longer accept off-cycle determination letter applications (as defined in section 14 of Rev. Proc. 2007-44), except with respect to new and terminating plans."

Procedural Completeness Review

  1. Review the case file for only the following four items. Verify the application includes the:

    1. Correct user fee. See IRM 7.11.1.10, User Fee Requirements.

    2. Completed current version of the application (Form 5300, 5310, 5316) with required attachments and signed and dated by an authorized person.

      Note:

      If less than five items on the application are missing or incorrect, request the corrected application with the technical review items.

      Exception:

      For cases received on or after January 1, 2018, if an old version of the Form 5300 is received, return the application incomplete with a 1924 letter.

    3. Plan document. For Form 5300, the plan document must be a current restatement.

    4. Procedural Requirements Checklist (last page of the Form 53XX), including completed applicable checklist attachments.

      Note:

      If this is the only procedural review item missing, request the checklist with the technical review items.

  2. If you discover that the case meets the requirements for a closing agreement, you can’t close the case as an incomplete submission. Complete both the Procedural and Technical reviews and then follow the closing agreement procedures (see IRM 7.11.8).

  3. If the only Procedural Completeness Review issue is that the plan may qualify for a user fee refund, proceed to Technical Review and resolve through a Letter 1196 request.

  4. For all terminating plans that submit a Form 5310 application and cases submitted under the post-RAC rules of Rev. Proc. 2016-37, the Procedural and Technical Review items are combined and all information needed is requested on an Letter 1196 request (skip IRM 7.11.1.14.1, Procedurally Incomplete Cases).

Procedurally Incomplete Cases

  1. If the submission doesn’t comply with one or more Procedural Completeness Review items, create a Letter 5543, Procedurally Incomplete Letter, and the List of Missing Items attachment using the letter template in the Forms/Pubs/Products Repository.

    1. Date the Letter 5543 the next business day after the date you send the letter.

    2. List the response date 14 calendar days from the date of the letter (if the plan sponsor requests one, you may grant an additional 14 calendar day extension using a Letter 5537).

    3. Fax the Letter 5543 and keep the fax confirmation in the case file, if the taxpayer or POA gave you a fax number. If not, mail the Letter 5543.

  2. Use the postmark (or fax) date of the response to Letter 5543 to determine if the response was submitted timely.

    1. For TEDS cases, use the postmark date that the Service Center stamps on the Application Identification Sheet (AIS) and/or first page of the correspondence.

      Note:

      For mailed responses, if the stamped postmark and received dates are the same, subtract 10 calendar days from that date, to determine the "deemed" postmark date.

    2. For e-fax submissions, use the date on the "Fax Reception Report" in Outlook. If the e-fax was sent before midnight in the senders time zone, accept it.

    3. For POD Office fax submissions, use the likely submission date of the response based on all facts and circumstances.

    4. For POD Office mailed submissions, use the USPS postmark date. If the postmark date is missing, subtract 10 calendar days from the IRS receipt date.

    5. If there are additional facts and circumstances that warrant further consideration, document the analysis/conclusion on the Form 5621 and if appropriate, discuss with your manager.

  3. If the plan sponsor submits a timely response to Letter 5543 and you determine it’s incomplete before the response due date:

    1. Immediately call the sponsor.

    2. Notify them of the deficiency(s) and that we’ll close the case as incomplete if they don’t submit the missing information on or before the Letter 5543 due date.

  4. If the plan sponsor submits a timely but incomplete response to Letter 5543 and you don’t review it until after the response due date, close the case per IRM 7.11.1.14.1 (5) through IRM 7.11.1.14.1 (8) below.

  5. If the plan sponsor doesn't send a complete response within 15 business days after the deadline (to allow time for internal mail processing, but doesn’t extend the deadline), issue a Letter 5536, Final Disposition Letter, and include the List of Missing Items page(s) (even if IRS received it before the specialist can administratively close the case).

  6. Don’t return hard copy case files or user fees to plan sponsors issued a Letter 5536.

  7. Close incomplete cases (in other words, those in which you issue a Letter 5536) with EDS status 03.

  8. If there are any potential disqualifying defects (such as, missing required amendment), email the Closing Agreement Coordinator who alerts the Voluntary Correction Program (VCP). Include in your email:

    • Name of sponsor

    • Plan name

    • Plan number

    • EIN

    • Potential qualifying defect(s) you identified - be specific (for example, list each missing required amendment)

Technical Review

  1. Begin the technical review of the case file after the Procedural Completeness Review items in IRM 7.11.1.14 are satisfied. The technical review includes analyzing the entire application package including but not limited to:

    • The application

    • Plan language

    • Prior law verification

    • Amendments, if any

    • Cover letter

    • All other supporting documentation

    Note:

    The level of review depends on the type of case you’re assigned. Discuss with your manager to determine the level of review and which worksheets to complete, if necessary.

  2. Plan sponsors must follow the procedures in Rev. Proc. 2018-4 (revised annually) when requesting a DL. If the application is missing information, you must request additional information using the following letters.

  3. Draft Letters 1196, 1955, 5537 and 5542 and their related attachments using the letter templates in the Forms/Pubs/Products Repository. If the plan sponsor or authorized representative gave a fax number, then you must send Letters 1196, 1955, 5537, and 5542 to the individual(s) via fax. If faxed, keep a fax confirmation for the case file. Include a copy of the AIS sheet when faxing information requests for TEDS cases.

    Additional Information Letter Letter purpose/response date
    Letter 1196
    • Initial request for additional information.

    • Use a response date of 21 calendar days from letter date.

    Letter 1955
    • Subsequent information request(s) after Letter 1196.

    • Use a response date of 14 calendar days from letter date.

    Letter 5537
    • Documents 10-day extension to Letter 1196 or 1955 deadline requested verbally or in writing before response date by sponsor or authorized representative.

    • Use a response date of 10 calendar days from the previous response date.

    Letter 5542
    • Documents extension granted by Area Manager.

    • Used only in rare and extenuating circumstances.

    • Applicant must request extension in writing before deadline.

    • Specialist must first approve then send to manager, and if manager approves, they send to area manager for approval.

    • If area manager:

      • Approves, issue Letter 5542 and use the area manager’s granted response date.

      • Disapproves, call and notify applicant and document action in the case file.

    Exception:

    You may grant a 14- day extension without requesting approval from area manager if the plan sponsor’s appointed contact or the POA is no longer working on application. This allows time for a new employee or POA to become familiar with the case.

    Note:

    If a response date falls on a Saturday, Sunday, or legal holiday, use the next business day.

  4. Include an AIS with any written correspondence for a TEDS case.

  5. Write additional information requests professionally, clearly state the issue(s) and cite authority to support the government's position.

  6. If anonymity is a concern, use last name only or request a pseudonym. See IRM 10.5.7.1, Use of Pseudonyms by IRS Employees.

Technically Incomplete Cases

  1. If you don’t receive the plan sponsor’s complete response to Letter 1196, 1955, 5537, or 5542 by 15 business days after the letter deadline, send one of the following:

    1. A closing agreement offer letter after you complete the steps in IRM 7.11.8.2.1, Preparing the Case for the Closing Agreement Process, if the case meets the requirements for a closing agreement. If the plan sponsor doesn’t accept the closing agreement offer, consider proposing an adverse determination letter per IRM 7.11.11, Proposed Adverse Cases.

    2. Letter 5544, if the case doesn’t meet the requirements for a closing agreement.

    3. Letter 5544 and refer the case to exam per IRM 7.11.10, EP Examination and Fraud Referral Procedures, if the issue(s) require an exam referral but doesn’t affect plan qualification.

  2. Use Letter 5544, Technically Incomplete Letter, and attach the List of Missing Items page(s).

    • Use the Letter 5544 template and List of Missing Items attachment in the Forms/Pubs/Products Repository.

    • Date the Letter 5544 with the date you send it.

    • Insert a response date 30 calendar days from the date of the letter. If it falls on a Saturday, Sunday, or legal holiday, use the next business day. If faxed, keep a fax confirmation for the case file.

  3. If the applicant sends a deficient response to Letter 5544 before the response deadline, immediately call them to notify them of the deficiency(s) and indicate that unless they send the missing information by the deadline, we’ll close the case as an incomplete application.

  4. If the applicant doesn’t send a complete response by the response due date (allowing 15 additional business days (mail and scanning time)), close the case incomplete and, depending on which criteria the application was submitted, issue:

    1. Letter 5888, and the List of Missing Items page(s), for cases submitted on or after January 1, 2017 under the rules in Rev. Proc. 2016-37.

    2. Letter 5536, Final Disposition Letter, and the List of Missing Items page(s) for cases submitted under Rev. Proc. 2007-44, RAC rules if either the Letter 5544 response deadline or the postmark date of the response is after the end of the plan’s RAC.

    3. Letter 5888, if the application is a Form 5310 for a terminating plan.

  5. Don’t return hard copy case files or user fees to plan sponsors issued a Letter 5536 or 5888.

  6. Close incomplete cases (in other words, those in which you issue either a Letter 5536 or 5888) with EDS status 03.

  7. If there are any potential disqualifying defects (such as, missing required amendment), email the Closing Agreement Coordinator who alerts VCP. Include in your email:

    • Name of sponsor

    • Plan name

    • Plan number

    • EIN

    • Potential qualifying defect(s) you identified - be specific (for example, list each missing required amendment)

Voluntary Correction and pre-February 1, 2015 Cases

  1. The procedures in IRM 7.11.1.14.1, Procedurally Incomplete Cases, and IRM 7.11.1.15.1, Returning an Application for Failure to Respond to Technical Review, don’t apply to:

    1. Cycle D2 and earlier Form 5300 applications

    2. Form 5310 applications with a control date before February 1, 2015.

    3. DL applications with an open VCP application.

    4. Form 5307 applications.

  2. For these types of cases, complete a procedural completeness review in IRM 7.11.1.14 (1), (except the Procedural Requirements Checklist is not required) and a technical review in IRM 7.11.1.15 (1), at the same time.

  3. If the application is mostly complete but you still need to request additional information, send a Letter 1196 and, if necessary, a Letter 1955. If the plan sponsor fails to respond timely to these requests:

    1. Return non-VCP cases to the plan sponsor with a Letter 1012

    2. Close the case in status 03.

    3. For applications with an open VCP application, discuss with your manager how to proceed when the applicant fails to respond timely.

      Note:

      Don’t close these cases with a Letter 5536 or 5888.

  4. If the application is missing required documents and determined to be grossly incomplete and you haven’t contacted the plan sponsor:

    1. Close the case as incomplete application.

    2. Issue a Letter 1013.

    3. Use closing code 03.

    4. Do not request a hardcopy of the case because we no longer return the application to the plan sponsor.

    Note:

    For applications with an open VCP application, discuss with your manager before returning a case.

Withdrawal of Applications

  1. A plan sponsor may withdraw their DL application at any time before IRS issues a final adverse DL. See IRM 8.7.8.3.2, Withdrawal of the EP Application.

  2. The plan sponsor must submit a written request to withdraw the application.

  3. The IRS keeps the application and doesn’t refund the user fee.

  4. For all withdrawn cases:

    1. Create a Letter 2044 (DO/CG).

    2. Use closing code "04."

    3. Use Law Indicator Code for the last law that could be verified (if no prior DL, use law indicator Z).

    4. Use caveat 8000 on the letter and the date of the written withdrawal request for the variable.

    5. Add caveat 10 if the plan has a potential disqualifying feature. Also complete EP Examination referral and send an email to QA as described below.

  5. If there are potential disqualifying features, refer the case to exam using the procedures in IRM 7.11.10, EP Examination and Fraud Referral Procedures. Inform the plan sponsor that you are referring the plan for exam.

  6. Also, if there are potential disqualifying features, email the Closing Agreement Coordinator in QA who alerts VCP. The plan sponsor won’t be able to seek correction for issues raised during the determination process. Include in your email:

    • Name of sponsor

    • Plan name

    • Plan number

    • EIN

    • Qualification issues you identified - be specific (for example, list each missing required amendment)

  7. The 60-day period for interested party comments doesn’t apply to withdrawn applications. If interested parties have submitted comments, send a copy of the withdrawal letter to each interested party, using Pattern Letter 1935(P).

Duplicate Submissions

  1. If a plan sponsor sends duplicate cases, correction dispose (status 30) one of the cases. To determine which case to correction dispose, use these rules:

    1. If both cases are in TEDS, correction dispose either one. If both have the same control date but the user fee is only paid on one, dispose the one with incorrect fee. Do not retrieve the hard copy case file for the correction disposed case.

    2. If one case is in TEDS and one in EDS, generally dispose the EDS case. If you keep the EDS case, print the necessary documents from the TEDS case and place them in the EDS case file.

  2. To correction dispose:

    • Add "Duplicate EDS case # _has been correction disposed," on the Form 5621 for the case you review.

    • Add "This case is duplicate of EDS case # _and is being correction disposed" on the Form 5621 for the correction disposed case.

    • For TEDS cases, close the duplicate case in status 74 and close the case you reviewed in 74PC.

    • Send to secretary for case closure.

    • Email the secretary when you close the case if the user fees aren’t correct. Request that they email "*TE/GE-EO-Adjustments" these statements: "Change user fee on correction disposed case EDS case #_ to $(0). Also change the user fee on the on-going case EDS case #_ to $_ and the user fee payment code to V on both."

How to Request a Hardcopy of a Case from Files

  1. To request a hardcopy of a case from the Florence files office, complete a Form 2275, Records Request, Charge and Recharge. Find a blank version of the form in the Forms/Pubs/Products Repository.

  2. Complete these Form 2275 items:

    1. Box 1 - Plan sponsors EIN

    2. Box 2 - Form number (5300, 5307, 5310)

    3. Box 3 - Plan number

    4. Box 4 - Year case established

    5. Box 5 - Document Locator Number (DLN)

    6. Box 6 - Name and address of the plan sponsor

    7. Box 9 - Have your manager electronically sign this box

    8. Box with no number - Enter your EDS employee number

    9. Box 11 - Check the "Other" box and enter "TEGE EP Determinations"

    10. Box 12 - Check the "Cincinnati" box

    11. Box 12B - Enter "TE/GE - EP"

    12. Box 12D - Your group number

    13. Box 12E - Your office address

    14. Box 12F - Your room number where your mail is delivered to your office

    15. Box 12G - Your name

    16. Box 12H - Your phone number

    17. Box 13 - Check "A. Original Document"

    18. Box 14 - Check "A. Initial"

    19. Box 18 - Enter "Need hard copy of case file (include TEDS case #)"

  3. Secure email the form to your manager for approval. The manager signs box 9 and returns it to you.

  4. Email the form to "*TEGE DETERMINATIONS PROCESSING." Do not send this email secured because they won’t be able to open it. Instead, use secure zip before you send the email.

  5. When you receive the hardcopy, it will come with a Form 3210 and a copy of the Form 2275 submitted to obtain the hard copy. You should:

    1. Sign the Form 3210 and send it back to Florence. Make a copy for the orange folder.

    2. Email the TEGE Determinations Processing mailbox and let them know you received the hard copy. Print copy to place in orange folder.

    3. Import a copy of the email into the non-disclosable folder on TEDS.

    4. Process the case as usual. Staple and place copy of signed Form 3210, copy of e-mail acknowledging receipt of hard copy, on the left side of the orange folder (rubber band the hard copy to the orange folder).

    5. Before closing the case, assemble the hard copy case per Exhibit 7.11.1-2, Case File Assembly Guide. Place the Form 2275 on top of the hard copy folder so that it can be returned to the correct location.

DL Cases with Related Voluntary Correction Submissions

  1. Review the DL application for these indications of an open/pending VCP submission:

    • Information on a cover letter

    • Form 5300 Line 19 is checked "yes"

    • Non-scannable file in TEDS that indicates a submission to VC

  2. If you see indicators, contact the VCP contact person to verify whether a VCP case has been established.

    If the VCP submission: Then:
    Is in the DL application and was never sent to VCP
    • Print a copy of the VCP submission and send to the selected specialist in group 7526 (ask your manager for their name).

    • They will fax it to the campus to be established.

    Is assigned to a specialist
    • Secure email the specialist asking for the status and the failures being corrected.

    • Include in your email, the plan name, plan number, EIN, EDS number, and the VCP control number, if available.

    Is in unassigned inventory
    • Contact the plan sponsor and request that they provide a copy of Compliance Statement when issued.

    • Review the case and resolve any other issues.

    • Place the case in suspense until the Compliance Statement is issued. See IRM 7.11.1.21, Suspense Cases.

    • If you find additional defects in the application not covered in the VCP Compliance Statement, contact the Closing Agreement Coordinator for further instructions.

    Note:

    If the failures that are being corrected in VCP are operational and do not adversely affect the DL application, document the Form 5621 and close the case under normal procedures.

Protecting VCP Eligibility

  1. Plan sponsors may protect their eligibility to enter into VCP by disclosing an issue in their DL application. They commonly disclose an issue in the cover letter of their initial DL submission. To make the disclosure effective, the cover letter must contain specific details on the relief sought; not a broad, generic reservation.

  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 you determine the issue raised in the cover letter is a qualification issue, inform the plan sponsor and tell them to submit an application to VCP. Follow the procedures in IRM 7.11.1.20, DL Cases with Related Voluntary Correction Submissions.

Suspense Cases

  1. Suspend your work on a case when:

    1. Management directs you to do so.

    2. There is a pending VCP application that affects the form of the plan (for example, a late amendment).

      Exception:

      Don’t suspend cases that have only operational issues.

    3. There is pending litigation.

    4. The plan is under examination by the IRS or PBGC and the other business unit indicates that issuing a DL would impact their review’s outcome or their review may result in a plan qualification failure and issuing a DL would be inappropriate.

      Note:

      Effective May 5, 2017, you are not required to suspend any cases under examination by the DOL. If the plan meets the requirements of IRC 401(a), issue the DL regardless of whether DOL is examining the plan.

  2. Before you suspend work on a case:

    1. Work the case to the furthest point possible (resolve any other issues in the application).

    2. Contact the other business unit/government entity to determine the status of their review.

    3. If they expect their review to continue beyond two weeks, place the determination case in group suspense.

    4. Create Letter 1938 and send to the plan sponsor/POA.

    5. Update the case to suspense status: status 37 for EDS or TEDS.

  3. You may take the case out of suspense if:

    Reason case was suspended Action allowing case to be taken out of suspense
    Management directed Management permits case to be taken out of suspense.
    Pending VCP application You secure a copy of the VCP Compliance Statement and place it in the case file.
    Concurrent EP Exam audit and/or Exam referral If, after 6 months, EP Exam:
    1. Hasn’t started their review, take the case out of suspense. Inform the EP Area Manager who will notify EP Exam that you are closing the determination case.

    2. Has started but not finished their review, and haven’t discovered issues that affect the determination case, take the case out of suspense. Have your manager inform the EP Area Manager who notifies EP Exam that you are closing the determination.

    3. Has started but not finished their review, but has discovered issues that would affect the determination case, leave case in suspense until audit conclusion.

    Cases pending litigation Secure an explanation from the POA or plan sponsor about the nature of the litigation against the plan.
    If you determine that the legal actions against the plan will affect the DL, place the case in suspense until the litigation is resolved.

How to Close Case to Manager

  1. There are two ways to close a case to your manager after you finish a case review.

  2. TEDS cases with 50 or less pages of correspondence received via eFax are closed via an email to your manager:

    1. Create the applicable closing letter in Notepad in EDS.

    2. Generate and export the CCR in TEDS.

    3. Create electronic Form 3198-A for mandatory review cases.

    4. Import the Form 5621, any work papers, correspondence and fax documents (sent or received), and any other documents not already scanned into the TEDS file by the Covington Service Center.

    5. Change case to status 74PC on TEDS.

    6. Secure email the items in a-d plus the AIS sheet to your manager. Title the email "Case for Closure" and include the case name, EDS case number, type of closing letter, and if applicable, “Refund to be processed” in the body of the email.

    Exception:

    If you’re a remote employee without a secretary or manager in your POD, use the procedures in IRM 7.11.1.22 (2) even if eFax over 50 pages.

    Caution:

    If any original documents are received at your POD, you must use the procedures in IRM 7.11.1.22 (3) because original documents should not be destroyed.

  3. All other cases (For example, TEDS cases with over 50 pages of correspondence received via eFax, paper cases, if you received any original (faxed or mailed) documents to your POD, and any other case that your manager requests) are closed with a physical folder sent to secretary:

    1. Create and print the applicable closing letter.

    2. Print copies of the Form 5621, CCR, any work papers, correspondence and fax documents (sent or received), Form 3198-A for mandatory review cases, AIS for TEDS cases, and any other documents that should be associated with the hardcopy of the case file.

      Note:

      Any documents scanned into TEDS by the Covington Service Center (either mailed to Covington or sent to the TEDS fax numbers) don’t have to be been printed for the case file.

    3. For TEDS cases with correspondence received via eFax in excess of 50 pages, import the correspondence into TEDS, print and place in orange folder or hard copy.

    4. For TEDS cases with correspondence received via mail or fax, fax the correspondence to your eFax or scan through a copier and import into TEDS and place in orange folder or hard copy.

    5. Import the Form 5621, any work papers, correspondence and fax documents (sent or received), and any other documents not already scanned into the TEDS file by the Covington Service Center.

    6. Put non-disclosable items on the left side of orange folder or paper case file. Put disclosable items on the right side of the orange folder or paper case file.

    7. If applicable, print 2 copies of the Form 1725 and Split Dollar User Fee form. Place one copy on the left side (non-disclosable) and the other copy with a copy of the Form 8717 & first page of Form 53xx on the outside of the orange folder. This will indicate to the secretary that the refund needs to be processed. If TEDS case, import documents to the non-disclosable folder.

    8. If TEDS case, change case to status 74 or 74PC.

    9. Give the orange folder or paper case file to your secretary who processes the case and gives to manager to review.

Individually Designed Plans

  1. Common issues for individually designed plans 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 EP Determinations QA Recurring Error Reports found at: My Job, Revenue Agent, Case Closing under the "Determinations and Determinations Quality Assurance" section.

Code Sections which may be Incorporated by Reference

  1. Plans aren’t permitted to incorporate sections of the Code and Regulations by reference unless the incorporation is specifically authorized by the Code, Regulations or other authority. See Announcement 75-110, 1975-43 IRB 20.

  2. If a plan has a choice to make, (for example, a plan can use either the current or prior year testing method under IRC 401(k)), they can’t incorporate that part 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.

Part-Time Employee Exclusions

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

  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 don’t customarily work more than “x” number of hours per week. Plans that have this language are imposing a service requirement that could result in excluding an employee who may complete more than 1,000 hours of service, in violation of IRC 410(a)(1).

  3. Closely scrutinize any exclusion classification, whether it is part-time, seasonal, temporary, or any other classification of employees. If a plan has employee classifications, then it must clearly define them. The language may have to be amended to meet IRC 410(a)(1).

  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).

    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.

Fail Safe Provisions for Coverage and Nondiscrimination

  1. As a result of the corrective amendment procedures in 26 CFR 1.401(a)(4)-11(g), plans may contain fail-safe provisions designed to ensure they automatically satisfy:

    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
    26 CFR 1.401-1(a)(2) A qualified pension, profit sharing, or stock bonus plan must be a definite written program which is established and maintained by the employer.
    26 CFR 1.401-(b)(1)(i) 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.
    26 CFR 1.401-1(b)(1)(ii) 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) The accrued benefit of a participant under a qualified plan may not be decreased as a result of an amendment to the plan.
    26 CFR 1.401(a)(4)-11(g) Where certain rules are satisfied, a corrective amendment adopted after the end of a plan year is treated as adopted and effective as of the first day of such plan year enabling such plan to satisfy IRC 401(a).
  3. For a fail-safe provision to satisfy these code sections, it:

    1. Can’t give the plan sponsor discretion in determining whether the provisions require additional allocations or accruals. In other words, a plan sponsor can’t have discretion over which test it will use to satisfy the nondiscrimination and/or coverage requirements. To satisfy this requirement, the plan must specify which test (e.g., the average benefit test for coverage or the general test for nondiscrimination) it uses to satisfy coverage and/or nondiscrimination and the methods or optional rules (e.g., cross-testing) it uses to run the test. The plan can’t incorporate the test and any optional rules by reference. Also, the plan must state any definitions of terms necessary in running the test and the optional rules used for the test.

    2. Must include language that ensures a participant's rights 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. Can’t give the plan sponsor discretion over which employees receive additional allocations or accruals. You must be able to tell from the plan terms which employees will receive the additional allocations or accruals.

    4. Must state a formula for the additional allocations or accruals, keeping in mind IRC 411(d)(6).

      Exception:

      Sometimes it may not be necessary for a plan’s fail-safe to provide a formula for additional allocations or accruals, such as a fail-safe which is built into a plan’s normal allocation or benefit formula.

  4. Plans with fail-safe provisions that don’t satisfy the above criteria should be corrected to satisfy the above requirements or deleted. If the plan sponsor refuses to correct or delete the provision, propose an adverse letter.

  5. Note that the corrective amendment procedures under 26 CFR 1.401(a)(4)-11(g) can be used more efficiently if the plan doesn’t contain fail-safe language:

    1. By deleting the fail-safe language, plan sponsors have more flexibility each year when deciding which test and optional rules to use to satisfy the nondiscrimination or coverage requirement.

    2. Using a fail-safe provision, conversely, eliminates all flexibility and may lead to using a method in satisfying IRC 401(a)(4) or IRC 410(b) that is not the most cost effective to the plan sponsor and the plan.

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, plan sponsors who adopt a VS plan and make minor modifications may submit them to the IRS for review. Pre-approved plans are usually submitted on a Form 5307, but if the individual plan adopter substantially modifies the plan, they are only allowed to apply for a DL using a Form 5300 and only if they meet the criteria in IRM 7.11.1.13, When Plans May Apply for a Determination Letter. See Rev. Proc. 2016-37 section 20.03.

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

    1. Pre-approved plans with power to amend.

    2. Correction of pre-approved plans language.

    3. Listing of required modifications (LRM).

    4. Pre-approved plan with revoked opinion/advisory letters.

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 on behalf of adopting employers aren’t required to submit interim amendments with the Form 5307 application but should still submit discretionary amendments for review.

    Note:

    VS plans where the practitioner doesn’t have the power to amend on behalf are still required to submit interim amendments.

    1. To determine if a VS practitioner has the power to amend, review the plan document to determine if it has language that permits the practitioner to amend the plan on behalf of adopting employers. See Rev. Proc. 2015-36, section 15.03.

    2. For plans that give the practitioner the power to amend, if the application includes an unsigned interim amendment, it’s not necessary to secure the executed amendment because it’s assumed the M&P or VS practitioner timely adopted an amendment. Don’t include the adoption date for the unsigned interim amendments on the DL.

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

Correction of Pre-Approved Plans Language

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

    1. Accept the language as previously approved.

    2. Complete a referral. See a sample in the "Pre-Approved Plans" folder on the shared server.

    3. Sign the referral. List appropriate citations.

    4. Get 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 reviews the information to determine if further action is necessary.

Listing of Required Modifications (LRM)

  1. LRMs are information packages that help M&P sponsors to draft plans to conform to applicable law and regulations. The IRS creates new LRMs for each major set of law changes, and for defined contribution and defined benefit plans separately. Find the LRMs at: IRS.gov - Listing of Required Modifications - LRMs.

Pre-Approved Plan with Revoked Opinion/Advisory Letter

  1. The IRS may revoke an opinion or advisory letter found to be in error or in violation of current IRS rules. 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. 2015-36, section 22, for more information.

  2. If you are working a determination case and find that the plan sponsor has an advisory or opinion letter which has been revoked, contact the pre-approved coordinator to verify.

  3. Generally, you return the case with a Letter 1012 (if you’ve made contact) or Letter 1015 (if you haven’t). The plan sponsor may resubmit as an individually designed plan using a Form 5300, if eligible.

Delayed Determination Letter Conference

  1. If an application for a DL has been pending for at least 270 days, the plan sponsor has the right to a conference with the EP Determinations Manager concerning the application’s status.

  2. The conference may be by phone or in person and the discussion is limited to processing procedures only.

  3. The applicant must request a conference with the EP Determinations Manager in writing and send it to the specialist assigned the application or, if the plan sponsor doesn’t know who’s reviewing the application, to the EP Determinations Manager at the address in Exhibit 7.11.1-1.

  4. Parties can’t make a tape, stenographic, or other verbatim recording of a status conference. The applicant may request subsequent conferences after 90 days after the last preceding conference.

  5. For more details, see Rev. Proc. 2018-4 (revised annually), section 10.17.

Determination Letters not Issued within 270 Days

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

  2. Plan sponsors must exhaust all administrative remedies before a declaratory judgment will be made (IRC 7476(b)(3)) including:

    • Filing a complete application under Rev. Proc. 2018-4 (revised annually).

    • Properly filing the notice to interested parties per Rev. Proc. 2018-4, section 20 (revised annually), and Treas. Reg. 1.7476-2.

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

      Note:

      If the plan sponsor requests, in writing, that EP Determinations seek technical advice on the applicability of IRC 7805(b) relief, this is considered an administrative step. See IRM 7.11.12, Preparing Technical Advice Requests.

60-Day Period

  1. You may close cases and issue DLs without any holding period for the following types of plans, which aren’t subject to comments by Interested Parties, DOL and PBGC:

    1. A plan which hasn’t provided employer contributions at any time after September 2, 1974.

    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, that plan are made by employers of participants in such plan.

    3. Specimen plans or basic plan documents of practitioners requesting advisory/opinion letters in IRM 7.11.4, IRC Section 401(a) Pre-Approved Plans Program.

    4. Applications that are withdrawn by the plan sponsor. See IRM 7.11.1.17, Withdrawal of Applications.

  2. You must hold all other plans for 60 days from the control date to allow interested parties to comment.

  3. If you receive interested party comments after you review a plan, but before you issue a DL, consider the comments. See IRM 7.11.1.29, Interested Party Comments.

Abusive Transactions/Listed Transactions

  1. The Abusive Tax Avoidance Transactions (ATATs) group handles tax schemes that:

    1. Promise large deductions.

    2. Divert reportable income.

    3. Promise tax free distributions.

  2. When you detect a possible transaction or plan type that appears abusive, discuss with your manager and then, if appropriate, email the Abusive Transaction Hotline with any applicable information. Find more information at IRS.gov/retirement-plans/ep-abusive-tax-transactions.

  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(e)(3) plans.

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 (26 CFR 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 you identify a Listed Transaction during a DL request, develop the issue according to these procedures:

    1. Discuss the case with your manager.

    2. Complete a Form 5666, TE/GE Information Report, per IRM 7.11.10, EP Examination and Fraud Referral Procedures, and send it to the EP Tax Shelter Coordinator by any method 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 for guidance on our current enforcement strategy.

International Issues

  1. Complete the electronic International Worksheet (see the shared sever in the "International Issues" folder and sample in Exhibit 7.11.1-4, International Worksheet) if the Form 5300 series application includes one or more of the following issues:

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

    • 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 (Trust established in Puerto Rico and an election is made to qualify under U.S. law).

  2. Send the form to your group manager for approval. Secure email the approved form to the QA reviewer listed on the form.

  3. If you discover either of the following potential qualification issues, prepare an examination referral using the procedures in IRM 7.11.10, EP Examination and Fraud Referral Procedures, and send it to the appropriate QA reviewer listed on the International Worksheet:

    • 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.)

  4. Report time you spend working on potential international issues on WebETS activity code 301 and project code 0060. This includes both direct case time and any ancillary time you spend working on customer inquiries.

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 in the plan document but should be incorporated in a separate addendum.

  3. Add caveat 19 to the 5274 Letter and caveat 17 to the 1132 Letter for all dual-qualified plans.

Puerto Rican Plan Election Under ERISA section 1022(i)(2)

  1. To be a qualified plan under IRC 401(a), a trust must be created/established in the United States.

    Exception:

    Trusts created/established in Puerto Rico are to be treated as trusts created/established in the United States (if they make a written election for this). ERISA section 1022(i)(2).

  2. The election can be made in one of the following ways (26 CFR 1.401(a)-50(b)):

    1. File a statement making the election to the EP Exam Group Manager in Plantation, Florida.

      Note:

      The mailing address and fax number for the EP Exam Group Manager is:
      IRS - TE/GE Employee Plans
      c/o Group Manager
      7850 SW 6th Court, Group 7650
      Plantation, FL 33324
      Fax: 855-230-1536

    2. File the election as part of an IRS DL application.

  3. If the trust election is registered with the EP Exam Group Manager, he/she must store the election in a database for ERISA section 1022(i)(2) elections and send return correspondence to the plan administrator acknowledging receipt.

  4. If you encounter an election in a DL application:

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

    2. Verify that "Puerto Rican plan" is listed as a case category on TEDS. If not, add it per IRM 7.15.7.3.7, Editing Case Categories.

    3. Prepare the favorable DL (Add caveats 19 and 29 to the Letter 5274 and caveats 18, 36, and 37 to the Letter 1132) and close case to your manager.

    4. E-fax the 5300 series application and the favorable DL to the appropriate QA reviewer listed on the International Worksheet.

Interested Party Comments

  1. Plan sponsors are required to give notice to interested parties before submitting a DL application per Rev. Proc. 2018-4, section 20 (revised annually).

  2. Interested parties are defined in 26 CFR 1.7476-1(b) and generally include:

    1. The employer’s present employees who are eligible to participate in the plan.

    2. The employer’s other present employees whose principal place of employment is the same as that of the employees eligible to participate in the plan.

    3. For plan terminations: 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 IRS. If an interested party/group of interested parties submits their comments to DOL, the interested parties may request DOL to comment on the application to the IRS. The DOL then forwards the interested party comments to the IRS with their own comments, if appropriate.

  4. Associate Interested party comments with the determination application as soon as administratively possible. Parties must submit their comments by the 45th day after the date EP Determinations receives the determination application for EP to consider them during the plan review. Comments parties submitted to DOL are subject to additional rules. See Rev. Proc. 2018-4 (revised annually), section 19 for further explanation.

  5. When you receive an interested party comment:

    1. Immediately send a Letter 5446, Acknowledgment Letter, to the interested party.

    2. Consider the comments as part of your 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.

    1. Anonymous comments aren’t considered interested party comments.

    2. If an interested party contacts you and wants to submit anonymous comments, explain that his/her comments aren’t confidential and we won’t notify him of our final decision on the application submitted.

    3. We don’t give the anonymous comments to the employer, but the employer may view the comments if the application is subject to public disclosure.

      Note:

      This IRM doesn’t address this issue, so contact a disclosure specialist if the disclosure comes up.

  7. If your determination is favorable:

    1. Prepare a Letter 1935 for each interested party that submitted comments.

    2. Attach a copy of the favorable DL to each Letter 1935.

    3. Prepare Letter 1939 for the plan sponsor, which notifies them that interested party comments were submitted.

    4. Don’t mail the letters; keep them in the case file for QA to mail.

  8. If your determination is unfavorable:

    1. Prepare a Letter 1935 for each interested party that submitted comments and follow the adverse procedures in IRM 7.11.12.

    2. Attach a copy of the adverse DL to each Letter 1935.

    3. Don’t prepare a Letter 1939.

    4. Don’t mail the letters; keep them in the case file for QA to mail.

  9. If your application is deemed "unable to rule" or "incomplete" , prepare a Letter 1935 for each interested party with a copy of the closing letter but don’t complete the "List of Missing Items" .

  10. Be careful to avoid improper disclosures to the interested party. You may solicit information on the interested party comments but you can’t disclose to them your case actions for the determination application. QA reviews the case, mails the appropriate letter(s) and closes the case. The case remains in QA for at least 91 days as outlined in IRC 7476(b)(5) and the Letter 1935.

  11. Interested party comments make the case Mandatory Review. Prepare Form 3198, TE/GE Special Handling Notice. Mark the Form 3198 "Mandatory Review - Interested Party Comments" .

  12. If you or QA reasonably anticipate litigation by an interested party, QA may forward the case for pre-issuance review by Counsel.

  13. See Rev. Proc. 2018-4 (revised annually), sections 19 and 20 for additional information.

  14. All interested party comments are available to the plan sponsor (The Code of Federal Regulations (CFR) and 26 CFR 601.201(o)(5)(v)). If a plan sponsor, upon receiving Letter 1939, contacts you and requests copies of the comments, contact QA to obtain copies of the comments.

  15. Draft Letters 1935, 1939, and 5446 using the letter templates in the Forms/Pubs/Products Repository.

Application Involving Plan Merger or Consolidation, Spin-off, or Transfer of Plan Assets or Liabilities

  1. EP Determinations doesn’t rule directly on any plan mergers, consolidations, spin-offs or transfers, however, EP Determinations frequently encounters DL applications for ongoing and terminating plans which were previously involved in mergers, etc.

    Term and Regulation Section Definition
    Merger or Consolidation - 26 CFR 1.414(l)-1(b)(2) Combining two or more plans into a single plan. A merger or consolidation doesn’t occur:
    1. Merely because one or more corporations undergo reorganization (whether or not taxable).

    2. 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.

    Spin-off - 26 CFR 1.414(l)-1(b)(4) Splitting a single plan into two or more plans
    Transfer of assets or liabilities - 26 CFR 1.414(l)-1(b)(3) One plan diminishes assets or liabilities and another plan acquires these assets or assumes these liabilities
  2. Verify the following issues (in addition to normal review procedures) for plans involved in these types of transactions:

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

    2. Protected benefits are still available.

    3. The merger agreement/amendment was timely adopted. See IRM 7.11.1.12 (3)

  3. 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) (IRC 401(a)(12) and IRC 414(l)), so ensure that:

    1. Vested benefits are not reduced.

    2. Special benefits, rights, and features have not been reduced.

    3. Benefits from the pension plan may still be distributed using Joint and Survivor Annuities (if a pension plan merges with a non-pension plan).

  4. For applications with a spin-off, determine if a "spin-off/termination" or "termination/reestablishment" transaction has occurred. Under a typical "spin-off/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.

  5. Under a "termination/reestablishment" an employer typically:

    1. Terminates an overfunded defined benefit plan.

    2. Receives the excess assets.

    3. Then establishes a new defined benefit plan covering the active employees.

  6. See IRM 7.12.1.17.1, Overfunded DB Plan at Termination, for DL requests involving a defined benefit plan where a "termination/reestablishment" or "spin-off/termination" has occurred.

  7. The effective date of a merger or spin-off is determined based on the facts and circumstances of the particular situation. To determine the effective date, consider these relevant factors, none of which is necessarily controlling:

    1. The date(s) 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 spin-off 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.

  8. Because a plan sponsor may rely on the favorable DL for the surviving plan as to whether the merged plans were timely and correctly amended for new tax law, include only the surviving plan’s amendments on the favorable DL.

  9. If you discover any issues, you may need to refer the plan for an exam. See IRM 7.11.10, EP Examination and Fraud Referral Procedures.

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.

Deferred Retirement Option Plan (DROP) Features in Governmental Plans

  1. Under a typical DROP design, a DB plan participant who is eligible to retire and immediately receive retirement payments under the DB plan:

    1. Continues to work and makes an election to freeze his/her benefit accruals (no additional service or compensation credits accrue).

    2. The amounts that the participant would have received as a DB retirement payment had he retired are credited to the DROP (DB Benefit Amounts).

  2. Additionally, the DROP may also permit employee or employer contributions to the DROP in addition to the DB Benefit Amounts credited to the DROP (Additional Contributions). A back DROP is a plan into which contributions to the DROP account are made for the years after the employee enters into the arrangement and for prior years. The plan determines the specific years.

  3. DB Benefit Amounts credited to a DROP aren’t treated as annual additions subject to the IRC 415(c) limitation. Therefore, if the DROP plan doesn’t allow for any other Additional Contributions, IRC 415(c) language isn’t required in the plan.

  4. If Additional Contributions are provided in the DROP, the Additional Contributions also aren’t treated as annual additions subject to the IRC 415(c) limitation unless all three of the following are met:

    1. The DROP consists of segregated accounts for each participant

    2. Earnings on amounts in the DROP are based solely on actual investment earnings (the DROP doesn’t provide a fixed or guaranteed rate of return on funds in the DROP).

    3. The DROP doesn’t permit the accrual of earnings in the DROP to stop at any time.

    Note:

    See IRM 4.72.7.3.5, Detailed Explanation of the Three Criteria Used for Determining Whether IRC 415(c) Limits Apply to Additional Contributions in a DROP, for more detailed information on how a plan may meet these criteria.

  5. Review the plan document and if the DROP doesn’t meet all three criteria, the Additional Contributions aren’t treated as annual additions subject and the IRC 415(c) limits language isn’t required in the plan.

  6. The benefits can’t be subject to the employer's discretion. The plan document must be clear as to what rate of return, if any, is credited to the DROP.

Group Trust (Pooled Investment)

  1. A group trust status request for a DL is filed on Form 5316, Application for Group or Pooled Trust Ruling.

  2. The application must include these documents:

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

    2. A completed Form 5316.

    3. A copy of the trust’s latest DL, 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, Rev. Rul. 2011-1, Notice 2012-6, and Rev. Rul. 2012-24.

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

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

  5. See Rev. Proc. 2018-4 (revised annually), section 16, for more information.

Administrative File

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

  2. The administrative file contains two types of documents:

    1. Administrative record items

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

  3. The case file, consisting of the initial submission material and all correspondence between the IRS and the plan sponsor, makes up the majority of the "administrative record" . See IRM 7.11.11.2 for a definition of administrative record and Exhibit 7.11.11-1, Sample Proposed Adverse Case File Assembly, for an example of includable items. Place other documents 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, organize documents 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 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).

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 you receive a request for public inspection, send the request to the address listed in Number 3 of Exhibit 7.11.1-1, Mailing Addresses. Taxpayers may get help to request copies of employee plans related information 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. This means that only the employer, their designated representative and properly identified plan participants may inspect the case file.

  5. Find the procedures for public disclosure in IRC 6104(a)(1)(B), (C), and (D), IRM 11.3.10, and 26 CFR 301.6104.

Administrative File Retention

  1. All EP Determination case files are electronically scanned into TEDS. The electronic file is kept on TEDS indefinitely. The hard copy of the file is kept until TEDS is certified for back-up and recovery purposes and then destroyed. See IRM 1.15.24, Records Management, Records Control Schedule for Tax Administration - Tax Exempt & Government Entities (TE/GE).

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

    1. Issued a final adverse letter.

    2. Received interested party comments.

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

  3. Director, EP Rulings and Agreements, may decide to:

    1. Keep certain information from administrative files to efficiently respond to plan sponsor requests for corrected DLs.

    2. Hold the entire file for a designated period (such as, 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 EP Records Retrieval Form (internal use only) found in the "Letters & Forms" folder on the shared server.

Normal Retirement Age for Pension Plans

  1. On May 22, 2007, the IRS published 26 CFR 1.401(a)-1(b)(2) to address the definition of normal retirement age (NRA) for qualified pension plans.

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

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

    2. substantially all participants are qualified safety employees and a NRA of at least 50

    The plan is deemed to comply with the Final Regulations; therefore you may issue the DL without further consideration.
    1. a NRA less than 62 (even if later amended)

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

    Complete the NRA check sheet from the "NRA Final Regulations" folder on the shared server and send to QA who helps determine whether the plan complied with the Final Regulations.

    Exception:

    If the pension plan is a collectively bargained multiemployer plan with a NRA of age 55 or above

    The plan is deemed to comply with the Final Regulations; however, complete the NRA check sheet from the "NRA Final Regulations" folder on the shared server and send to QA for final approval.

Pension Equity Plan (PEP) Accrued Benefit Rules under IRC 411(b)(1)

  1. In a DB plan, the participant's accrued benefit must not be reduced on account of any increase in his age or service (except in rare circumstances) (IRC 411(b)(1)(G)).

  2. Most PEP formulas include an interest component that is either:

    1. Explicit (interest is added to the accumulated benefit after accruals cease).

    2. Implicit (interest is included as part of a deferred to NRA annuity factor used to convert the accumulated benefit to an annuity payable at NRA).

  3. A plan provides for explicit interest if it states that interest is credited to the accumulated benefit after benefit accruals cease (such as upon termination of employment, transfer to a nonparticipating employer or division, or attainment of a maximum number of years of service or points).

    Example:

    A plan may state that after a participant terminates employment with the plan sponsor, the accumulated benefit is credited with 4% interest for each year until the annuity starting date.

  4. An implicit interest PEP doesn’t credit interest to the accumulated benefit after benefit accruals cease, but instead determines the accrued benefit as an annuity commencing at NRA by dividing the accumulated benefit by a deferred annuity factor. This has the same effect as projecting interest to NRA using the interest rate (and mortality rates, if applicable) embedded in the deferred annuity factor.

  5. A PEP must contain language that ensures compliance with the accrued benefit rules under IRC 411(b)(1)(G). Review all PEP plan documents to ensure that the plan contains language showing that they comply with IRC 411(b)(1)(G). Pending the issuance of guidance that will provide for more specific ways of complying with IRC 411(b)(1)(G), there are a number of ways that a plan may include acceptable language in the plan document. See the examples below for language that a plan may provide.

    Type of PEP Example of Plan Language
    Explicit Rate and Implicit Rate PEPs Notwithstanding any other provision in the plan, a participant’s accrued benefit as of any determination date will never be less than the benefit required to comply with IRC 411(b)(1)(G)
    Explicit Rate and Implicit Rate PEPs Notwithstanding any other provision in the plan, a participant’s accrued benefit may not be reduced on account of an increase in a participant’s age or service.
    Explicit Rate and Implicit Rate PEPs A participant’s accrued benefit as of any determination date shall not be less than the accrued benefit to which the participant would have been entitled if he had ceased accruals at the end of any prior plan year.
    Explicit Rate PEPs A participant’s accrued benefit shall be the lesser of the annuity benefit that the participant has accumulated to date (including interest projected to Normal Retirement Age (NRA)) and the annuity benefit the participant would accumulate if he worked to NRA.
    Explicit Rate PEPs The accumulated benefit determined under the PEP formula as of any determination date cannot be less than the accumulated benefit as of the end of any prior year with interest credited to the determination date, determined as if the participant had ceased accruals as of the end of that prior plan year.
    Implicit Rate PEPs A participant’s accrued benefit shall be the lesser of the annuity benefit that the participant has earned to date (including interest (and mortality, if applicable), reflected in the deferred annuity factor) and the benefit the participant would earn if he worked to NRA and accumulated the full number of PEP credits.

    Caution:

    While plan sponsors can add most of these provisions retroactively, a PEP plan generally can’t be amended to apply the "lesser of" formula to benefits already accrued, because that amendment could cause a reduction in the accrued benefit and violate IRC 411(d)(6).

Mailing Address List

Send application Forms 5300, 5307, 5309, 5310, and 5316 to one of the addresses in Rev. Proc. 2018-4, section 31.02.


Use one of these addresses for the EP Determinations centralized site with the below identifiers:

Express mail or delivery service Mailing Address
Internal Revenue Service Internal Revenue Service
550 Main Street PO Box 2508
Cincinnati, OH 45202 Cincinnati, OH 45201
*Add the following identifiers 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
Director, EP Rulings and Agreements - 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

Case File Assembly Guide

1- In unagreed/adverse letter cases, or in cases where a request for public inspection is received, prepare an index. List in the index, all of the pertinent material on the right side of the folder. Tab the material on the right side according to the index and fasten it to the folder.

2- For all unagreed/adverse letter cases prepare a report (Attachment A) explaining why the plan is not qualified. This report should contain sections covering FACTS, LAW, CONCLUSION and the TAXPAYER’S POSITION. Leave the original plus one copy loose in the file. The group manager initials a file copy and fastens it in the file.

4- Label all unneeded material purge and place as the last item on the right side of the folder. Don’t purge original forms. Don’t mark anything "purge" on unagreed/adverse letter cases. NOTE: The case should not be purged at the group level.

5- If required, staple Form 3198-A, Special Handling Notice, to the outside of the folder.

6- Note to TEDS users, generally you don’t have to rearrange items on TEDS to meet the below requirements but you must ensure that all non-disclosable items are in the correct folder. If the hardcopy of the case is received for a TEDS case, an attempt should be made to arrange the items in the correct order.

Left Side/ Top to Bottom Right Side/ Top to Bottom
Form 5666, TE/GE Information Report, 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 plan sponsor, 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 IRS makes an investigation regarding the facts as submitted by the plan sponsor 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 work papers, 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 26 CFR 301.6104(a)-1(g) Last favorable DL.
Form 5402, Appeals Transmittal Memorandum, and supporting statements along with any Appeals work papers, if applicable. See 26 CFR 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:

Place any confidential information described in IRC 6103(b) (such as, compensation information) on the left side of the folder due to disclosure issues.

Closing agreements, including related documents (work papers, correspondence, etc.). Written correspondence between the IRS and the plan sponsor for 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 IRS to the plan sponsor 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 last favorable determination letter (LFDL) unless they are being used to verify RAP.

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 26 CFR 1.401(a)(9)-1, A-3
IRC 401(a)(17) - Governmental Plans - annual compensation limits 26 CFR 1.401(a)(17)-1(d)(4)(ii)(C)
IRC 401(a)(17)(B) - Cost of Living Increases 26 CFR 1.401(a)(17)-1(a)(3)
IRC 401(a)(30) - Limit on Elective Deferrals - A plan may incorporate the applicable limits by reference. 26 CFR 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). 26 CFR 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). 26 CFR 1.401(m)-1(c)(2)
IRC 402(g) - Annual Limit - The dollar limitation under IRC 402(g) may be incorporated by reference. 26 CFR 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 26 CFR 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. Please see the note below.
415(d) - A plan may incorporate by reference the annual adjustments to the limitations of 415 that are made pursuant to 415(d).

Note:

Notice 2010-15, Q&A-9 provides that differential wage payments must be treated as compensation under IRC 415(c)(3) and Reg 1.415(c)-2. If the plan incorporates by reference the default definition under Reg § 1.415(c)-2(a), or the safe harbor definition under Reg 1.415(c)-2(d)(2), it will not satisfy the requirement that differential wage payments be included as part of IRC 415(c)(3) compensation. This is because neither of these definitions incorporate differential wages under IRC 3401(a). Therefore, if the plan uses the default definition or the definition under Reg 1.415-2(d)(2), insure that the plan separately includes differential wage payments. The safe harbor definitions under Reg. 1.415(c)-2(d)(3) and (4) include wages under IRC 3401(a) and, thus, comply with the requirement that differential wage payments be included as part of IRC 415(c)(3) compensation.

26 CFR 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. 26 CFR 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. 26 CFR 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. 26 CFR 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.

International Worksheet

EP DETERMINATIONS INTERNATIONAL WORKSHEETRev. January 2017
   
Plan Sponsor: _ EIN: _
TEDS #: _ Specialist Name: _
Manager’s Approval: _ Group #: _Date: _
Refer to IRM 7.11.1.28
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.
Instructions:
If the answers to Part I items #3 or 4 are answered yes, a referral to EP Examination may be required. If so, send the worksheet and additional documentation by secure email to EP Quality Assurance
If any other question is answered yes, please send the worksheet (with the group manager's digital signature) by secure email to EP Quality Assurance.
Include a copy of the worksheet in 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.
PART I: Foreign sponsors other than in the U.S. Territories:
1. Does the plan have a foreign plan sponsor? Yes □ No □
2. Is the trust a foreign trust? Yes □ No □
If yes; the 5274 should include the caveat 29, 1132 Letter should include the caveats 36 and 37.
3. Does the foreign trust invest in a group trust? Yes □ No □
Identify Trust section(s)_

If yes, submit the Form 5666 to EP Quality Assurance and suspend the application.
Exception for Puerto Rico trusts: Rev. Rul. 2011-1 exempts U.S. qualified Puerto Rico plans and trusts that participated in group trusts as of Jan. 10, 2011.
4. Has or does the plan intend to transfer of assets or liabilities to or from a U.S. trust or a foreign trust? Cite_ Yes □ No □
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 and the Form 5666 to EP Quality Assurance or Efax to 855-212-0911 and suspend the application.
Exception for transfer to Puerto Rican trust: Notice 2012-6 permits a transfer to be made to a separate Puerto Rico plan and trust by January 1, 2013.
 
PART II: Is the sponsor located in a U.S. territory? Yes □ No □
1. American Samoa Commonwealth of North Mariana Islands (CNMI)
Guam Puerto Rico U.S. Virgin Islands (USVI).

ERISA § 1022 provides guidance for the tax coordination agreement between the IRS and Puerto Rico tax authority. Plan sponsors with employees in both the U.S. and P.R. may elect to satisfy the requirements of the U.S. and P.R. Internal Revenue Code (IRC); or a foreign P.R. trust may elect to be treated as a qualified plan under IRC §401(a).
Circular Letter No. 11-10 (as modified by Circular Letter No. 13-02), describes the statutory requirements that must be included in a plan document that covers employees in Puerto Rico. Plan sponsors of Puerto Rico-only or dual-qualified plans must adopt amendments to comply with the Puerto Rico Internal Revenue Code (PRIRC) by the due date, including extensions, of the Puerto Rico income tax return for the 2013 taxable year.
EP Determinations does not review those provisions for compliance with the PRIRC, the sponsor must also apply for a letter from the Puerto Rico Hacienda.
Refer to:https://www.irs.gov/retirement-plans/ep-examination-process-guide-section-10-puerto-rico-compliance-questions-and-answers
2. Is the trust established in Puerto Rico and the Form 5300 application submitted to make an ERISA§1022(i)(2) election)? Yes □ No □
Section 1022(i)(2) of ERISA permits trusts created or organized in Puerto Rico to make an election to be treated as a U.S. qualified plan and trust 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.
Add caveats 29 and 19 to the 5274 Letter or caveats 18, 36, and 37 to the 1132 Letter. Forward a copy of the 5300 series application and the favorable determination letter to EP Quality Assurance 401 W. Peachtree St. Stop 512-D Atlanta, GA 30308, or EFAX to 855-212-0911.
3. Is the plan sponsor and trust located in the U.S. and does the plan include a dual qualification addendum with provisions intended to comply with the Puerto Rico Internal Revenue Code (PRIRC) for employees located in Puerto Rico? Yes □ No □
Even though the plan is designed to be qualified in the U.S., the dual qualified plan also includes provisions intended to comply with the PRIRC. As the PRIRC differs from the IRC 401(a), the provisions intended to comply with the PRIRC should be incorporated in a separate addendum, to avoid a violation of ERISA § 404(a)(1)(D). The IRS determination letter provides reliance on the plan’s compliance with the IRC 401(a) requirements only, therefore we add the caveats to advise the letter does not apply to the P.R. addendum. The plan must also be submitted to the PR tax authority to receive reliance on the PR Code.
Please add caveat 19 to the 5274 Letter or caveat 18 to the 1132 Letter:
"This determination letter applies to the provisions for the qualification requirements under the Internal Revenue Code and does not apply to the addendum for the qualification requirements under the Puerto Rico Internal Revenue Code."