IRS Limits Consideration of Prior Plan Amendments

The IRS made the assertion in the latest issue of its  Employee Plans News , an electronic IRS newsletter aimed at retirement plan practitioners.

According to the article, the plan amendments in question were not covered on the prior determination later because they were not included with the plan’s application. The IRS won’t caveat for the amendments, officials said in the newsletter article, because they “should have been included in the prior application. If amendments are made after submission of a determination letter application, they should be submitted to the IRS for association with that application.”

If an IRS representative contacts a plan sponsor about a letter application, the article claimed, the plan sponsor should take that opportunity to tell the representative about the earlier amendments and send the IRS copies of them so they can be considered as part of the application.

From now on, the IRS said, its representative handling a particular application will only review the document as submitted – which may include amendments that predate a prior favorable determination letter. To the extent that language is still part of the document, their review will cover it with the current letter. But the letter will not be caveated for the date those amendments were adopted, the service said.

Rev. Proc. 2004-6 provides that, because a plan amendment, other than a minor plan amendment which could be submitted on Form 6406, may affect other portions of a plan, a determination letter issued on such a plan amendment will express an opinion on the entire plan, as amended. So, that amendment must be looked at in conjunction with the prior application, according to the article. If a determination letter could be issued on that amendment and plan, the prior letter would have to be revoked. In most of these cases the 401(b) period is no longer open, the IRS said.

The Form 5300 instructions state that all applications for plans that have at any time in the past received a favorable determination letter must include a copy of the plan’s latest determination letter and subsequent amendments and or restatements. Said the IRS officials: “Those are the amendments we will rule on.”

To subscribe to the Employee Plans News, go to  www.irs.gov/retirement/page/0,,id=6941,00.html .

The IRS also distributes a second electronic newsletter,  Retirement News for Employers .To subscribe to, go to  www.irs.gov/retirement/page/0,,id=122751,00.html .