Reed Smith To Offer Opinion Letters To Replace IRS Determination Letter

Reed Smith will offer plan sponsors a law firm opinion letter, similar to a determination letter, on the continued qualified status of an individually designed plan document.

In general, plan sponsors of individually designed tax-qualified retirement plans are no longer able to receive a determination letter from the Internal Revenue Service (the "IRS") on the tax-qualified status of a plan. IRS determination letters are routinely used as "proof" of qualified status for audits and agency compliance checks, mergers and acquisitions, significant plan re-design, and participant rollovers. Due to the historical reliance on determination letters, plan sponsors will need to find other ways to prove a plan's compliance with the Internal Revenue Code.

To address this need, Reed Smith is launching its qualified plan opinion letter program.

Background

Effective January 1, 2017, the IRS eliminated the staggered 5-year determination letter remedial amendment cycles for individually designed plans and limited the determination letter program to initial plan qualification and qualification upon plan termination. The IRS stated that it will consider additional circumstances based on program capacity and other factors, but no additional circumstances apply in calendar year 2017. Accordingly, most sponsors of individually designed plans are no longer eligible to receive updated favorable determination letters from the IRS.

Going forward, the IRS will publish an annual...