On May 26, 2016, the IRS posted on its website a revised list of checklists that the agency has developed for use by its own Employee Benefits Specialists in determining whether a retirement plan’s provisions are in compliance with the Internal Revenue Code (“Code”). Each checklist consists of an IRS publication and two sample forms which together incorporate:
- a general explanation providing guidance with respect to the law;
- “alert guidelines” in the form of worksheets, for use in reviewing a retirement plan’s terms and provisions; and
- “plan deficiency paragraphs” that contain pre-approved plan language that, while not mandatory, is deemed to satisfy the applicable Code requirements when used verbatim in retirement plans.
Because these checklists are used by the IRS’ own specialists, they should be very useful to retirement plan sponsors in helping to identify what the IRS considers to be legally compliant in terms of plan language.
The revised checklists, which are newly bundled into one package, cover the following areas:
- Minimum participation standards;
- Minimum vesting standards for defined contribution plans;
- Minimum vesting standards for defined benefit plans;
- Joint and survivor annuities;
- Miscellaneous provisions;
- Coverage and nondiscrimination requirements for defined contribution plans;
- Coverage and nondiscrimination requirements for defined benefit plans;
- Permitted disparity;
- Limitations on contributions and benefits;
- Top-heavy requirements;
- Employee leasing;
- Required plan distributions;
- Affiliated service groups;
- Employee and matching contributions (for defined contribution plans);
- Section 401(k) requirements (for defined contribution plans);
- Section 401(h) (for retiree medical benefits that are part of a defined benefit plan); and
- Section 436 requirements (for defined benefit plans).
The IRS notes that the checklists may be helpful to plan sponsors as a review tool prior to submitting a plan for a determination letter. As a practical matter, the IRS will no longer be accepting determination letter applications on a five-year remedial amendment cycle on and after January 1, 2017 (see IRS Notice 2016-03). Nevertheless, the checklists should offer retirement plan sponsors and their advisors a powerful advantage when drafting and reviewing their plan documents for general purposes.