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IRS Publishes Update to Its Annual Revenue Procedure Requesting Determination of Employee Benefit Plans Tax Qualification Status

Posted by Corey F. Schechter | Jan 09, 2013 | 0 Comments

Although not required, an employer has the option of seeking an advance determination as to the qualified status of its retirement plan by the Internal Revenue Service (“IRS”), rather than waiting for the IRS to review the plan in connection with an audit. This written advance determination is called a “determination letter.” A favorable determination letter from the IRS indicates that, in its opinion, the terms of the plan conform to the requirements of the Internal Revenue Code (“IRC”).

The advantage of obtaining a favorable determination letter is that the employer is afforded some assurance that its retirement plan is “qualified” (i.e., afforded favorable tax treatment for meeting certain requirements under the IRC). Receipt of a favorable determination letter allows the employer to make contributions to the retirement plan with the knowledge that its deductions for those contributions will most likely be allowed should the IRS audit its tax return.

On January 2, 2013, the IRS issued Rev. Proc. 2013-6, which revises procedures for issuing determination letters on the tax qualified status of employee retirement plans.

Going into effect on February 1, 2013, the newly updated Revenue Procedure appeared in Internal Revenue Bulletin 2013-1.

In Rev. Proc. 2013-6, the IRS updated the procedures in Rev. Proc. 2012-6 for issuing determination letters on the qualified status of pension, profit-sharing, annuity, stock bonus, and employee stock ownership plans (“ESOPs”) under IRC sections 401, 403(a), 409, and 4975(e)(7), and on the tax-exempt status of related trusts or custodial accounts under IRC Section 501(a).

For a complete copy of Rev. Proc. 2013-6, please visit the IRS's website at: http://www.irs.gov/irb/2013-01_IRB/ar11.html

About the Author

Corey F. Schechter

Corey Schechter practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Employment and Labor Law.

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Retirement Plans

We help establish a customized plan that meets regulatory requirements as a tax qualified plan. Following implementation, our attorneys can assist clients and their plan administrator with regular reviews and updates to help with regulatory compliance for the plan's operation, and continued effectiveness in meeting the client's specific goals.

ESOPs

We are dedicated to employee ownership. When you come to us for ESOP services, you receive influential legal counsel who stand beside you to help you stay informed, in compliance, and abreast of the latest developments-all to help you realize your plan goals as fully and effectively as possible.

QDROs

A QDRO is a specially designed court order that is required for the division of retirement benefits in a family law case. Many family law attorneys do not possess the expertise necessary to divide retirement benefits or stock options upon divorce. We have extensive experience in dividing qualified plans, government plans, IRAs and stock options between the employee spouse and non-employee spouse.

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