IRS Allows Governmental Plan Sponsors to Elect Cycle E
As an early holiday greeting, the Internal Revenue Service (IRS) issued Revenue Procedure (Rev. Proc.) 2012-50
on Nov. 21, 2012. This procedure gives the sponsor of an individually designed governmental plan the option of electing to use either Cycle C or Cycle E as its second remedial amendment cycle. The IRS noted offering sponsors of governmental plans the option of electing Cycle C or Cycle E affords such sponsors with greater flexibility to deal with the unique issues they face in obtaining approval for plan amendments during legislative sessions. To make an election, the sponsor must simply file a determination letter application for the plan during the one-year submission period for the applicable cycle the sponsor selects (Feb. 1, 2013 through Jan. 31, 2014 for Cycle C, or Feb. 1, 2015 through Jan. 31, 2016 for Cycle E). If the Cycle E submission option is elected, such a filing must comply with all the requirements for a Cycle E submission, including the applicable amendments contained in the Cycle E Cumulative List, and the plan must have been amended in accordance with Cycle C and Cycle D requirements.
Rev. Proc. 2012-50 amends Rev. Proc. 2007-44 which provides for a five-year remedial amendment period or cycle (for individually designed plans) or a six-year remedial amendment period or cycle (for pre-approved plans) during which such plans may be retroactively amended to comply with the qualification requirements of Section 401(a) of the Internal Revenue Code. While the five-year remedial amendment cycle for individually designed plans is generally based on the sponsor's employer identification number, the generally applicable cycle for all individually designed governmental plans is Cycle C.
Rev. Proc. 2007-44 was similarly amended by Rev. Proc. 2009-36 which provided that an individually designed governmental plan could elect Cycle E (instead of Cycle C) as the plan's initial Economic Growth and Tax Relief Reconciliation Act filing cycle for a determination letter.
Importantly, a sponsor's election of Cycle E, instead of Cycle C, as the second remedial amendment cycle for an individually designed governmental plan applies only to that plan and only to that cycle. For any subsequent remedial amendment cycle, the plan's cycle will revert to Cycle C. In other words, if a sponsor of a governmental plan files a determination letter application for the plan during the second Cycle E submission period ending on Jan. 31, 2016, the determination letter that is issued will expire at the end of the third Cycle C submission period (Jan. 31, 2019).
A determination letter issued in Cycle C or Cycle E for a governmental plan would ordinarily expire at the end of the next Cycle C (Jan. 31, 2014), in accordance with Rev. Proc. 2009-36. Rev. Proc. 2012-50 extends this expiration date to the end of the second Cycle E (Jan. 31, 2016) if the sponsor elects Cycle E as the plan's second remedial amendment cycle by filing in Cycle E.
For additional information about Rev. Proc. 2012-50, please contact Mary Beth Braitman, Lisa Erb Harrison, Tiffany Sharpley or any member of Ice Miller's Employee Benefits Group.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.