Groups representing large sponsors of retirement plans called on the IRS on Thursday to reverse its decision to stop issuing determination letters, which plans rely on to affirm qualified tax status.
IRS officials have proposed providing such letters only when plans are started or terminated, because of limited resources. The change would go into effect Jan. 1, 2017.
In separate letters sent to the IRS on Thursday, the ERISA Industry Committee, which represents large employers on benefits issues, and the Committee on Investment of Employee Benefit Assets, whose members manage $2 trillion of retirement assets, said the change would disproportionately harm larger plans.
“The lack of the IRS ‘seal of approval’ … is potentially devastating to large plan sponsors because it would create uncertainty” for the plans and participants, and auditors and other third parties, said Annette Guarisco Fildes, ERIC president and CEO, in the letter.
Discontinuation of a program that sponsors have relied on since 1944 “could significantly increase the risk and cost of maintaining a plan and could lead to further declines in plan sponsorship,” wrote CIEBA Executive Director Deborah Forbes.
Ms. Forbes called on IRS officials to work with plan sponsors to find solutions that would allow the program to continue.
ERIC officials suggested limiting individual determinations to plans with 15,000 or more participants.
Doing so “will not only ensure the smooth administration of large employer plans, but will also guarantee that (the IRS) uses its limited resources efficiently,” Ms. Fildes said.