7.11.5. Proper Use of Determination Letter Caveats

(1) Purpose: This IRM gives guidance for using caveats (selective paragraphs) in favorable Determination Letters (DL):

1. Letter 1132 - issued for terminating plans submitted on a Form 5310.

2. Letter 5274 - issued for ongoing plans submitted on a Form 5300 or 5307.

3. Letter 6569 - issued for use with 403(b) Plans.

4. Letter 6570 - Issued for use with 403(b) Plans.

(2) Audience: Employee Plans (EP) Determinations and Quality Assurance (QA) staff.

(3) Policy Owner: Director, EP.

(4) Program Owner: EP.

(5) Program Goals: The goal of EP Determinations is to ensure that plans comply with the tax laws. We do this by reviewing applications for determination and opinion letters and protecting the public interest by applying the tax law with integrity and fairness to all.

(6) EP Determinations employees should use the Forms/Pubs/Products Repository to draft closing and other correspondence letters and their related attachments.

(1) Use the chart in Exhibit 7.11.5-1, DL for Ongoing Plans (Letter 5274), to help you select the appropriate caveats for current applications. The chart is not an all-inclusive list; all caveat paragraphs are included in the repository for historical purposes.

(2) For ongoing IDP’s include caveats:

1. "B" to show that the DL doesn’t apply to qualification items that become effective after the dates specified on the applicable Required Amendment List (RA List).

2. "5" with a variable for the year for the applicable RA List.

(3) For ongoing IDPs, include on the Letter 5274 the date(s) of a), b), c), d), and e):

1. The initial plan document if effective on or after January 1, 2016, and not previously ruled on. Use Caveat 12.

2. The current restatement if subsequent to the initial plan document.

3. All interim amendments to comply with the 2015 CL, unless previously ruled on, and/or all amendments adopted to comply with the RA List for which the application was submitted and any other RA List item that has not been previously ruled on.

4. All discretionary or required amendments effective on or after January 1, 2016, that the employer elected to use in operation, unless previously ruled on.

5. All corrective amendments the plan sponsor submitted or IRS secured with a VCP application or Audit CAP effective on the later of the date of the LFDL or January 1, 2016.

(1) Use the chart in Exhibit 7.11.5-1, DL for Ongoing Plans (Letter 5274), to help you select the appropriate caveat(s) for current applications. The chart is not an all-inclusive list; it also includes all caveat paragraphs in the repository for historical purposes.

(2) Include these caveats for a pre-approved plan submitted during an IRS-announced two-year window:

1. "A" to show that the DL doesn’t apply to qualification items that become effective after the dates specified on the applicable CL.

2. "4" with a variable for the year of the applicable CL year we ruled on.

3. "7" with a variable "contribution" for DC plans or "benefit" for DB plans to indicate the letter's expiration date.

(3) Include on the Letter 5274 of pre-approved plan adopters, the date(s) of a), b) and c) below, regardless of the date of the LFDL:

1. The restated document and interim amendments adopted (including amendments adopted on behalf of a plan sponsor) to comply with the applicable CL for the cycle when the application was submitted.

2. All discretionary or required amendments the employer adopted since the last restatement that satisfied the CL for the prior cycle.

3. All corrective amendments the plan sponsor submitted or IRS secured with a VCP application or Audit CAP in the applicable cycle.

(1) All caveat paragraphs are included in the repository.

(2) For ongoing IDP’s include caveats:

1. “B” to show that the DL doesn’t apply to qualification items that become effective after the dates specified on the applicable Required Amendment List (RA List).

(3) For ongoing IDPs, include on the Letter 6570 the date(s) of a), b), c), d), and e).

1. The initial plan document, effective on or after January 1, 2016. Use paragraph 4.

2. The current restatement if subsequent to the initial plan document.

3. All interim amendments and/or all amendments adopted to comply with the RA List for which the application was submitted and any other RA List item that has not been previously ruled on.

4. All discretionary or required amendments that the employer elected to use in operation.

5. All corrective amendments the plan sponsor submitted or IRS secured with a VCP application or Audit CAP.

(1) Use the chart in Exhibit 7.11.5-2, Letter 1132 for Terminating Plans, for help in selecting the appropriate caveat(s) for current applications. The chart is not an all-inclusive list; all caveat paragraphs are included in the repository for historical purposes.

(2) For 5310 applications, include on the Letter 1132, the date(s) of a), b), c), d) and e):

1. The initial plan document or the restated plan document effective on or after January 1, 2016, if not previously ruled on.

2. All amendments listed on the applicable RA List, including amendments adopted to comply with laws that are effective on the plan termination date, if not previously ruled on, and include amendments for which the RAP for that law hasn’t otherwise ended.

3. Any interim amendments adopted to comply with the 2015 CL, except for interim amendments previously ruled on.

4. All discretionary or required amendments effective on or after January 1, 2016, which the employer implemented in operation.

5. All corrective amendments submitted or secured with a VCP application or Audit CAP effective on the later of the date of the LFDL or after January 1, 2016.

Example: Employer X terminates an individually-designed plan and submits a Form 5310 application on June 17, 2022. Employer X has an EIN that ends in 4 and received an LFDL for the 2013 CL. Therefore, include on the Letter 1132, interim amendments that appeared on the 2014 and 2015 CL, any applicable item from the 2016-2022 RA List and any discretionary or required amendments effective on or after January 1, 2016.

(1) Use the chart in Exhibit 7.11.5-2, Letter 1132 for Terminating Plans, for help in selecting the appropriate caveat(s) for current applications. The chart is not an all-inclusive list; all caveat paragraphs are included in the repository for historical purposes.

(2) Include on the Letter 1132 for applications of pre-approved plan adopters, the date(s) of a), b), c), and d) below, regardless of the date of the LFDL:

1. The restated document and interim amendments adopted (including amendments adopted on behalf of a plan sponsor) to comply with the applicable CL for which the latest advisory or opinion letter was issued.

2. All discretionary or required amendments the employer adopted since the last restatement that satisfied the Cumulative List for the prior cycle.

3. All interim amendments adopted to comply with a law that is effective on the plan termination date even if the RAP for that law hasn’t otherwise ended.

4. All corrective amendments the plan sponsor submitted or IRS secured with a VCP application or Audit CAP in the applicable cycle.

(1) All caveat paragraphs are included in the repository for historical purposes.

(2) For 5310 applications, include on the Letter 6569 the date(s) of a), b), c), d) and e):

1. The initial plan document or the restated plan document, if effective on or after January 1, 2016.

2. All amendments listed on the applicable RA List, including amendments adopted to comply with laws that are effective on the plan termination date even if the RAP for that law hasn’t otherwise ended.

3. Any interim amendments adopted to comply with the Cumulative List.

4. All discretionary or required amendments which the employer implemented in operation.

5. All corrective amendments submitted or secured with a VCP application or Audit CAP.

(1) Consult your manager or EP Determinations QA before you add any customized caveat that will be printed as an addendum. You must include an addendum in the enclosures and include caveat 37 on the Letter 5274 and caveat 19 on Letter 1132 to indicate that the letter has a third-page addendum. Don’t indent the paragraph on the addendum.

(2) If the plan sponsor submits an adopted trust document:

1. Before the initial plan document, use caveat 22 on Letter 5274, or caveat 28 on Letter 1132.

2. On the same date as the initial plan document, use caveat 12 on Letter 5274, or caveat 6 on Letter 1132, which covers both the plan and trust adoption.

3. After the initial plan document, use caveat 13, 14, or 15 on Letter 5274, or caveat 5 or A7 on Letter 1132. Also, treat trust amendments like any other plan amendment.

(3) Governmental Plans - For governmental entities that apply for a DL, add caveat 29 to Letter 5274 and caveat A31 to Letter 1132 to show that the DL is based on the plan sponsor’s assertion that the plan is a government plan under IRC 414(d).

(4) Proposed Amendments: Don’t include the LFDL’s proposed amendment adoption dates on your current DL.

(5) Mergers: If the application is submitted with plan merger documentation, include only the amendments for the surviving plan on the DL. The plan sponsor can still rely on this DL for the merged plan(s) even though their amendment dates aren’t included on the DL.

(6) International: Dual-qualified plans have trusts in the U.S. and intend to have dual qualification under both the Puerto Rico Code and Internal Revenue Code. If the plan includes an addendum for dual qualification, include caveat 2 on Letter 5274 or caveat 29 on Letter 1132.

(7) Non-electing church: If the plan indicates that it is a non-electing church plan, include caveat 40 on Letter 5274 and caveat 30 on Letter 1132.

(8) Retiree medical benefit: If the application includes the information in Rev. Proc. 2024-4, (revised annually) Section 18, for IRC 401(h) retiree medical benefits and the plan meets the requirements of IRC 401(h) and IRC 420, include caveat 31 on Letter 5274 and caveat 14 on Letter 1132 for the second and subsequent cycles. If the application requests a ruling under IRC 401(h) only, include caveat 39 on Letter 5274.

(9) Accident and health plans: If the plan has provisions for health and disability benefits, include on the DL the following customized addendum caveat: "This determination is not an opinion on whether disability benefits or medical care benefits are accident and health plan benefits under IRC section 105 or whether contributions are contributions by an employer to accident and health plans under IRC section 106."

(10) Power of Attorney (POA) copies: Attach to Letter 937-A, only copies of the DL to a POA if the Form 2848 box is checked to send the POA notices and communications.

(11) Interested party comment cases: Select the appropriate opening caveat. Paragraph 1 for a complete application or Paragraph 2 if the application is incomplete or going to be returned. Delete dates from Letter 1935 and Letter 1939 before forwarding the case to EP Determinations QA.

(12) Partial Terminations Ruling Request Only: If the plan sponsor is requesting only a partial termination ruling, prepare Letter 5889, Partial Termination Determination. In the letter repository, select either Selectable Paragraph B for “Partial Termination Occurred” or Selectable Paragraph C for “Partial Termination DID NOT Occur.”