For Immediate Release
Washington, DC – The ERISA Industry Committee (ERIC) is extremely disappointed that the Internal Revenue Service (IRS) has decided to eliminate the 5-year cycle determination letter program for individually designed plans.
As the only national trade association advocating exclusively for the employee benefit and compensation interests of the country’s largest employers, ERIC has repeatedly expressed concern about the elimination of the program and the effect its discontinuance would have on ERIC members and their ability to provide secure retirement benefits in a cost-effective manner.
“ERIC is extremely disappointed that the IRS did not heed our many warnings about the fallout that would happen if the determination letter program was discontinued for individually designed plans. Today’s decision hurts everyone –plan sponsors, employees, and their families –and will have massive rippling effects throughout the benefits world,” said Will Hansen, Senior Vice President, ERIC. “The determination letter program is particularly important to large employers as 98 percent use individually designed plans. The program’s discontinuance will significantly increase the risk and cost of plan sponsorship creating another government imposed reason why employers should move away from sponsoring retirement plans, particularly pension plans.”
ERIC conducted a survey of its members, leaders across all industries, on the determination letter program and the IRS curtailment of it:
- 83% of respondents stated that their external auditor requested and used the IRS determination letter as proof of compliance with federal laws and regulations
- Over 67% of respondents were concerned with maintaining compliance with federal laws and regulations if the determination letter program is eliminated
- 76% of respondents confirmed there will be a significant increase in legal and audit costs to operate retirement plans due to the lack of a determination letter program
- 25% of respondents stated that audit and legal costs are paid by plan participants, which will increase the cost to participate in a retirement plan and potentially drive down account balances
- 17% of respondents stated audit and legal costs are split among the plan sponsor, plan assets, and participants, which would also negatively impact account balances.