HOLLYWOOD, Fla.--The focus of the Internal Revenue Service's Employee Plans Division in the coming year will be on enhancing the quality of customer service, releasing additional guidance relating to provisions enacted in the Pension Protection Act, and cooperating with IRS enforcement officials in an effort to increase plan compliance, an official said Jan. 19.

Andrew E. Zuckerman, IRS director of rulings and agreements, outlined the division's priorities at a meeting of the American Bar Association Tax Section.

Zuckerman said he also would like to encourage a higher quality of submissions when sponsors seek determination letters for their plans. Officials are spending an inordinate amount of time reworking cases that require extensive corrections, he said. The determination letter program was intended to handle cases from plans that are in relatively satisfactory condition, Zuckerman told BNA. He said the problem with submissions needing substantial reworking has persisted for years, and officials are trying to determine how to finally resolve it. The issues are so complicated, it is not hard to find a problem in a plan, he said. But, he made a distinction between plan documents with occasional problems and those where wholesale changes are needed because of “errors such as improperly drafted or outdated documents and incorrect amendments.”

The extent to which officials can spend less of their time reviewing compliant plans will give them more time to focus on more serious compliance concerns, he told attendees. Another issue program officials are facing is a “mini-backlog” that is likely to develop as the rate of plan submissions spikes as the deadline for Cycle A plans approaches.

A “flood” of submissions are anticipated beginning Jan. 22, Zuckerman said. He advised sponsors to “get those submissions in,” warning practitioners that the level of review will not decline when the volume of submissions increases as Cycle A ends.

He said requests for extensions are coming in, citing illness and legislative changes, but that so far he has seen none that would compel an extension of the Jan. 31, 2007, deadline for Cycle A.

Cash Balance Plans.

Zuckerman said 20 IRS officials have completed the training they will need to spend the remainder of 2007 working to clear the inventory of roughly 1,250 traditional defined benefit plans that were converted to defined benefit cash balance plans and that have languished in the determination letter program since 1999.

Work on those submissions is expected to begin Jan. 22, he said. Zuckerman added that the U.S. Supreme Court’s recent decision to not hear the IBM age discrimination case would not affect the determination letter process for the cash balance plans (10 PBD, 1/17/07). The high court's action left standing a Seventh Circuit ruling that cash balance plans do not discriminate against older workers.

Upcoming Guidance.

Martin L. Pippins, manager, technical guidance and quality assurance in the Employee Plans Division, told the meeting that officials are working on an update of rules that established the staggered determination letter program. The guidance is expected within “the next few weeks,” he said. Pippins also said additional guidance is due to be released “pretty soon” addressing the treatment of late submitted, pre-approved, defined contribution plans. The guidance may include a fee that can be paid in order to allow the plans to be treated as timely submitted, he said.

By Sheila R. Cherry