A retirement plan is considered to be qualified if it meets the requirements of IRC 401(a) in form and operation. A qualified plan is entitled to favorable tax treatment.

The EP Determination Letter Program is in place to help taxpayers understand the applicable tax laws governing retirement plans and ensure that their plans comply. This program is responsible for the issuance of certain letter rulings, determination letters, opinion letters, advisory letters and approval letters.

EP Determinations may enter into a closing agreement with a plan sponsor to resolve compliance failures that become apparent during a determination letter application review.

See these IRMs for other closing agreement procedures:

The IRS Commissioner may enter into and approve a written closing agreement with any person relating to the liability of such person with respect to any internal revenue tax for any taxable period ending before or after the date of such an agreement. (IRC 7121 and regulations).

Treasury Regulation 26 CFR 301.7121-1(a) allows the IRS to enter into a closing agreement in any case in which there appears to be an advantage permanently and conclusively closing the case, or if the taxpayer shows good and sufficient reasons for a closing agreement, and the Commissioner determines that the United States will not sustain any disadvantage by entering an agreement. (26 CFR 301.7121-1(a)).

The Commissioner delegates to the Commissioner, Tax Exempt and Government Entities Division (TE/GE), in cases under their jurisdiction to enter into and approve a written agreement with any person relating to the internal revenue tax liability of such person, or the person or estates for whom they act. (Delegation Order 8-3, IRM 1.2.2.9.3(12)).

This authority to enter into a closing agreement is further delegated to the Director, Employee Plans, and the Director, EP Rulings and Agreements (EP R&A). The authority delegated does not, however, include the authority to set aside any closing agreement, which is retained by the Commissioner. (IRM 7.2.1.9, Modification of Closing Agreements).

A complete list of delegation orders governing EP R&A can be found on IRS.gov at Delegation Orders and Policy Statements by Process.

The mission of Employee Plans is to provide EP’s customers top quality service by helping them understand and comply with applicable tax laws and to protect the public interest by applying the tax laws with integrity and fairness to all.

The Director, EP, reports to the Deputy Commissioner, TE/GE, and is responsible for planning, managing, directing and executing nationwide EP activities.

EP responsibilities include:

The Director, EP R&A, reports to the Director, EP, and is responsible for three types of services for retirement plans— voluntary compliance, determination letters, and technical guidance.

Responsibilities of the EP R&A staff include:

Programs reports:

Program effectiveness:

The IRS receives EP determination letter applications, and user fees from taxpayers on Pay.gov.

The user fee information is then transferred to LINUS to ensure it is properly recorded.

The application information from Pay.gov is transferred to Tax Exempt Determination System (TEDS) and EP/EO Determination System (EDS) which are the systems that EP Determinations uses to control their inventory.

TEDS contains roles and permissions to ensure proper separation of duties. (IRM 7.15.4).

The EP Determinations Area Managers coordinate the assignment of inventory.

In order to ensure a consistent level of managerial engagement in the process of making key strategic decisions during a determination letter review, the specialist submits requests for approval by their manager through TEDS.

The manager approves or rejects any request through the TEDS.

EP Determinations QA reviewers perform reviews on mandatory review cases and for cases selected for the Tax Exempt Quality Measurement System (TEQMS) to ensure that specialists are conducting their determination letter reviews per technical, procedural and administrative requirements. See IRM 7.11.3 and IRM 7.11.9 for more information.

The IRS is fully committed to protecting the privacy rights of taxpayers and employees. Privacy laws are included in the IRC, the Privacy Act of 1974, the Freedom of Information Act, and IRS policies and practices. For more information about these laws, visit the FOIA Library | Internal Revenue Service (irs.gov).

This table lists commonly used terms and provides their definitions.

Rev. Proc. 2021-30, Introduction To Employee Plans Compliance Resolution System.

IRM 7.2.1, TE/GE Closing Agreements, Closing Agreements Originating in EP Technical.

IRM 7.2.2, TE/GE Closing Agreements, Employee Plans Compliance Resolution System (EPCRS).

IRM 7.2.4, TE/GE Closing Agreements, Employee Plans Voluntary Closing Agreement Requests.

Delegation Orders and Policy Statements by Process

FOIA Library | Internal Revenue Service (irs.gov)

To determine if a case meets the requirements for a closing agreement:

If the issue is an operational failure, as described in Rev. Proc. 2021-30, Section 5, that involves a year for which the statute of limitations is open, refer the issue to EP Examinations using the procedures in IRM 7.11.10, EP Examination and Fraud Referral Procedures.

If the failure is an operational failure which resulted in the employer adopting a retroactive amendment to reflect plan operation, your manager and area manager will need to approve the PDFW.

After you've received your manager's approval, inform the plan sponsor of your findings and the potential need for a closing agreement.

To correct the failure:

The IRS imposes a sanction for qualification failures. The nonamender sanction amounts are determined using a percentage of the VCP user fees as noted in Rev. Proc. 2021-30, Section 14.04 and Rev. Proc. 2024-4, Appendix A.11, (updated annually).

Nonamender sanction amounts generally aren’t negotiable. However, consider reducing the sanction if the:

For failures other than nonamender failures, the sanction is a negotiated amount and determined based on facts and circumstances. See Rev. Proc. 2021-30, Section 14.01. Generally, the amount will not be less than the VCP user fee that applies to the plan.

Discuss the information and determine a sanction range with your manager which you must negotiate with the plan sponsor.

Once you've reached an agreement on the sanction amount, prepare the closing agreement. State the issue clearly so it leads to only one interpretation.

When you complete the closing agreement, secure email the following documents to your group manager:

The manager reviews these documents and forwards them to the area manager who will either approve or return them with suggested changes.

After the manager and senior manager approve the closing agreement, send the closing agreement to the plan sponsor with a Letter 1595 and Letter 937-A to the POA. Get the manager’s approval if you change any part of the closing agreement or operational compliance statement.

Mail the following documents to the taxpayer:

If the plan sponsor or POA doesn't respond to the final closing agreement cover letter within two weeks, send Letter 6480-A (10-day Letter) and a copy of the original Letter 1595 letter with your manager's approval.

Explain to the plan sponsor or POA that they must return the following documents to your address:

After discussing the case with the plan sponsor and sending the final closing agreement cover letter packet, email the Pay.gov representative, the taxpayer’s name, the taxpayer’s EIN and plan number, and the sanction amount.

Once payment is submitted through Pay.gov, the Pay.gov representative will pull the Form 3244-A, check or ACH Transaction Detail, deposit ticket number, voucher number if paid with credit card, and any supporting documents and email them to the specialist.

If you received the signed closing agreement from the taxpayer and not the documents needed from Pay.gov to send the packet to Kansas City, send an email to the Pay.gov representative.

If you receive the executed closing agreement packet with no errors, prepare Letter 1595-D for the plan sponsor, and a Letter 937-A for all POAs authorized to receive correspondence. Select paragraph D when enclosing an operational compliance statement; if enclosing Pay.gov instructions, select paragraph H. Within three business days send by secure email Letter 1595-D, the employer signed closing agreement and the operational compliance statement, if applicable, to your manager. Don't include PII in the subject line.

The manager will review the documents and forward them to the area manager for signature within three business days of receipt.

Area manager, EP Determinations duties: When you receive a complete closing agreement packet, within five business days, sign the closing agreement and the 1595-D letter. The IRS signature may be digital.

Specialist duties: Upon receipt of a copy of the approved closing agreement from the area manager, the specialist will: