Determination Letter

AAA

DEFINITION of 'Determination Letter'

A formal document issued by the IRS that decrees whether or not the retirement plan of the addressee is within Employee Retirement Income Security Act (ERISA) guidelines. If the plan is determined to be lacking in some respect, the shortcomings and necessary action to be taken will be listed. If the plan meets all of the requirements set forth by ERISA, then the plan becomes certified as a qualified plan and is eligible for all resulting tax benefits.

INVESTOPEDIA EXPLAINS 'Determination Letter'

Determination letters must be requested from the local IRS district office of the employer. If a plan is found to be deficient, then after corrections are made a second letter will be issued. This process can repeat itself until the plan is found to be compliant with ERISA guidelines. Determination letters can also be issued pursuant to proposed changes in an existing plan if needed.

RELATED TERMS
  1. Cash Or Deferred Arrangement - ...

    The method of funding any type of qualified profit-sharing or ...
  2. Deficiency Letter

    A letter, issued by the Securities and Exchange Commission (SEC) ...
  3. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
  4. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  5. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  6. Employee Retirement Income Security ...

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
RELATED FAQS
  1. I have a small business, and I'm considering setting up an SEP IRA. What are leased ...

    Generally, a leased employee is the employee of an outside organization from which you lease the employee's services. For ... Read Full Answer >>
  2. I am 59 (not 59.5) and my husband is 65. We have participated in a SIMPLE IRA with ...

    During the first two years after a SIMPLE IRA is established, assets held in the SIMPLE IRA must not be transferred or rolled ... Read Full Answer >>
  3. When can benefits be received from a provident fund?

    Like most retirement savings vehicles, participants in provident funds are eligible to receive benefits at retirement. However, ... Read Full Answer >>
  4. Is Social Security Income a perpetuity?

    Because Social Security income does not continue indefinitely, it cannot be classified as a perpetuity. What Is a Perpetuity? A ... Read Full Answer >>
  5. What types of investments are allowed in a provident fund?

    Different provident funds have different investment rules and restrictions. The allowable investments in an Indian provident ... Read Full Answer >>
  6. How does a provident fund compare to U.S. Social Security?

    A provident fund shares many attributes of the U.S. Social Security program, including government sponsorship and set contribution ... Read Full Answer >>
Related Articles
  1. Taxes

    Avoiding IRS Penalties On Your IRA Assets

    The best way to avoid additional charges and taxes is to know which transactions have expensive consequences.
  2. Options & Futures

    Asset Protection For The Business Owner

    Could incorporating your business help protect it? Find out here.
  3. Options & Futures

    Must-Know Rules For Converting A 401(k) To A Roth

    In 2008, the IRS spelled out the details for converting employer-plan funds directly to Roth IRAs.
  4. Retirement

    Millennials: Retire With $1,000,000 --Here's How

    It is possible for Millennials to retire with $1,000,000, if they take the right steps and make the necessary sacrifices now.
  5. Professionals

    Pension Annuity vs. Lump Sum: Which is Best?

    Which pension distribution option best serves your client, a pension annuity or a lump-sum payout?
  6. Retirement

    Roth 401(k) Vs. Roth IRA: Which One Is Better?

    It all depends on your age, your income - and your plans for your retirement nest egg.
  7. Investing

    Two Heads Are Better Than One In Finances

    Given the importance of a retirement account, having professional help with savings accounts is far more important than a personal chef or chauffer.
  8. Professionals

    How Retirees Should Approach Interest Rate Hikes

    Here's what retirees can do if interest rates rise.
  9. Investing Basics

    Are Annuities Right for You?

    Annuities are safe and often appealing, but IRAs and 401(k)s offer advantages that annuities typically can’t match, with little additional risk.
  10. Retirement

    Those Who Retire Early Share These Traits

    Here's how people planning on retiring early prepare for what's ahead.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!