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.

BREAKING DOWN '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.

  1. Plan Sponsor

    A plan sponsor is a designated party, usually a company or employer, ...
  2. Summary Plan Description

    The summary plan description is a document that employers are ...
  3. Non-Qualified Plan

    A non-qualified plan is a tax-deferred, employer-sponsored retirement ...
  4. Qualified Retirement Plan

    A qualified retirement plan meets the requirements of Internal ...
  5. Deficiency Letter

    A letter, issued by the Securities and Exchange Commission (SEC) ...
  6. Corporate Pension Plan

    A formal arrangement between a company and its employees - or ...
Related Articles
  1. Financial Advisor

    Are You ERISA Compliant? Follow This Checklist

    Following a checklist can make achieving compliance with Employee Retirement Income Security Act of 1974 (ERISA) requirements much less burdensome.
  2. Investing

    401(k) Lawsuits: How Employers Are Protecting Themselves

    Some companies are making it harder for employees to sue over retirement fund problems. Here is what you need to know about the trend.
  3. Financial Advisor

    How Do Pension Funds Work?

    Traditional private pension funds are well regulated by the government through ERISA and the PBGC. Alternative investments are aiding portfolio returns.
  4. Retirement

    Why Retirement Plan Sponsors Could Face Litigation

    A Supreme Court decision makes it easier for retirement plan participants to sue their employers. Apathy is not a strategy for plan sponsors.
  5. Retirement

    Six Options for Moving Retirement Money - Part I

    If you leave your current job and have a 401(k), there are many things you can do with it.
  6. Financial Advisor

    How to Follow Investment Committee Best Practices

    More plan sponsors are forming investment committees to fortify their fiduciary standards. These are best practices for investment committees to follow.
  7. Financial Advisor

    4 Compensation Plans for Wealthy Earners

    Here's what advisors need to know about non-qualified deferred compensation plans.
  8. Financial Advisor

    SEP vs. Keogh Plans: Which is Right for You?

    SEP and Keogh plans each have their pros and cons. Here's how to choose which one is right for you.
  9. Retirement

    Do You Have a Crummy 401(k)?

    High-cost, outdated plans can keep your retirement portfolio from thriving. Here's what to do – and the 2015 Supreme Court case that could help.
  10. Financial Advisor

    Advising FAs: Explaining Estate Planning to a Client

    As the old saying goes, you can't take it with you. For this reason, it is important to have a current estate plan in place to protect your family and belongings.
  1. Are SIMPLE IRA plans subject to ERISA?

    Learn how the Employee Retirement Investment Security Act, or ERISA, guides the administration of Savings Incentive Match ... Read Answer >>
  2. What are my main rights as a 401(k) plan participant?

    Learn how under ERISA, 401(k) plan participants are guaranteed several important rights, including protections of their plan ... Read Answer >>
Hot Definitions
  1. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  2. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  3. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  4. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  5. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  6. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
Trading Center