In response to legislation impacting defined contribution (DC) plans, federal agencies take the specifics of laws and translate them into guidance. The Internal Revenue Service (IRS) administers and enforces the U.S. tax laws, including the Internal Revenue Code. The Department of Labor (DOL) administers federal labor laws that protect workers’ rights. Each department may issue a wide assortment of types of guidance, with varying levels of authority or different degrees to which they can be relied upon. This blog focuses on the IRS guidance.

Different types of IRS guidance

Some guidance is “official” and widely applicable, while others apply only to a specific party or provide a very general overview of an issue. Knowing what each type of guidance is used for, where the guidance can be found, and whether the guidance may be relied upon is key to ensuring compliance.

Below is a short summary of the most common forms of IRS guidance, in order of most “reliable” to less.

Regulation
Regulations are intended to interpret and give directions on complying with the law or tax code. Generally, regulations are issued in proposed form and subject to a comment period. After public input is fully considered, a final regulation or a temporary regulation (these expire after three years) is published in the Federal Register.

► DC plan sponsors and fiduciaries may rely on final and temporary regulations but may not rely on proposed regulations unless expressly stated.

Revenue Ruling
A revenue ruling is an official interpretation of the tax code, and it draws a conclusion on how the law is applied to a specific set of facts. Revenue rulings are published in the Internal Revenue Bulletin. Revenue rulings do not carry the same level of authority as IRS regulations.

► Any party whose circumstances are substantially similar to those described in the revenue ruling can rely on it.

Revenue Procedure
A revenue procedure is an official statement of an administrative practice or procedure that affects the rights or duties of plan sponsors, fiduciaries, administrators, and participants and that should be a matter of public knowledge. It is also published in the Internal Revenue Bulletin.

► While a revenue ruling generally states an IRS position on a specific set of facts, a revenue procedure provides instructions and may be relied upon.

Notice or Announcement
A notice may contain guidance that involves substantive interpretations of the Internal Revenue Code or other provisions of the law. For example, notices can be used to relate what regulations will say in situations where the regulations may not be published in the immediate future. It is also published in the Internal Revenue Bulletin.

An announcement is a public pronouncement that has only immediate or short-term value. For example, announcements can be used to summarize the law or regulations without making any substantive interpretation; to state what regulations will say when they are certain to be published in the immediate future; or to notify taxpayers of the existence of an approaching deadline. Announcements may be found on the IRS website.

► Notices and announcements provide less certainty to DC plans, sponsors, and fiduciaries.

Private Letter Ruling
A private letter ruling (PLR) interprets and applies tax laws to a specific set of facts before the situation occurs or before the associated tax return is filed. PLRs are not officially published but may be found on the IRS website after all identifying information has been removed.

► A PLR may not be relied on as precedent by other DC plans, but it can indicate how the IRS might rule in other, similar situations.

Technical Advice Memorandum
A technical advice memorandum, or TAM, is guidance furnished by the Office of Chief Counsel upon the request or in response to technical or procedural questions that develop during an official proceeding. TAMs are issued only on closed transactions and provide the interpretation of proper application of laws, regulations, revenue rulings, or other precedents. TAMs are generally made public after all identifying information has been removed.

► The advice rendered represents a final determination of the position of the IRS, but only with respect to the specific issue in the specific case in which the advice is issued.

A Complicating Factor
In 2024, the Supreme Court overruled the established judicial deference (aka “Chevron deference”) framework, which had historically deferred rule-making authority to federal agencies. In a pair of cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce (collectively Loper Bright), the court held that Chevron’s judicial deference framework contravened a requirement for courts to “decide all relevant questions of law” and “interpret . . . statutory provisions.” Additional opinions applying Loper Bright may be necessary to determine the full impact of this decision, but this ruling may inhibit the IRS’s ability to issue tax guidance.

Takeaways

IRS guidance provides a framework for plan sponsors, fiduciaries, and participants seeking to implement tax-preferred savings opportunities. Without this framework, legislation as it is drafted would be insufficient and the uncertainty it engenders would severely hinder these opportunities. And recent legislation—including the SECURE Act of 2019, the CARES Act of 2020, and SECURE 2.0 passed in 2022—would be rendered essentially useless. Employers should consult with their legal counsel and/or tax advisers before taking any particular action in reliance of IRS guidance.