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IRS Issues 2020 Cumulative Amendment List for Qualified Retirement Plans

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

In a Notice, IRS has issued the 2020 Cumulative Amendment (CA) list for individually designed retirement plans. The CA list identifies certain changes in qualification requirements that became effective in 2020 that may require a retirement plan to be amended in order to remain qualified and establishes the date by which any necessary amendment must be made.

Background.

Code Sec. 401(b) provides a remedial amendment period during which a retirement plan may be amended retroactively to comply with the Code’s qualification requirements. The disqualifying provisions that may be amended retroactively and the remedial amendment period during which retroactive amendments may be adopted are described in Reg §1.401(b)-1.

Rev Proc 2016-37, 2016-29 IRB 136, provides procedures for issuing opinion letters and describes the 6-year remedial amendment cycle system for pre-approved plans. Pre-approved defined benefit plans and pre-approved defined contribution plans have separate six-year cycles.

A CA list identifies changes in the qualification requirements that the IRS will consider in its review of pre-approved plan documents for purposes of issuing opinion letters. A change in the qualification requirements includes a statutory change or a change in the requirements provided in regulations or other published guidance. (Rev Proc 2016-37)

Rev Proc 2016-37 provides, generally, that in the case of a qualified individually designed plan, the remedial amendment period for a disqualifying provision arising as a result of a change in qualification requirements is extended to the end of the second calendar year that begins after the issuance of the CA List on which the change in qualification requirements appears.

Similarly, Rev Proc 2019-39, 2019-42 IRB 945, provides that, with respect to a form defect in a Code Sec. 403(b) individually designed plan, the remedial amendment period arising as a result of a change in 403(b) requirements ends on the last day of the second calendar year that begins after the issuance of the CA List on which the change in 403(b) requirements appears.

2020 CA list.

The 2020 CA List is to be used by pre-approved plan providers to submit opinion letter applications for pre-approved defined benefit plans during the third remedial amendment cycle, which begins May 1, 2020, and ends January 31, 2025. Defined benefit plans may be submitted for approval during the on-cycle submission period, which begins August 1, 2020, and ends July 31, 2021.

For 2020, the CA list includes the following:

  • Deleting the 6-month prohibition on employee contributions to an employer plan (including a defined benefit plan) after a hardship distribution (Code Sec. 401);
  • Permitting rollovers from a qualified plan to a SIMPLE IRA (Code Sec. 402);
  • Complying with the regulations covering statutory hybrid plans, including the rules with respect to determining the current account balance, payment of benefits based on current account balances and the definition of lump-sum benefit formula (Code Sec. 411(a)(13);
  • Complying with the regulations covering statutory hybrid plans, including the rules expanding the list of rates that satisfy the market rate of return requirement (Code Sec. 411(b));
  • Complying with regulations that provide that amounts paid to an Indian tribe member as remuneration for services in an activity relating to fishing rights may be treated as compensation for purposes of applying the limits on qualified plan benefits and contributions (Code Sec. 415);
  • Complying with regulations that provide methods for defined benefit pension plans to distribute a participant’s accrued benefit partially as an annuity and partially as a lump-sum or other accelerated form of payment. The regulations also provide that the minimum present value requirements apply to the distribution of only the portion of a participant’s accrued benefit that is paid as a lump-sum or other accelerated form of payment (Code Sec. 417);
  • Electing to be or ceasing to be a cooperative or small employer charity. (Code Sec. 436)

No SECURE Act provisions.

On December 20, 2019, Congress passed the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act, PL 116-94). Because its date of passage is after December 1, 2019, the IRS will not consider SECURE Act provisions in its review of any opinion letter application submitted under the third remedial amendment cycle. Therefore, the IRS will not review any defined benefit plan document submitted under the third remedial amendment cycle for any changes in the qualification requirements made by the SECURE Act, and pre-approved plan providers should not include SECURE Act provisions in plan documents submitted with their opinion letter applications under the third remedial amendment cycle for pre-approved defined benefit plans.

Amendment deadline.

Generally, December 31, 2022, is the last day of the remedial amendment period with respect to:

  1. A disqualifying provision arising as a result of a change in qualification requirements that appears on the 2020 CA list, and
  2. A form defect arising as a result of a change in Code Sec. 403(b) requirements that appears on the 2020 CA list.

Later dates may apply to a governmental plan. (Rev Proc 2016-37, Sec. 5)

Generally, the deadline for adopting any SECURE Act plan amendments is the last day of the first plan year beginning on or after January 1, 2022. This deadline, provided in section 601 of the SECURE Act, applies for these interim or discretionary amendments, instead of the general deadlines for timely adoption of interim or discretionary amendments set forth in section 15 of Rev Proc 2016-37.

To continue your research on remedial amendment periods, see FTC 2d/FIN ¶H-5146; United States Tax Reporter ¶4014.08.

 

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