The IRS recently issued its "Required Amendment List," which contains the annual list of amendments that must be adopted by certain individually-designed retirement plans. This year, the List includes the requirements imposed by the final hardship distribution regulations, and certain rules that apply to collectively-bargained cash balance / hybrid defined benefit plans. Sponsors of individually-designed qualified plans and 403(b) plans should review the List carefully to ensure that they make timely amendments to their plans.
In 2016, the IRS first announced that it would begin publishing an annual "Required Amendment List." The Required Amendment List includes the statutory and administrative changes in qualification requirements that are first effective during the plan year in which the List is published.
Final Hardship Distribution Regulations
In 2019, the IRS issued final regulations that govern the events that constitute qualifying hardships for 401(k) and 403(b) plans, the funds that are available for hardship distributions, and the standards that are used to determine whether those funds are needed to relieve a participant's hardship.
The 2019 Required Amendment List indicates that plans, which have one of the following provisions, must be amended to reflect the final regulations:
- Plans that provide for a suspension of elective deferrals or employee contributions as a condition for obtaining a hardship distribution of elective deferrals; or
- Plans that do not require a representation from an employee who requests a hardship distribution that the employee has sufficient liquid assets reasonably available to satisfy the need.
The operational changes required by the final regulations apply to hardship distributions that are made on or after January 1, 2020.
Note that the prohibition on a qualified plan's or 403(b) plan's suspension of elective deferrals and employee contributions as a condition for obtaining a hardship distribution of elective deferrals applies not only to the plan that makes the hardship distribution, but also to all of the employer's other qualified plans, 403(b), or 457 plans, as applicable.
Final Regulations for Certain Cash Balance / Hybrid Defined Benefit Plans
Cash balance/hybrid defined benefit plans that are maintained pursuant to a collective bargaining agreement ratified on or before November 13, 2015, must be amended to comply with certain regulations regarding market rate of return and other requirements.
For the first time, the 2019 Required Amendment List also applies to individually-designed 403(b) plans.
Cost of Living Adjustments
Keep in mind, the Required Amendment List does not include the periodic cost-of-living adjustments to various dollar limitations, but these adjustments are treated as if they were included. Most plans do not need to be amended annually to reflect these periodic adjustments.
The deadline for the 2019 required amendments for an individually-designed, nongovernmental plan (including 403(b) plans) is December 31, 2021. The IRS notes that later dates may apply to governmental plans.
Plan sponsors should be sure to review the Required Amendment List annually to ensure that they have a plan to incorporate the required amendments into their plan document by the applicable deadline, and so that they operationalize applicable requirements timely. For this year in particular, plan sponsors should pay careful attention to the fact that the final hardship regulations apply beginning January 1, 2020 even though amendments are generally not required until December 31, 2021.
Additionally, the end of the year is a good opportunity for plan sponsors to review their qualified retirement plan to ensure that plan operations match plan terms. It is recommended that plan sponsors consult with experienced employee benefits counsel regarding these and any other plan amendments and applicable deadlines.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.