The U.S. Internal Revenue Service (IRS) recently updated its Operational Compliance List (the List) for retirement plans to reflect changes and guidance that recently became effective.
The IRS provides the List periodically, to help qualified retirement plan sponsors and practitioners achieve operational compliance by identifying material changes in qualification requirements for qualified retirement plans (including Section 403(b) plans) that become effective during a calendar year. The List is updated periodically to reflect new legislation and IRS guidance and is particularly helpful to qualified plan sponsors as a compliance checklist since the IRS has closed its determination letter program to most qualified retirement plans. It should be noted that the List is not a comprehensive list of qualification requirements, and plans must be operated in compliance with any change in qualification requirements even if not included on the List.
Changes effective in 2022
- Electronic alternative to in-person spousal consents. Proposed regulations issued on December 31, 2022, provide for an electronic alternative to the requirement that spousal consents under a qualified retirement plan be signed in the presence of a witness. The IRS has indicated that taxpayers may rely on the proposed regulation before the final regulation takes effect.
- Guidance relating to required minimum distributions (RMDs):
- As indicated in our prior update, Notice 2022-53 provided relief related to RMDs from a -qualified retirement plan that applied in 2021 and 2022. Specifically, a plan will not lose its tax-qualified status if it failed to make RMDs in 2021 or 2022, and a plan participant will not be subject to the 50% excise tax for failing to receive RMDs for those years.
- Proposed regulations provide guidance related to increases in the RMD age from 70-1/2 to 72 and the shortened period over which certain designated beneficiaries can take distributions. The regulations also provide guidance related to eligible rollover distributions under IRC Section 401(a)(9). Taxpayers may rely on the proposed regulations for the 2021 distribution calendar year.
- Final regulations provide guidance relating to the life expectancy and distribution period tables used to calculate RMDs from qualified retirement plans (including Section 403(b) plans).
- Deadlines for amending an eligible qualified retirement plan:
- As indicated in our prior updates, Notice 2022-45 and Notice 2022-33 extended the deadlines for amending an eligible retirement plan to reflect certain provisions of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the Relief Act) , the Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act), and the Bipartisan American Miners Act of 2019 (the Miners Act).
- The new amendment deadline for qualified plans (other than governmental plans) and 403(b) plans not for public school employees is December 31, 2025. The new deadline for governmental qualified plans and 457(b) and 403(b) plans for public school employees is generally later in 2023.
- Special Financial Assistance Program for Financially Troubled Multiemployer Plans:
- The American Rescue Plan Act of 2021 provided that the sponsor of an eligible multiemployer plan may apply to the Pension Benefit Guaranty Corporation to receive special financial assistance provided certain conditions are satisfied.
- Plans receiving special financial assistance must be amended to (i) reinstate any benefits previously suspended for certain participants or beneficiaries, effective when the special financial assistance is paid to the plan, and (ii) provide make-up payments, without interest, to participants or beneficiaries who have commenced benefits by the date the special financial assistance is paid to the plan.
Knowledge Management Lawyer Katie Dean contributed to this Sidley Update.
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