Running a retirement plan requires following all the IRS requirements to the T. Each year, the IRS issues a list of required amendments along with the general plan amendment deadlines to go with them. The IRS has amended the amendment.
The New Determination Program Rev.Proc.2016-2037 is here. The rules may change according to the type of plan.
NOTE: THE JULY 2022 SEASON FOR AMENDMENTS OPENS SOON.
Rulings for Individually-designed Retirement Plans
The tax-qualified, individually design plans may look different under the Revenue Procedure 2016-37 rules. There’s a little history behind it, but in general, the amendments must be noted and, as changes occur, incorporated into existing programs. Be aware that the Remedial Amendment Cycle (RAC) has been replaced, as described below.
Changes to the Determination Letter Program
Going back to the Revenue Procedure 2007-44, we see that it provided a five-year Remedial Amendment Cycle (RAC) method for amended, individually-designed plans to request a Determination Letter, usually every five years. Under that arrangement, plans had to adopt interim amendments promptly for elements that appeared on the Cumulative List for required plan alterations.
If the interim amendments were adopted quickly, employers would be granted an extension to complete remedial amendments. They would have until the close of the five-year RAC to rectify any qualification issues.
More recently, the 2015-19 announcement stated that the RAC system would end and a new plan for the IRC Section 401(b) phase would be formed. So it is that the Revenue Procedure 2016-37 terminates the RAC system and replaces it with a fresh approach to the remedial amendment periods.
Changes to the requirements for when a plan’s amendment must be adopted under the Internal Revenue Code (IRC) Section 401(b)
Unless legislation or additional directions state otherwise, the IRC Section 401(b) remedial amendment timing for mandatory amendments will be tied to a Required Amendment (RA) List. The IRS will no longer require interim amendments.
What is the Required Amendments List? It is the annual list of all the amendments for which an individually designed plan must be modified to retain its qualified-plan standing. The IRS will publish the RA List after October 1, of each year. Generally, plan sponsors must implement any amendment on the RA List by the conclusion of the subsequent calendar year after the year in which the RA List is published. For instance, any plan amendments for items on the 2016 RA List generally must be implemented by December 31, 2018.
Discretionary amendments to non-governmental plans would still have to be incorporated by the end of the plan year in which the plan amendment is implemented, according to Section 8 of the Revenue Procedure 2016-37, “Plan Amendment Deadline.”
Be advised that the Revenue Procedure 2016-37 does not change a plan’s operational compliance criteria. Employers still need to run their plans in compliance with any alteration in qualification requirements from the [effective] date of the change, irrespective of the plan’s 401(b) period for applying amendments. To help employers, the IRS plans to provide an Operational Compliance List annually to identify qualification requirement changes that are effective during any given calendar year.
Our team suggests that you pay careful attention to amendment due dates that are supposed to be on a rolling schedule, except when they have been amended. Contact LSL CPAs to make sure you’re in compliance.