The IRS just issued its list of required changes for pre-approved defined benefit plans (see Notice 2020-14). As a reminder pre-approved plans are generally prototype and volume submitter form documents prepared and submitted for approval by a plan’s provider/vendor. Defined benefit plans include traditional pensions (including frozen plans) as well as cash balance plans and some other hybrid plans. A few highlights for companies maintaining these pre-approved defined benefit plans:
- The IRS confirmed what we knew about the timing of amendments based on the SECURE Act. As a reminder, the deadline for adopting any plan amendment made pursuant to the SECURE Act is the last day of the first plan year beginning on or after January 1, 2022. This deadline applies both for interim (think, required) and discretionary amendments in place of the general deadlines for timely adoption of interim or discretionary amendments set forth in Rev. Proc. 2016-37.
- As a reminder, the six-month prohibition on employee contributions to all plans maintained by the employer (including defined benefit plans) after a hardship distribution has been eliminated. Thus, a contributory defined benefit plan may need to be amended to remove the six-month delay it currently imposes following a hardship (e.g., from the company’s 401(k) plan). See the 401(k) regulations for more detail.
- The IRS confirmed that, while the law of the land regarding same-sex spouses has been set since 2013, no changes are mandated based on more recent decisions (including the Obergefell v. Hodges decision decided by the Supreme Court affirming that the fundamental right to marry is guaranteed to same-sex couples by both the Due Process Clause and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution). Provisions regarding treatment of same-sex married couples should generally parallel those afforded to opposite-sex married couples. Several pieces of IRS guidance (including Rev. Rul. 2013-17, Notice 2014-19, and 2015-86) contain the details.
- Rollovers from a qualified plan to a SIMPLE IRA are now permissible. This change become law under the Protecting Americans from Tax Hikes Act of 2015 (PATH Act).
A company that maintains a defined benefit plan on a pre-approved document should expect more information from the plan’s provider in coming months. This list of updates issued by the IRS is intended to be used by pre-approved plan providers to submit opinion letter applications for pre-approved defined benefit plans during upcoming remedial amendment cycles. Defined benefit plans may be submitted for approval during the period running August 1, 2020, through July 31, 2021.