Cycle 4 submissions open for preapproved qualified DC plans 

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June 5, 2024

 

Notice 2024-3 sets out the 2023 cumulative list of changes in plan qualification requirements for preapproved qualified defined contribution (DC) plans. The list identifies the changes that IRS will consider when reviewing plan documents for the fourth remedial amendment cycle, which began Feb. 1, 2023. Providers of preapproved qualified DC plans have from Feb. 1, 2024, through Jan. 31, 2025, to submit Cycle 4 plan documents for IRS review. Once IRS finishes reviewing submissions, it will issue opinion letters to providers whose documents have been approved. Employers may then adopt the plans within a window (usually about two years) announced by IRS. Preapproved 403(b) plans and defined benefit plans have separate cycles and won’t be reviewed during this submission period.

Changes on the 2023 cumulative list

The 2023 cumulative list identifies changes in qualification requirements for preapproved DC plans since the 2017 cumulative list, including several implemented by the Setting Every Community Up for Retirement Enhancement (SECURE 1.0) Act (Division O of Pub. L. No. 116-94) and the SECURE 2.0 Act of 2022 (Div. T of Pub. L. No. 117-328). IRS hasn’t yet issued final regulations for all SECURE 2.0 provisions. However, the agency notes the 2023 list includes items that plan providers can reflect in Cycle 4 submissions because either “no interpretive guidance is needed” to draft provisions for these items or IRS has issued sufficient interpretive guidance for plan providers.

Some notable items on the 2023 cumulative list include:

  • Changes to the age that triggers required minimum distributions (RMDs) under Internal Revenue Code (IRC) Section 401(a)(9) from age 70-1/2 to 72 for employees born on or after July 1, 1949 (under SECURE 1.0) and to 73 for employees born on or after Jan. 1, 1951 (under SECURE 2.0) (SECURE 2.0’s further increase to age 75 won’t take effect during Cycle 4, so IRS will not review plan documents for that provision at this time)
  • New restrictions on lifetime “stretch” distributions to designated beneficiaries under SECURE 1.0
  • Waiver of 2020 RMDs under the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 (Pub. L. No. 116-136)
  • SECURE 1.0 and 2.0’s new rules on the participation of long-term, part-time employees
  • SECURE 1.0’s statutory exception to the “one bad apple rule” for multiple-employer and pooled employer plans
  • SECURE 1.0 and 2.0’s new distribution options for participants experiencing the birth or adoption of a child, personal emergencies, or domestic abuse
  • Safe harbor plan changes, including SECURE 1.0’s increase in the automatic contribution cap (from 10% to 15%) for qualified automatic contribution arrangements (QACAs) and elimination of certain notice requirements for plans providing safe harbor nonelective contributions
  • Guidance in IRS Notice 2020-52 on suspending or reducing safe harbor contributions during the COVID-19 pandemic
  • Reduction of the minimum permissible in-service distribution age from 62 to 59-1/2 under the Bipartisan American Miners (Miners) Act of 2019 (Division M of Pub. L. No. 116-94)
  • Changes to the hardship distribution rules for 401(k) and 403(b) plans under the Bipartisan Budget Act of 2018 (Pub. L. No. 115-123) and the 2019 final regulations
  • Provisions of various laws relating to disaster-related use of retirement funds

Not all changes covered. When reviewing submissions, IRS won’t consider any provisions not included on the 2023 cumulative list, with the exception of certain routine ministerial guidance, such as the annual cost-of-living increases to plan limits. However, if a plan has not been previously reviewed (e.g., a new plan) or has been amended with respect to previously approved language, IRS will also review the plan for items on earlier cumulative lists or any other qualification requirements that existed prior to the implementation of cumulative lists.

Sample plan provisions

IRS’s Listing of Required Modifications (LRM) provides sample plan provisions for sponsors updating plan documents. For sponsors updating DC plans for the 2023 cumulative list, three LRMs are available: one for DC plans in general, one with provisions specific to cash or deferred arrangements, and one for employee stock ownership plans.

Plan amendments

The cycle system doesn’t affect the timing rules — recently updated in Rev. Proc. 2023-37 — for adopting amendments to preapproved plan documents. The deadline for discretionary amendments remains the end of the plan year in which the amendments are operationally put into effect, while interim amendments for changes required by law or guidance are now due by Dec. 31 of the second calendar year after the changes appear on IRS’s Required Amendments List. Governmental plans have later deadlines if the sponsor must take legislative action to adopt plan amendments.

However, for either type of amendment, a statute, regulation or other guidance can set a different deadline. For instance, amendments for the SECURE 1.0, SECURE 2.0, Miners and CARES acts — whether discretionary or required — are generally due by Dec. 31, 2026.

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