IRS Notice 2022-33 and 2022-45 recently extended the time for pension plan sponsors to amend their plans for several important pieces of legislation. The following legislative changes – which many sponsors should have passed by December 31, 2022 – are generally due by December 31, 2025 (government sponsors have different deadlines related to their legislative timelines):
- All provisions of the SECURE Act (Setting Every Community Up for Retirement Enhancement) (Div. O of Pub. L. no. 116-94)
- Provisions of the CARES (Coronavirus Aid, Relief and Economic Security) Act (Pub. L. no. 116-136) which suspended 2020 minimum required distributions from defined contribution (DC) plans and allowed plans to offer special penalty-free distributions and loan relief to participants impacted by the COVID-19 pandemic
- The Bipartisan American Miners Act of 2019 (Div. M of Pub. L. no. 116-94) provision that lowered the allowable age for in-service distributions from pension plans to 59-1/2
- Provisions of the Taxpayer Certainty and Disaster Tax Relief Act 2020 (Div. Pub EE. L. no. 116-260) allowing penalty-free distributions to participants affected by certain disasters
The List of required changes (RA List) is an annual list of tax law changes for qualified and 403(b) plans that establishes change deadlines for individually designed plans affected by the items on the list. In general, sponsors must modify their plans for changes appearing on the RA List before the end of the second calendar year following the year an RA List is published. Accordingly, the deadline for amending the 2020 RA List Amendments in Notice 2020-83 is December 31, 2022, unless the IRS extends the deadline.
Payments in case of difficulty of care under the SECURE law. The 2020 RA List includes a SECURE Act provision that added “hardship payments” for foster care providers to DC plan participants’ compensation under Section 415 , effective for plan years beginning after 2015. However, Notice 2022-33 extends the plan amendment deadlines for the SECURE Act, with no exception to this provision. Therefore, the deadline for modifying this change is apparently December 31, 2025.
CARES Act extension of CSEC plans. The 2020 RA List also includes a provision of the CARES Act that extends special defined benefit funding rules for cooperative and small charitable employers (CSEC) schemes to certain sponsors providing services to mothers and children. CSEC plans are not subject to the funding-based benefit restrictions under Section 436 of the Internal Revenue Code, so sponsors must amend plans that have been granted CSEC status under the CARES Act to remove benefit restriction provisions. None of the recent notices extending timelines for CARES Act amendments include the deadline for these new CSEC plans. Therefore, sponsors of these plans are expected to pass amendments removing language from Section 436 on restrictions on benefits by December 31, 2022.
Periodic updates not specifically mentioned on the RA list. Each RA List automatically includes certain periodic updates, even if those items are not specifically referenced on that RA List. Examples of such updates include changes in cost of living adjustments, spot segment rates used to determine the applicable 417(e)(3) interest rate, and applicable 417(e) mortality tables. )(3) for the year in which these changes are effective. Most plans incorporate these items by reference, eliminating the need for modifications. But plans that do not incorporate these elements by reference must be modified by December 31, 2022 for updates that took effect in 2020.
Most discretionary amendments to reflect optional changes to plan design must be enacted before the end of the plan year in which the change takes effect. Calendar-year plan sponsors that made discretionary design changes in 2022 must generally adopt compliant changes by December 31.
- Notice 2022-45 (IRS, September 26, 2022)
- Notice 2022-33 (IRS, August 3, 2022)
- Div. Pub EE. L. no. 116-260the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Congress, December 27, 2020)
- Notice 2020-83 (IRS, December 1, 2020)
- Pub. L. no. 116-136the CARES Act (Congress, March 27, 2020)
- Div. Mr. of Pub. L. no. 116-94the Bipartisan Miners Act of 2019 (Congress, December 20, 2019)
- Div. O of Pub. L. no. 116-94the SECURE law (Congress, Dec. 20, 2019)
- List of required changes (IRS)
#Pension #plan #sponsors #short #list #yearend #Mercier