IRS Expands Discretionary Amendment Deadline for Pre-Approved Retirement Plans

December 4, 2020
Hall Benefits Law, LLC

On September 2, 2020, the IRS released Revenue Procedure 2020-40, which modifies prior guidance set forth in Revenue Procedure 2016-37 and Rev. Proc 2019-39 to expand the circumstances under which deadlines for discretionary amendments may be extended for pre-approved qualified plans and 403(b) plans.

Background

The provisions of the prior revenue procedures as revised by Revenue Procedure 2020-40 include the following:

Provisions of Revenue Procedure 2016-37 that set forth:

  • Procedures for obtaining determination letters for qualified individually designed plans and opinion letters for qualified pre-approved plans submitted to the IRS, including providing plan amendment deadlines for interim and discretionary amendments made to these plans.
  • The deadline for the timely adoption of a discretionary amendment to a qualified pre-approved plan. In general, a discretionary amendment is considered to have been adopted timely if the plan amendment is adopted by the end of the plan year in which the plan amendment is operationally put into effect and provides that the deadline applies unless a statutory provision or guidance issued by the IRS sets forth an earlier deadline to timely adopt a discretionary amendment with respect to a plan year)

Provisions of Revenue Procedure 2019-39 that set forth:

  • Procedures for obtaining opinion and advisory letters for section 403(b) pre-approved plans submitted to the IRS, and provides plan amendment deadlines for interim and discretionary amendments made to section 403(b) pre-approved plans and for discretionary amendments made to section 403(b) individually designed plans
  • The deadline for the timely adoption of a discretionary amendment to a section 403(b) pre-approved plan. In general, a discretionary amendment is considered to have been adopted timely if the plan amendment is adopted by the end of the plan year in which the plan amendment is operationally put into effect. This rule also applies unless a statutory provision or guidance issued by the IRS sets forth an earlier deadline to timely adopt a discretionary amendment with respect to a plan year.

Revenue Procedure 2020-40 Revisions

Revenue Procedure 2020-40 amends the above provisions of Revenue Procedures 2016-37 and 2019-39 to allow the usual deadline for discretionary amendments to be expanded by statute, regulation, or IRS guidance, even if the amendment is not an interim amendment. The result of this change is that the provision for pre-approved plans is now consistent with the rules for individually designed plans. The guidance also makes a comparable change to the rules for 403(b) pre-approved plans.

Revenue Procedure 2020-40 modifications are in effect as of September 2, 2020.

HBL stays on top of the legislative and regulatory changes that apply to clients’ businesses and ensures that benefit plans and processes are updated to stay in compliance. To learn more, call our team today at 678-439-6236.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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