IRS extends discretionary change deadline for pre-approved retirement plans

On September 2, 2020, the IRS published Revenue Procedure 2020-40, which amends the previous guidance set out in Revenue Procedure 2016-37 and Rev. Proc 2019-39 to expand the circumstances under which the deadlines for advance discretionary changes Approved Qualified Plans and 403 (b) Plans are renewable.

background

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

Provisions of the 2016-37 revenue procedure, which stipulate:

  • Procedures for obtaining letters of confirmation for qualified, customized plans and opinion letters for qualified, pre-approved plans submitted to the IRS, including providing plan change deadlines for tentative and discretionary changes to those plans.
  • The deadline for timely adoption of a change in discretion to a qualified pre-approved plan. In general, a change in discretion is deemed to be accepted on time if the plan change is accepted by the end of the plan year in which the plan change is operationally effective and provides that the deadline applies, unless statutory provision or guidance from the IRS sets an earlier deadline in order to adopt a change of discretion in relation to a plan year in good time.

Provisions of the revenue procedure 2019-39, which stipulate:

  • Procedures for obtaining opinions and advisory letters for Section 403 (b) pre-approved plans submitted to the IRS and deadlines for plan changes for tentative and discretionary changes to Section 403 (b) pre-approved plans and for discretionary changes to Section 40 403 ( b) individually designed plans
  • The deadline for timely acceptance of a change in discretion to a pre-approved plan under Section 403 (b). In general, a change in discretion is deemed to have been accepted in good time if the plan change is accepted by the end of the plan year in which the plan change comes into effect. This rule also applies unless a legal provision or guidance issued by the IRS provides an earlier deadline for timely acceptance of a change in judgment with respect to a plan year.

Revenue process 2020 – 40 revisions

Revenue Procedure 2020-40 amends the aforementioned provisions of Revenue Procedures 2016-37 and 2019-39 to allow the usual deadline for discretionary changes by law, regulation or IRS guidance to be extended, even if the change occurs is not a temporary change. The result of this change is that the requirement for pre-approved plans is now consistent with the rules for custom plans. The guidelines also contain a similar change to the rules for 403 (b) pre-approved plans.

Changes to the 2020-40 revenue process will apply from September 2, 2020.

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