IRS publishes 2021 operational compliance listing for certified retirement plans | Hodgson Russ LLP

In connection with the abolition of the Determination Letter Program for Customized Plans in 2017, the IRS began publishing an Operational Compliance List (“OC List”) for qualified retirement plans. Because operational compliance with legislative changes affecting qualified retirement plans is often required before the deadline for changing plan documents expires, the OC list describes mandatory and discretionary changes to qualification requirements for tax-qualified and 403 (b) retirement plans that are effective in each calendar year .

In addition to the OC list, the IRS publishes required change lists annually, listing the legal and administrative changes to qualification requirements that first come into effect during the plan year. Combined, the OC List and Required Changes List provide plan administrators with a basic inventory of relevant legislative changes or IRS guidance that affect their retirement plans.

The 2021 OK list contains the following new operational requirements for 2020, 2021 and 2022:

Valid from 2020:

  • SAFE trading
    • Rules clarifications included in IRS Notice 2020-68, including rules for:
      • Qualified birth or adoption distributions.
      • Treatment of Long Term Care Allowance as Eligible Compensation under Code Section 415.
      • Allowing anti-curtailment relief for plan changes to an annuity plan or annuity contract in accordance with the amendments to the SECURE Act.
      • Reduction of the minimum age for eligible distributions from qualified pension plans from 62 to 59½ years.
    • Clarifications of rules included in IRS Notice 2020-86, including rules for:
      • The increase from a cap of 10% to 15% for the safe haven of automatic enrollment of the 401 (k) plan after the initial period of automatic voting.
      • Timely adoption of a Safe Harbor 401 (k) plan with non-elective contributions.
  • CARES law
    • IRS Notice 2020-50: Addresses the implementation and management of coronavirus-related distributions and COVID-related plan loan relief.
    • IRS Notice 2020-51: To implement the 2020 minimum dividend waivers, including the language for changing the model plan.
  • Consolidated Funds Act (“CAA”)
    • Provides temporary relief in the event of partial termination of the plan.
    • Allows special disaster-related use of pension funds for major disasters reported in the period January 1, 2020 to February 25, 2021.
    • For certain employees in certain multi-employer plans that cover workers in the construction and construction industry, the minimum age for distribution in service will be changed to 55 years (instead of 59½ years).
  • IRS Notice 2020-42: Offers temporary physical attendance waiver for spouse consents under qualified retirement plans during the 2020 calendar year.
  • IRS Notice 2020-52: Provides guidance on implementing mid-year suspensions or cuts in contributions to Safe Harbor 401 (k) plans.

Valid from 2021:

  • SECURE Act / IRS Notice 2020-38: provides guidelines that require qualified cash or deferred agreements (“CODAs”) to enable long-term employees who work at least 500 but less than 1,000 hours per year to become plan participants.
  • IRS Notice 2021-03: Extends Temporary Exemption From Physical Attendance For Spouse Consents To Qualified Retirement Plans To June 30, 2021.

Valid from 2022:

  • The final provisions contain updated tables on life expectancy and the payout period, which are used to determine the required minimum payouts in calendar years beginning on or after January 1, 2022.

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