The IRS has updated its Operational Compliance List (OC List) as provided per Revenue Procedure (Rev. Proc.) 2016-37, Section 10, to help plan sponsors and practitioners achieve operational compliance by identifying changes in qualification requirements effective during a calendar year.
Rev. Proc. 2016-37 changed the IRS’ determination letter program for tax-qualified individually designed plans and changed the requirements for when plan amendments must be adopted under Internal Revenue Code (IRC) Section 401(b). It also ended the remedial amendment cycle system and replaced it with a new approach to the remedial amendment period.
The OC List identifies matters that may involve either mandatory or discretionary plan amendments depending on the particular plan, and it may reference other significant guidance that affects daily plan operations.
The IRS notes that in order to be qualified, a plan must comply operationally with each relevant qualification requirement, even if the requirement is not included on the OC List. A plan must be operated in compliance with a change in qualification requirements from the effective date of the change. The updated OC List includes items effective in 2020.
Changes effective in 2020 discussed in the document include several made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act. It includes provisions of the act related to:
- An increase in 10% cap for automatic enrollment safe harbor after first plan year;
- Rules relating to election of safe harbor 401(k) status;
- Portability of lifetime income options;
- Employees of church-controlled organizations participating in section 403(b)(9) retirement income accounts;
- Penalty-free withdrawals from retirement plans for individuals in case of birth or adoption;
- An increase in age for the required beginning date for required minimum distributions (RMDs);
- Difficulty of care payments treated as compensation for retirement contribution limitations;
- Modification of nondiscrimination rules for closed defined benefit (DB) plans;
- Modification of required distribution rules for designated beneficiaries; and
- Provisions relating to plan amendments.
Also in the OC List for 2020 are amended rules regarding hardship withdrawals made by the Bipartisan Budget Act of 2018 and the Tax Cuts and Jobs Act. The list also includes information about regulations that extended temporary nondiscrimination relief for closed DB plans.The full OC List may be viewed at https://www.irs.gov/retirement-plans/operational-compliance-list.