Morgan Lewis associate Samantha Kapnek co-authored this article.
On December 4, the Internal Revenue Service (IRS) issued Notice 2019-64, which contains the 2019 Required Amendments List for individually designed tax-qualified retirement plans. As background, the IRS issues its Required Amendments List each year to identify statutory and administrative changes to the tax qualification rules that may require sponsors of individually designed retirement plans to amend their plans to comply with the changes. In general, the deadline for adopting any required amendments on the list is the end of the second calendar year after the list is issued.
The 2019 list identifies the following changes that may require amendments to an individually designed retirement plan:
- Final regulations relating to hardship distributions. Plans must be amended to comply with the mandatory changes in the final regulations updating the hardship distribution rules for 401(k) and 403(b) plans. Specially, if applicable, effective as of January 1, 2020, plans must be amended to (1) eliminate any requirement that an employee suspend elective deferrals or employee contributions as a condition for receiving a hardship distribution, and (2) require an employee who requests a hardship distribution to represent that he or she has insufficient cash or other liquid assets reasonably available to satisfy the financial need. Certain other changes to the hardship distribution rules set forth in the final regulations are permissive. Read more about the changes to the hardship distribution rules.
- Final regulations regarding cash balance/hybrid defined benefit plans. Certain collectively bargained cash balance/hybrid defined benefit plans maintained pursuant to one or more collective bargaining agreements ratified on or before November 13, 2015, must be amended to comply with those portions of the regulations regarding market rate of return and other requirements that first became applicable to such plans on or after January 1, 2017.
If they haven't already, sponsors of individually designed plans should review their plans to determine whether amendments are necessary. However, as noted above, no immediate action is required as plan sponsors generally would have until December 31, 2021 (the end of the second calendar year after the publication of the 2019 list) to adopt any required plan amendments. Please contact the authors or your Morgan Lewis contact if you have questions or need assistance.