Making a List and Checking it Twice: IRS Issues the 2016 Required Amendments List

As anticipated and noted in a prior client alert, the IRS has issued the 2016 Required Amendments List for Qualified Retirement Plans (“RA List”) in Notice 2016-80, which contains information regarding the 2016 RA List and related guidance.

• As a result of the recent changes to the IRS determination letter program for individually designed qualified retirement plans, the IRS has modified the rules regarding the remedial amendment period, which is the period during which a plan may be amended retroactively to comply with the qualification requirements under Internal Revenue Code (“Code”) Section 401(a).
• The Treasury Regulations under Code Section 401(b) describe the disqualifying provisions that may be amended retroactively during a remedial amendment period and grant the Commissioner of the Internal Revenue Service the discretion to designate certain plan provisions as disqualifying provisions and to extend the remedial amendment period.
• For individually designed qualified retirement plans, the remedial amendment period for a disqualifying provision resulting from a change in qualification requirements is extended to the end of the second calendar year that begins after the issuance of the RA List on which the change in qualification requirements appears.
• December 31, 2018, is the last day of the remedial amendment period, and the plan amendment deadline, for a disqualifying provision that results from a change in qualification requirements on the 2016 RA List (except that a later date may apply to a governmental plan).
• The Treasury Department and the IRS have indicated that an RA List will be published annually. Generally, a change in a qualification requirement will not appear on an RA List until guidance (including, in certain cases, a model amendment) has been provided in regulations or published in the Internal Revenue Bulletin, unless it is not anticipated that guidance will be issued.
• An RA List includes statutory and administrative changes in qualification requirements that are first effective during the plan year in which the list is published. An RA List does not include:
  • Guidance issued or legislation enacted after the list has been prepared
  • Changes in qualification requirements for which the Treasury Department and IRS expect to issue future guidance (which will be included on an RA List in a future year)
  • Changes in qualification requirements that permit (but do not require) optional plan provisions, excluding changes that cause existing plan provisions, which may have been optional, to become disqualifying provisions
  • Changes in tax laws affecting qualified plans that do not change the qualification requirements under Code Section 401(a) (e.g., changes to the tax treatment of distributions or funding requirements for qualified retirement plans)
• The RA List has two parts. Part A addresses changes in qualification requirements that generally require an amendment to most plans or to most plans of the type affected by the change. Part B addresses changes in qualification requirements that the Treasury Department and IRS anticipate will not require amendment to most plans but may require amendment to a particular plan due to a unique plan provision (e.g., Part B may list an amendment that is required only if a plan doesn’t incorporate a particular qualification requirement by reference).
• Changes to: (i) various dollar limits adjusted for cost of living increases; (ii) spot segment rates used to determine the applicable interest rate under Code Section 417(e)(3); and (iii) the applicable mortality table under Code Section 417(e)(3) are treated as included on the RA List for the year in which such changes are effective, even though not directly referenced on the RA List. However, few plans contain language that will require amendment as a result of these changes because the index adjustment language is typically included in the plan.
• Each plan sponsor must determine whether a particular change in qualification requirements that appears on an RA List requires an amendment to its plan. Not every change in qualification requirements listed on the RA List will automatically require plan amendment.

2016 Required Amendments List

• Part A: None: There are no changes in qualification requirements first effective in 2016 that generally require an amendment to most plans or most plans of a certain type by December 31, 2018.
• Part B: Collectively-Bargained Defined Benefit Plans: Plans must be amended by December 31, 2018, to incorporate restrictions on accelerated distributions from underfunded single-employer plans in employer bankruptcy under Code Section 436.