The IRS has updated its Operational Compliance List (OCL) for changes effective in 2019. The list is available on the IRS website. The IRS updates the OCL periodically to identify changes in qualification requirements for retirement plans, in order to assist plan sponsors in meeting operational compliance requirements following the elimination of the five-year remedial amendment cycle for individually designed plans effective in 2017.
The updated OCL adds the following changes relating to hardship distributions that may require operational changes in 2019:
- Bipartisan Budget Act of 2018 (a Drinker Biddle alert summarizing the Bipartisan Budget Act of 2018 changes can be accessed here): (i) elimination of the requirement to take any available loan from the plan; (ii) expansion of sources available for hardship distributions; and (iii) elimination of the six-month suspension of contributions.
- Proposed Regulations Regarding Hardship Withdrawals (a Drinker Biddle alert summarizing the proposed regulations can be accessed here): (i) prohibition on suspending a participant’s contributions as a condition of obtaining a hardship distribution; (ii) revision of safe harbor list of expenses deemed to constitute an immediate and heavy financial need, including modifications regarding casualty losses and disaster-related expenses.
- Relief for Victims of Hurricanes Florence and Michael. The IRS and the Treasury Department extended the relief provided under IRS Announcement 2017-15 (covering Hurricane Maria and the California Wildfires) to similarly-situated victims of Hurricanes Florence and Michael, applying updated “Incident Dates” specific to these 2018 hurricanes and setting a relief deadline of March 15, 2019. Any necessary amendments to incorporate the relief into a plan’s terms must be made no later than the deadline for amending a disqualifying plan provision, as set forth in Revenue Procedure 2016-37.
The OCL is cumulative, covering operational changes effective in 2016 – 2018, as well as the recent additions for 2019.