Rev. Proc. 2020-9 Addresses Interim Amendments for Pre-Approved Plans That Allow Hardship Distributions | Practical Law

Rev. Proc. 2020-9 Addresses Interim Amendments for Pre-Approved Plans That Allow Hardship Distributions | Practical Law

The Internal Revenue Service (IRS) has issued Revenue Procedure 2020-9 (Rev. Proc. 2020-9), which clarifies which amendments are integral to pre-approved retirement plan provisions that must be amended to comply with the final regulations on hardship distributions. Rev. Proc. 2020-9 also extends the deadline for making these interim amendments to December 31, 2021.

Rev. Proc. 2020-9 Addresses Interim Amendments for Pre-Approved Plans That Allow Hardship Distributions

by Practical Law Employee Benefits & Executive Compensation
Published on 13 Dec 2019 • USA (National/Federal)
The Internal Revenue Service (IRS) has issued Revenue Procedure 2020-9 (Rev. Proc. 2020-9), which clarifies which amendments are integral to pre-approved retirement plan provisions that must be amended to comply with the final regulations on hardship distributions. Rev. Proc. 2020-9 also extends the deadline for making these interim amendments to December 31, 2021.
On December 12, 2019, the IRS issued Revenue Procedure 2020-9 (Rev. Proc. 2020-9), which clarifies which amendments are integral to pre-approved retirement plan provisions that must be amended to comply with the final regulations on hardship distributions. Rev. Proc. 2020-9 also extends the deadline for making these interim amendments to December 31, 2021.

Background

Under a six-year remedial amendment cycle, pre-approved tax qualified retirement plans may seek one new opinion letter from the IRS during each cycle (see Legal Update, IRS Provides Determination Letter Guidance in Revenue Procedure 2016-37 and Practice Note, Pre-Approved Plans: Design Choices, Tax-Qualification Rules, and Best Practices). Plans may need to make interim amendments in response to changes in plan qualification requirements during the remedial amendment cycle that result in the plan having a disqualifying plan provision. An interim amendment is one that:
  • Amends a disqualifing provision.
  • Is integral to a disqualifying provision.
Unless otherwise specified, the deadline for making an interim amendment is generally the end of the remedial amendment period.
In September 2019, the IRS issued final regulations on hardship distributions (84 Fed. Reg. 49651 (Sept. 23, 2019); see Legal Update, IRS Issues Final Regulations on Hardship Distribution Rules). The final regulations:
  • Eliminate the suspension of elective contributions or employee contributions as a condition of obtaining a hardship distribution.
  • Require plan sponsors to obtain a participant's representation regarding insufficient cash or liquid assets to meet a financial need.
Accordingly, plan sponsors must amend plans, as needed for hardship distributions made on or after January 1, 2020, to comply with these provisions (see Legal Update, IRS Notice 2019-64 Provides 2019 Required Amendments List).

Revenue Procedure 2020-9

Rev. Proc. 2020-9 provides that:
  • Amendments relating to hardship distribution provisions that are effective on or before January 1, 2020, are integral to the amendments required to comply with the final hardship regulation provisions concerning suspensions of contributions and representations of financial need.
  • The deadline for adopting the interim amendments required as a result of the final regulations on hardship distributions is extended to December 31, 2021.
Rev. Proc. 2020-9 is effective on December 12, 2019.