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IRS Updates Operational Compliance List for 2022
Practical Law Legal Update w-038-4396 (Approx. 6 pages)
IRS Updates Operational Compliance List for 2022
by Practical Law Employee Benefits & Executive Compensation
| Published on 07 Feb 2023 • USA (National/Federal) |
The Internal Revenue Service has updated the Operational Compliance List for tax-qualified retirement plans. The Operational Compliance List notifies plan sponsors and service providers of changes to the tax-qualification requirements that became effective during the 2022 calendar year.
The IRS has updated the Operational Compliance List for tax-qualified retirement plans. Under IRS Rev. Proc. 2016-37, the Operational Compliance List identifies changes to the tax-qualification requirements for plans that became effective during the 2022 calendar year. For more information on Rev. Proc. 2016-37, see Legal Update, IRS Provides Determination Letter Guidance in Revenue Procedure 2016-37.
2022 Operational Compliance List
The updated Operational Compliance List identifies changes to tax-qualification requirements that took effect in 2022, including changes related to spousal consents, required minimum distributions (RMDs), and special financial assistance for multiemployer plans.
Physical Presence Requirement for Spousal Consents
The Operational Compliance List includes the following changes relating to the rules for spousal consents under qualified retirement plans:
- IRS Notice 2021-40, which extended the temporary relief from the physical presence requirement for obtaining spousal consents under qualified retirement plans from July 1, 2021, through June 30, 2022 (see Legal Update, IRS Notice 2021-40 Extends Temporary Relief from the Physical Presence Requirement for Spousal Consents Through June 2022).
- IRS Notice 2022-27, which extended the temporary relief from the physical presence requirement for obtaining spousal consents under qualified retirement plans from July 1, 2022, through December 31, 2022 (see Legal Update, IRS Notice 2022-27 Extends Temporary Relief from the Physical Presence Requirement for Spousal Consents Through December 2022).
- Proposed regulations that would retain the physical presence requirement for spousal consents but provide two alternatives allowing remote witnessing of spousal consents (87 Fed. Reg. 80501 (Dec. 30, 2022); see Legal Update, IRS Issues Proposed Rules on Electronic Participant Elections and Spousal Consents).
Required Minimum Distributions
Regarding RMDs, the Operational Compliance List includes:
- IRS Notice 2022-53, which provides guidance on certain RMDs from retirement plans for 2021 and 2022 (see Legal Update, IRS Issues Guidance Regarding 2021 and 2022 Required Minimum Distributions).
- Final regulations that update the life expectancy and distribution tables that are used to calculate RMDs (85 Fed. Reg. 72472 (Nov. 12, 2020); see Practice Note, Required Minimum Distributions from Retirement Plans: Final Regulations with Updated Life Expectancy and Distribution Period Tables for Determining RMDs).
- Proposed regulations that would amend:
- the RMD rules to reflect changes made by the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), including the increase in the required beginning date for RMDs from 70½ to 72; and
- the rollover regulations under Internal Revenue Code Section 402(c).
Changes Under the CARES Act
The 2022 Operational Compliance List includes the:
- Extended deadlines for amending a retirement plan to reflect Section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provides for a waiver of RMDs for defined contribution plans and IRAs for 2020 (IRS Notice 2022-33; see Legal Update, IRS Notice 2022-33 Extends Deadlines for Amending Retirement Plans for the SECURE Act and the CARES Act).
- Extended deadlines for amending a retirement plan to reflect Section 2202 of the CARES Act, which allows coronavirus-related distributions and loans (IRS Notice 2022-45; see Legal Update, IRS Extends Deadlines for Amending Retirement Plans for the CARES Act and Disaster Tax Relief Act).
Changes Under the Taxpayer Certainty and Disaster Tax Relief Act
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Disaster Tax Relief Act) was enacted as Division EE of the Consolidated Appropriations Act, 2021 (CAA-21). The Operational Compliance List includes the extended deadline for amending a retirement plan to reflect Section 302 of the Disaster Tax Relief Act, which allows plans to offer special disaster relief to participants affected by disasters declared between January 1, 2020, and February 25, 2021 (IRS Notice 2022-45; see Legal Update, Year-End COVID-19 Stimulus Legislation Includes Numerous Employee Benefit and Executive Compensation Provisions, Including Surprise Medical Billing Requirements for Health Plans). This relief includes qualified disaster distributions, suspension of loan repayments, and higher limits for loans.
Changes Under the Bipartisan American Miners Act
The Bipartisan American Miners Act of 2019 was enacted as part of the Further Consolidated Appropriations Act, 2020. Section 104 of the Bipartisan American Miners Act lowered the minimum age for in-service distributions from a qualified pension plan from age 62 to age 59 ½. The updated Operational Compliance List includes the extended deadline for amending a retirement plan to reflect Section 104 (IRS Notice 2022-33; see Legal Update, IRS Notice 2022-33 Extends Deadlines for Amending Retirement Plans for the SECURE Act and the CARES Act: Amendments for the SECURE Act and Miners Act).
Changes Under the SECURE Act
The Operational Compliance List also includes the extended deadline for amending qualified plans, 403(b) plans, governmental 457(b) plans, and IRAs to reflect the SECURE Act (IRS Notice 2022-33; see Legal Update, IRS Notice 2022-33 Extends Deadlines for Amending Retirement Plans for the SECURE Act and the CARES Act: Amendments for the SECURE Act and Miners Act).
Multiple Employer Plans (MEPs)
The updated Operational Compliance List includes proposed regulations that would provide an exception to the unified plan rule (or "bad apple" rule) for a defined contribution multiple employer plan (MEP) that would allow the MEP to remain tax-qualified even if a participating employer does not meet tax-qualification requirements (87 Fed. Reg. 17225 (Mar. 28, 2022); see Legal Update, IRS Reissues Proposed Regulations Providing an Exception to the Unified Plan Rule for Multiple Employer Plans (MEPs)). Employers and pooled plan providers may rely on the proposed regulations until final rules are issued.
Special Financial Assistance for Multiemployer Plans
The Operational Compliance List also includes the following changes related to multiemployer plans:
- Under Section 9704 of the American Rescue Plan Act of 2021 (ARPA-21), the sponsor of a severely underfunded multiemployer plan may apply to the PBGC to receive special financial assistance, provided certain conditions are satisfied (see Practice Note, Multiemployer Pension Plans: Special Financial Assistance Program (SFAP) under ARPA-21).
- IRS Notice 2021-38, which provides guidance for multiemployer pension plans that receive financial assistance under the SFAP (see Legal Update, PBGC's Interim Final Rule Implements the Special Financial Assistance Program (SFAP) and IRS Notice 2021-38 Provides Related Guidance).
Practical Implications
The Operational Compliance List helps plans remain operationally compliant by identifying changes in qualification requirements effective during the calendar year. It is important for tax-qualified retirement plan sponsors and service providers to be aware of the 2022 updates to the Operational Compliance List.