IRS Issues 2023 Cumulative List for Defined Contribution Pre-Approved Plans in Notice 2024-3 | Practical Law

IRS Issues 2023 Cumulative List for Defined Contribution Pre-Approved Plans in Notice 2024-3 | Practical Law

The Internal Revenue Service (IRS) has issued Notice 2024-3, the 2023 Cumulative List of Changes in Requirements for Defined Contribution Qualified Pre-approved Plans.

IRS Issues 2023 Cumulative List for Defined Contribution Pre-Approved Plans in Notice 2024-3

by Practical Law Employee Benefits & Executive Compensation
Published on 03 Jan 2024 • USA (National/Federal)
The Internal Revenue Service (IRS) has issued Notice 2024-3, the 2023 Cumulative List of Changes in Requirements for Defined Contribution Qualified Pre-approved Plans.
On December 20, 2023, the IRS issued Notice 2024-3, the 2023 Cumulative List of Changes in Requirements for Defined Contribution Qualified Pre-approved Plans.
The 2023 Cumulative List will be used by pre-approved plan providers to submit opinion letter applications for pre-approved defined contribution plans during the fourth amendment cycle (Cycle 4), which began on February 1, 2023. Defined contribution plans may be submitted for approval during the on-cycle submission period, which begins on February 1, 2024, and ends on January 31, 2025, under Revenue Procedure 2023-37 (Rev. Proc 2023-37) (see Legal Update, IRS Updates Rules for Qualified and 403(b) Pre-Approved Plans in Rev. Proc. 2023-37).

Notice 2024-3

Under Rev. Proc. 2023-37:
  • Every pre-approved plan has a recurring remedial amendment cycle, and a provider of a pre-approved plan may apply for a new opinion letter for the plan for each remedial amendment cycle.
  • Defined contribution qualified pre-approved plans, defined benefit qualified pre-approved plans, and 403(b) pre-approved plans all have separate remedial amendment cycles.
  • The procedure for a provider to apply for a Cycle 4 opinion letter for a defined contribution qualified pre-approved plan is set forth.
  • The scope of reliance provided by a Cycle 4 opinion letter to adopting employers of a provider's defined contribution pre-approved plan is set forth.
  • The IRS publishes a cumulative list for each remedial amendment cycle to identify the recent changes in the qualification requirements that will be considered for the form of a pre-approved plan submitted to the IRS for that remedial amendment cycle.
  • A change in the qualification requirements includes a statutory change or a change in the requirements provided in the regulations or other guidance published in the Internal Revenue Bulletin, without regard to whether the change is required to be reflected in plan terms or relates to an optional provision that a provider could choose to reflect in plan terms as a discretionary amendment.
Until Notice 2024-3, Notice 2017-37 had been the most recent Cumulative List that applies to requests for opinion letters submitted for pre-approved defined contribution plans (the 2017 Cumulative List) (see Legal Update, IRS Revises Opinion Letter Procedures for Pre-Approved Plans in Revenue Procedure 2017-51 and Issues 2017 Cumulative List in Notice 2017-37). The 2017 Cumulative List applies with respect to the third remedial amendment cycle for pre-approved defined contribution plans, which is the period from February 1, 2017, to January 31, 2023.

SECURE 2.0 Act

The SECURE 2.0 Act was enacted on December 29, 2022 (see SECURE 2.0 Act Provisions Affecting Retirement Plans Toolkit). Under Notice 2024-3, the IRS will review a defined contribution qualified pre-approved plan document submitted for Cycle 4 only for the SECURE 2.0 provisions listed in the 2023 Cumulative List.
Providers of pre-approved plans should not include in plan documents submitted with their Cycle 4 opinion letter applications terms reflecting SECURE 2.0 Act provisions that are not listed in the 2023 Cumulative List.
Notice 2024-3 does state, however, that providers of pre-approved plans need to comply with applicable requirements relating to timely adoption of interim or discretionary amendments to reflect changes in qualification requirements made by SECURE 2.0 Act provisions. Generally, the deadline for SECURE 2.0 Act amendments is December 31, 2026.

2023 Cumulative List

The 2023 Cumulative List, which is provided in Section V of Notice 2024-3, identifies specific items the IRS has identified for review in determining whether the form of a defined contribution qualified pre-approved plan that has been submitted to the IRS for a Cycle 4 opinion letter has been properly updated since the plan was submitted for a Cycle 3 opinion letter, including:
  • Code Section 401(a), including:
    • Section 114 of the SECURE Act, which amended Code Section 401(a)(9)(C)(i)(I) to increase the age for the required beginning date for required minimum distributions (RMDs) from age 70½ to age 72 for employees born on or after July 1, 1949, but before January 1, 1951;
    • Section 107 of SECURE 2.0, which amended Code Section 401(a)(9)(C) to increase the age for the required beginning date for RMDs from age 72 to age 73, for employees born on or after January 1, 1951;
    • Section 2203(a) of the CARES Act, which provided a temporary waiver of RMDs from defined contribution plans for the 2020 calendar year;
    • Notice 2020-51, which provided guidance relating to the waiver of RMDs from defined contribution plans for 2020;
    • Section 401 of the SECURE Act, which provided new RMD rules for designated beneficiaries;
    • proposed regulations under Code Section 401(a)(9), which provided guidance relating to RMDs from defined contribution plans to reflect the amendments made to section 401(a)(9) by Sections 114 and 401 of the SECURE Act;
    • Section 202(a)(1) and (2) of SECURE 2.0, which eliminated the percentage limitation and increased the dollar limitation of the amount of an employee's interest under a defined contribution plan which may be used to pay premiums for a qualifying longevity annuity contract from $125,000 to $200,000;
    • Section 304 of SECURE 2.0, which increased the involuntary cash-out limit to $7,000 (from $5,000);
    • Section 104 of the Bipartisan American Miners Act of 2019 (Miners Act), which lowered the minimum age at which a pension plan may make a distribution to an employee who is not separated from employment at the time of the distribution from 62 to age 59 ½;
    • Notice 2020-68, which provided guidance on Section 104 of the Miners Act and the Section 113 of the SECURE Act;
    • Section 109 of the SECURE Act, which provided that defined contribution plans may permit certain transfers and distributions of lifetime investment options in cases in which the investment options are no longer authorized to be held as investment options under the plan;
    • Section 113 of the SECURE Act, which added Code Section 72(t)(2)(H), permitting an individual to receive a distribution of up to $5,000 without the 10% additional tax if the distribution meets the qualified birth or adoption distribution requirements;
    • Notice 2020-68, which provided guidance on the SECURE Act, including Section 113;
    • Section 115 of SECURE 2.0, which permitted an individual to receive a distribution from an applicable eligible retirement plan of up to $1,000 without application of the 10% additional tax if the distribution meets the requirement to be an emergency personal expense distribution;
    • Section 311 of SECURE 2.0, which amended Section 72(t)(2)(H)(v)(I) to restrict the permitted period for recontribution of qualified birth or adoption distributions to three years for qualified birth or adoption distributions made after December 29, 2022;
    • Section 314 of SECURE 2.0, which added Section 72(t)(2) permitting an individual to receive a distribution from an applicable eligible retirement plan of up to $10,000 without the 10% additional tax if the distribution is an eligible distribution to a domestic abuse victim;
    • proposed regulations under Code Section 401 which provided guidance on the use of forfeitures in qualified retirement plans; and
    • proposed regulations under Code Section 401 which provided an alternative to in-person witnessing of spousal consents required to be witnessed by a notary public or a plan representative and clarifying that certain special rules for the use of an electronic medium for participant elections also apply to spousal consents.
  • Code Section 401(b), including Section 317 of SECURE 2.0, which amended Code Section 401(b)(2) to provide guidance on elective deferrals in the case of an individual who owns the entire interest in an unincorporated trade or business and who is the only employee of such trade or business.
  • Code Section 401(k) and (m), including:
    • Section 41113 of the Bipartisan Budget Act of 2018 (BBA), which deleted the six-month prohibition on contributions after a hardship distribution and made other modifications;
    • Section 41114 of the BBA, which amended Code Section 401(k) to modify and provide guidance on the hardship distribution rules;
    • final regulations under Section 401(k), which amended the rules relating to hardship distributions from 401(k) plans to reflect statutory changes, including changes made by the BBA;
    • final regulations under Code Sections 401(k) and (m) which amended the definitions of qualified nonelective contributions (QNECs) and qualified matching contributions (QMACs);
    • Section 102 of the SECURE Act, which amended Code Section 401(k)(13)(C)(iii) to increase the 10% cap on automatic elective contributions under a qualified automatic contribution arrangement to 15%;
    • Section 103 of the SECURE Act, which amended Code Section 401(k) to eliminate certain safe harbor notice requirements for plans that provide for safe harbor nonelective contributions and added new provisions for the retroactive adoption of safe harbor status for those plans;
    • Notice 2020-52, which clarified the requirements that apply to a mid-year amendment to a safe harbor Section 401(k) or 401(m) plan that reduces only contributions made on behalf of highly compensated employees;
    • Notice 2020-86, which provided guidance on Sections 102 and 103 of the SECURE Act;
    • Section 121(a) of SECURE 2.0, which added new Code Section 401(k)(16), providing that an eligible employer may establish a starter 401(k) deferral-only arrangement pursuant to the requirements of Section 401(k)(16);
    • Section 401(a)(1) of SECURE 2.0 which amended Code Section 401(m)(12) to provide that a safe harbor automatic contribution arrangement under Section 401(m)(12) must meet the notice requirements under Section 401(k)(13)(E);
    • Section 112 of the SECURE Act and Sections 125 and 401(a)(2) of SECURE 2.0, which added the long-term part-time employee (LTPT) requirements;
    • proposed regulations under Code Section 401(k), which provided guidance on the LTPT employee provisions;
    • Section 116 of SECURE 2.0, which permitted an employer to make additional nonelective contributions for a year of a uniform percentage of compensation up to a specified amount for each employee who is eligible to participate in the employer's SIMPLE 401(k) plan and who has at least $5,000 of compensation from the employer for the year;
    • Section 117 of SECURE 2.0, which permitted eligible employers to allow eligible employees to contribute up to a specified amount of additional elective contributions and catch-up contributions to SIMPLE 401(k) plans; and
    • Notice 2024-2, which provided guidance on Section 117 of SECURE 2.0.
  • Code Section 402 and 402A, including:
    • Section 41104 of the BBA, which holds an individual harmless in the case of a wrongful levy upon an eligible retirement plan;
    • proposed regulations under Code Section 402(c), which amended the rules relating to eligible rollover distributions from defined contribution plans;
    • Section 604 of SECURE 2.0, which amended Code Section 402A to allow a qualified plan to permit an employee to elect to designate nonforfeitable employer matching or nonelective contributions as Roth contributions; and
    • Notice 2024-2, which provided guidance on Section 604 of SECURE 2.0.
  • Code Section 402(l), including Section 328 of SECURE 2.0, which amended Code Section 402(l)(5)(A) to permit governmental plans to make direct distributions to certain eligible retired public safety officers of amounts necessary to pay for qualified health insurance premiums.
  • Code Section 411, including Section 209 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which provided temporary guidance relating to partial plan terminations.
  • Code Section 413, including:
    • Section 101(a) of the SECURE Act, which added Code Section 413(e), creating a statutory exception to the unified plan rule for certain types of multiple employer plans (MEPs) that include defined contribution qualified plans; and
    • proposed regulations under Code Section 413(e).
  • Code Section 414(p), including Section 339 of SECURE 2.0, which amended the definition of "domestic relations order" in Code Section 414(p)(1)(B).
  • Code Section 414(v), including Section 109 of SECURE 2.0, which amended Code Section 414(v) to increase the annual limit on catch-up contributions, beginning with the 2025 taxable year, for individuals between ages 60 and 63.
  • Code Section 415, including:
    • Section 116 of the SECURE Act, which amended Code Section 415(c) to treat difficulty of care payments that are excluded from gross income as compensation for determining retirement contribution limitations; and
    • Notice 2020-68, which provided guidance on Section 116 of the SECURE Act.
  • Code Section 416, including:
    • Section 121(c)(3) of SECURE 2.0, which revised Code Section 416(g)(4)(H) to provide that a starter 401(k) deferral-only arrangement described in Section 401(k)(16)(B) shall not be treated as a top-heavy plan; and
    • Section 310 of SECURE 2.0, which added new Code Section 416(c)(2)(C), providing that employees not meeting the age or service requirements of Section 410(a)(1) may be excluded from consideration in determining whether a plan meets the top-heavy minimum benefit requirements in Section 416(c)(2)(A) and (B).
  • Disaster related rules, including:
    • Section 502 of the Disaster Tax Relief and Airport and Airway Extension Act of 2017, which provided special disaster-related rules for the use of retirement funds;
    • Section 11028 of the Tax Cuts and Jobs Act of 2017, which provided special disaster-related rules for the use of retirement funds;
    • Section 20101 of the BBA, which provided special disaster-related rules for the use of retirement funds;
    • Section 202 of the Taxpayer Certainty and Disaster Tax Relief Act of 2019, which provided special disaster-related rules for the use of retirement funds;
    • Section 2202 of the CARES Act, which provided special rules for coronavirus-related distributions and plan loans made to qualified individuals;
    • Notice 2020-50, which provided guidance relating to the application of Section 2202 of the CARES Act for qualified individuals and eligible retirement plans;
    • Section 302 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which provided special disaster-related rules for the use of retirement funds; and
    • Section 331 of SECURE 2.0, which provided permanent special rules governing plan distributions, recontributions, and loans to participant affected by qualified federally declared major disasters.