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IRS Issues 2020 Cumulative List in Notice 2020-14
Practical Law Legal Update w-024-3664 (Approx. 7 pages)
IRS Issues 2020 Cumulative List in Notice 2020-14
by Practical Law Employee Benefits & Executive Compensation
| Published on 09 Mar 2020 • USA (National/Federal) |
The Internal Revenue Service (IRS) issued Notice 2020-14, which includes the 2020 Cumulative List of Changes in Plan Qualification Requirements for Pre-Approved Defined Benefit Plans. It is the first Cumulative List that applies to opinion letter requests for pre-approved defined benefit plans since 2012.
On March 6, 2020, the IRS issued Notice 2020-14, which includes the 2020 Cumulative List of Changes in Plan Qualification Requirements for Pre-Approved Defined Benefit Plans.
The 2020 Cumulative List will be used by pre-approved plan providers to submit opinion letter applications for pre-approved defined benefit plans during the third six-year remedial amendment cycle (third-cycle opinion letter applications), which begins on May 1, 2020, and ends on January 31, 2025. Defined benefit plans may be submitted for approval during the on-cycle submission period, which, under Revenue Procedure 2020-10 (Rev. Proc. 2020-10), begins August 1, 2020, and ends July 31, 2021 (see Legal Update, IRS Delays Start of Third Six-Year Remedial Amendment Cycle for Pre-Approved Plans in Rev. Proc. 2020-10).
Notice 2020-14
Under Rev. Proc. 2016-37, the IRS uses Cumulative Lists when reviewing pre-approved plan documents submitted for opinion letters (see Legal Update, IRS Provides Determination Letter Guidance in Revenue Procedure 2016-37). The Cumulative Lists identify changes in the qualification requirements of the Internal Revenue Code (Code) that must be taken into account in a pre-approved defined benefit plan document for third-cycle opinion letter applications.
Until Notice 2020-14, Notice 2012-76 had been the most recent Cumulative List that applies to requests for opinion letters submitted for pre-approved defined benefit plans (the 2012 Cumulative List) (see Legal Update, IRS Releases 2012 Cumulative List of Changes in Plan Qualification Requirements). The 2012 Cumulative List applies with respect to the second remedial amendment cycle for pre-approved defined benefit plans, which is the period from February 1, 2013, to April 30, 2020.
The 2020 Cumulative List in Notice 2020-14 includes the changes in the qualification requirements that were issued, enacted, or effective after October 1, 2012, that relate to pre-approved defined benefit plans.
If the IRS has not previously reviewed a pre-approved defined benefit plan for items on earlier Cumulative Lists or for qualification requirements that applied before those earlier Cumulative Lists, the IRS will consider those items and qualification requirements when it reviews the plan.
However, Notice 2020-14 provides that the IRS will not consider any of the following items in its review of any opinion letter application submitted under the third remedial amendment cycle:
- Guidance issued after December 1, 2019.
- Statutes enacted after December 1, 2019. This means that the pre-approved defined benefit plans seeking opinion letters will not be reviewed for qualification changes made by the Setting Every Community Up for Retirement Enhancement Act (see SECURE Act).
- Qualification requirements first effective in 2021 or later.
- Statutory provisions that are first effective in 2020 for which there is no guidance identified in Notice 2020-14.
SECURE Act
The SECURE Act was enacted on December 20, 2019 (see Legal Update, Government Funding Legislation Includes the SECURE Act, Which Changes Retirement Plan Requirements and SECURE Act Compliance Chart). Under Notice 2020-14, the IRS will not review any defined benefit plan document submitted under the third remedial amendment cycle for any changes in the qualification requirements made by the SECURE Act. Furthermore, pre-approved defined benefit plan providers should not include SECURE Act provisions in plan documents submitted with their opinion letter applications under the third remedial amendment cycle.
Notice 2020-14 does state, however, that pre-approved defined benefit plan providers will need to timely adopt interim or discretionary amendments required by the SECURE Act. Section 601 of the SECURE Act provides that the deadline for adopting any plan amendment under the Act is the last day of the first plan year beginning on or after January 1, 2022, rather than the general deadlines for timely adoption of interim or discretionary amendments under Section 15 of Rev. Proc. 2016-37.
The 2020 Cumulative List
The 2020 Cumulative List, which is provided in Section V of Notice 2020-14, identifies changes in the qualification requirements of the Code that were issued, enacted, or effective after October 1, 2012, that relate to pre-approved defined benefit plans, including changes regarding:
- Same-sex marriage, including:
- the US Supreme Court's decision in United States v. Windsor, 570 U.S. 744 (2013) (see Legal Update, Supreme Court: DOMA Section 3 is Unconstitutional and Proposition 8 Proponents Lack Standing) and subsequent IRS guidance provided in Rev. Rul. 2013-17 (see Legal Update, IRS Adopts Same-Sex Marriage Recognition Rule) and Notice 2014-19 (see Legal Update, IRS Provides Guidance on the Application of Windsor and Revenue Ruling 2013-17 to Qualified Retirement Plans); and
- IRS guidance on the US Supreme Court's decision in Obergefell v. Hodges, 135 S. Ct. 2584 (2015) (see Legal Update, Supreme Court's Recognition of Same-Sex Marriage Raises Benefits and Employment Law Issues and Same-Sex Marriage Developments for Retirement Plans Toolkit).
- Code Section 401 (26 U.S.C. § 401), including:
- proposed regulations on determining whether the normal retirement age under a governmental pension plan satisfies the requirements of Code Section 401(a) (see Legal Update, IRS Issues Normal Retirement Age Proposed Regulations for Governmental Pension Plans); and
- final regulations that amend the rules governing hardship distributions from 401(k) plans (see Legal Update, IRS Issues Final Regulations on Hardship Distribution Rules).
- Code Section 402 (26 U.S.C. § 402). The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) (Pub. L. 114-113) allows for rollovers from a qualified plan to a SIMPLE IRA under Code Section 408(p)(1)(B) (26 U.S.C. § 408(p)(1)(B)) (see Legal Update, Consolidated Appropriations Act of 2016 Postpones Cadillac Tax and Permanently Extends Transit Benefit Parity).
- Hybrid retirement plans, including cash balance plans and pension equity plans (PEPs) (see Legal Updates, IRS Issues Final Regulations Providing Anti-Cutback Relief and Guidance for Hybrid Retirement Plans and IRS Issues Final Regulations Providing Guidance on Hybrid Retirement Plans and Proposed Regulations Providing Anti-Cutback Relief).
- Proposed regulations under Code Section 415 (26 U.S.C. § 415), providing that amounts paid to an Indian tribe member for services in an activity relating to fishing rights may be treated as compensation for purposes of qualified plan limits (78 Fed. Reg. 68780 (Nov. 15, 2013)).
- Final regulations under Code Section 417 (26 U.S.C. § 417), providing guidance on the minimum present value requirements for defined benefit plan distributions to simplify the treatment of certain optional forms of benefit that are paid to a participant partly in annuity form and partly in lump sum (see Legal Update, IRS Issues Final Regulations Modifying Minimum Present Value Requirements for Defined Benefit Plan Partial Annuity Distributions).
- Code Section 436 (26 U.S.C. § 436), including Section 202 of the Cooperative and Small Employer Charity Pension Flexibility Act (Pub. L. 113-97) and the Highway and Transportation Funding Act of 2014 (Pub. L. 113-159) (see Legal Update, President Obama Signs the Highway and Transportation Funding Act of 2014 with Pension Funding Provisions).
Practical Implications
Sponsors of pre-approved defined benefit plans should take note that Notice 2020-14 includes the 2020 Cumulative List, which will be used for third-cycle opinion letter applications for pre-approved defined benefit plans. Notably, the Notice provides that the IRS will not review any defined benefit plan document submitted under the third remedial amendment cycle for any changes in the qualification requirements made by the SECURE Act.
Plan sponsors should also be aware that, as Notice 2020-14 states, a plan will be qualified only if it complies with all relevant qualification requirements, not only those on the 2020 Cumulative List.