2020 Required Amendments List Includes “Difficulty of Care” Payments Amendment for Some Employers

The IRS has issued its 2020 Required Amendments List (RA List) for individually designed qualified retirement plans (including 401(k) plans) and 403(b) plans. RA Lists are issued annually to identify changes in the Code’s qualification requirements that may result in “disqualifying provisions” and require a remedial amendment (see our Checkpoint article). (A disqualifying provision is a required provision that is not in the plan document, a provision in the document that does not comply with the Code’s qualification requirements, or a provision that the IRS so designates.) RA Lists are usually divided into two parts. Part A lists changes in qualification requirements that require most plans (of the relevant type) to be amended. Part B lists changes that should only require amendments for certain plans with unusual plan provisions affected by the changes. Periodic cost-of-living adjustments (COLAs) to various dollar limitations do not appear on the annual RA List but are treated as if they are included. (Many plans do not need to be amended to reflect these periodic COLAs; for the 2021 COLAs, see our Checkpoint article.)

There are no items in Part A of the 2020 RA List. Part B of the 2020 RA list has two entries, only one of which applies to 401(k) plans. That entry relates to Code § 415(c), which limits annual additions to a participant’s account to the lesser of a dollar limit ($58,000 for 2021) or 100% of a participant’s compensation. For purposes of the 100% limit, the SECURE Act (see our Checkpoint article) increased participants’ compensation by the amount of excludable qualified foster care payments they receive that are “difficulty of care” payments. (Generally, difficulty of care payments are amounts paid because a state has determined that the provider needs additional compensation to care for an individual with a physical, mental, or emotional handicap.) Plans maintained by employers that have provided difficulty of care payments during the plan years beginning after 2015 and before 2021 must be amended to reflect the SECURE Act change by December 31, 2022, or if later, the deadline set by the SECURE Act’s amendment provision, explained in IRS Notice 2020-68 (see our Checkpoint article). Employers that begin making difficulty of care payments in later years must amend their plans by the end of the second calendar year after the calendar year in which those payments begin.

EBIA Comment: Notice 2020-68 clarified that employers who do not make difficulty of care payments do not need to amend their plans to incorporate the SECURE Act change. But those employers may still want to consider adding a difficulty of care payments provision when they next amend their plans (e.g., to adopt discretionary amendments in response to the SECURE Act) because the provision will be an easy one to overlook if circumstances change and the employer later starts making difficulty of care payments. For more information, see EBIA’s 401(k) Plans manual at Sections IV.B (“Form and Operational Qualification Requirements”), XXVII.F (“Disqualifying Provisions and Remedial Amendments”), and XXVII.G.1 (“Extended Remedial Amendment Periods for Individually Designed Plans”).

Contributing Editors: EBIA Staff.