Revenue Procedure 2021-38 (Sept. 1, 2021)
Available at https://www.irs.gov/pub/irs-drop/rp-21-38.pdf
The IRS has extended the period during which pre-approved plans may timely adopt intofficewindowserim amendments. The extension revises Revenue Procedure 2016-37, which (among other things) modified and restated the current six-year adoption and submission cycles for pre-approved plans (see our Checkpoint article). Under that system, pre-approved plans must adopt interim amendments when statutory or regulatory changes in the tax qualification rules occur that would cause a plan to have disqualifying provisions. (Disqualifying provisions include the absence of a required plan provision.) The 2016 guidance required pre-approved plans to adopt interim amendments by the end of the remedial amendment period described in IRS regulations. For single employer plans, that period generally ends on the later of the due date (including extensions) for the employer’s tax return for the year in which the qualification change took effect for the plan, or the last day of the plan year in which the change took effect. The period for multiple employer plans generally ends on the last day of the tenth month following the plan year in which the change took effect.
Revenue Procedure 2021-38 eliminates the interim amendment requirement’s reference to the end of the remedial amendment period and replaces it with a later—and arguably simpler—deadline for correcting disqualifying provisions attributable to qualification changes that are effective with respect to a plan after December 31, 2020. Under the revised deadline, interim amendments must be adopted “by the end of the second calendar year following the calendar year in which the change in qualification requirements is effective with respect to the plan.” This revision is incorporated by reference into the special deadline for government plans, which is now the later of the revised deadline or 90 days after the close of the third regular legislative session of the body authorized to amend the plan that begins on or after the amendment becomes effective. The revenue procedure also eliminates a special deadline for tax-exempt employers that is no longer relevant because the revised deadline no longer relies on tax-filing deadlines. Finally, the new revenue procedure announces that the IRS intends to further revise Revenue Procedure 2016-37 to reflect subsequent guidance, including the 2017 merger of the master and prototype and volume submitter programs (see our Checkpoint article), and to make additional changes.
EBIA Comment: The revised deadline for interim amendments by pre-approved plans is consistent with contemporaneous new guidance for 403(b) plans (in Revenue Procedure 2021-37), and largely resembles the extended remedial amendment period for individually designed plans under Revenue Procedure 2016-37. The deadlines for pre-approved and individually designed plans still are not identical, however, because the two-year period for individually designed plans isn’t triggered until a change appears on a Required Amendments List, which generally happens only after guidance for the item has been provided. This may occur in the same year a “change in qualification requirements is effective” (the relevant year for pre-approved plans), but it could be later. The revised deadline for pre-approved plans also resembles the statutory amendment deadlines in some recent legislation. For example, some provisions of the SECURE Act are effectively subject to a two-year rule, although in that case the “year” is the plan year, not the calendar year (see our Checkpoint article). Given the subtlety of the differences, and the consequences of error, it might be advisable to adopt a practice of amending earlier, so the differences don’t matter. For more information, see EBIA’s 401(k) Plans manual at Sections XXVII.E (“Amendment Timing: Overview”), XXVII.F (“Remedial Amendment Periods Under the Code”), XXVII.G (“IRS Guidance Extending Remedial Amendment Periods”), XXVII.K (“Adopting a Pre-Approved Plan”), and XXVII.L (“Pre-Approved Plan: Opinion Letter Program”).
Contributing Editors: EBIA Staff.