IRS Modifies Guidance on Discretionary Amendment Deadline for Pre-Approved Plans

The IRS has issued a revenue procedure expanding the situations in which the deadline for discretionary amendments by pre-approved plans may be extended. Under Revenue Procedure 2016-37 (see our Checkpoint article), qualified pre-approved plans (including 401(k) plans) are generally required to adopt discretionary plan amendments no later than “the end of the plan year in which the plan amendment is operationally put into effect.” However, an exception allows for changes in that deadline if “a statutory provision or guidance issued by the IRS sets forth an earlier deadline.” (Language affecting only interim amendments, by contrast, refers to the possibility of an “earlier or later” deadline.)

Revenue Procedure 2020-40 revises the earlier guidance to explicitly allow the usual deadline for discretionary amendments to be lengthened by statute, regulations, or IRS guidance, even if the amendment is not an interim amendment. The guidance provides that the usual deadline applies unless “a statutory provision, or regulations or other guidance published in the Internal Revenue Bulletin, sets forth a deadline…that is either earlier or later than [the usual deadline].” The guidance notes that the change makes the provision for pre-approved plans consistent with the rules for individually designed plans. The guidance also makes a similar modification to the rules applicable to Code § 403(b) pre-approved plans.

EBIA Comment: The guidance does not offer any context or reasons why the change is being made at this time. One potential explanation could be that the issue has arisen because of the extended amendment deadlines in the Setting Every Community Up for Retirement Enhancement (SECURE) Act (see our Checkpoint article) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act (see our Checkpoint article). The need may also have become more urgent because plan sponsors have begun to adopt third-cycle pre-approved plans (see our Checkpoint article). For more information, see EBIA’s 401(k) Plans manual at Sections XXVII.K (“Adopting a Pre-Approved Plan”) and XXVII.L (“Pre-Approved Plan: Opinion Letter Program”).

Contribution Editors: EBIA Staff.