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IRS Updates Operational Compliance List for Retirement Plans


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· 5 minute read

IRS Webpage: Operational Compliance List (Apr. 27, 2021)

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The IRS has updated its Operational Compliance (OC) list highlighting changes in tax-qualification requirements and related guidance affecting the operation of retirement plans. The IRS provides the OC list to help individually designed plans maintain operational compliance by identifying changes in requirements generally effective during a calendar year. (Like the IRS’s Required Amendments List (see our Checkpoint article), the OC list may also be a useful reminder as to plan provisions requiring amendment.) The list is available only on the IRS webpage and is updated from time to time as needed (see our Checkpoint article). Notable additions include items from the Coronavirus Aid, Relief, and Economic Security (CARES) Act (see our Checkpoint article) and COVID-19-related guidance, as well as guidance interpreting the SECURE Act. Developments added to the list that are of interest for 401(k) plans include the following:

  • Updated Required Minimum Distribution (RMD) Tables (2022). Final regulations updating the tables used to calculate RMDs (see our Checkpoint article).
  • Long-Term Part-Time Employees (2021). The SECURE Act rule requiring plans to permit elective deferrals by part-time employees who have attained age 21 and completed at least 500 hours of service during three consecutive 12-month periods (see our Checkpoint article).
  • Physical Presence Relief (2020 and 2021). Temporary relief from the requirement that some signatures—including spousal consents—be witnessed “in the physical presence” of a plan representative or notary public, which became available in 2020 (see our Checkpoint article) and is extended for 2021 (see our Checkpoint article).
  • CARES Act (2020). CARES Act provisions permitting coronavirus-related distributions and plan loan relief (including related guidance under Notice 2020-50; see our Checkpoint article), as well as temporary waiver of RMDs (including related guidance under Notice 2020-51; see our Checkpoint article).
  • Other New Items (2020). Guidance addressing midyear contribution reductions for highly compensated employees and providing temporary relief from certain requirements applicable to midyear reductions or suspensions of safe harbor contributions (see our Checkpoint article); the temporary rule providing partial plan termination relief (see our Checkpoint article); and disaster relief under the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (part of the Consolidated Appropriations Act, 2021; see our Checkpoint article).
  • Additions to SECURE Act Items (2020). Guidance relating to the SECURE Act (see our Checkpoint article) in Notice 2020-86, addressing contribution caps for automatic enrollment safe harbor plans and delayed adoption and removal of the annual notice requirement for safe harbor plans using nonelective contributions (see our Checkpoint article); and Notice 2020-68, addressing qualified birth or adoption distributions, the inclusion of difficulty of care payments in compensation, and plan amendments (see our Checkpoint article).

In addition, a note has been added to the entry on the 2019 list regarding the elimination of favorable tax treatment for plan loans made using credit cards or similar arrangements (see our Checkpoint article). The note recommends that, by the applicable deadline, plan sponsors remove plan language that provides for making loans through these arrangements.

EBIA Comment: Plan sponsors and advisors should keep in mind that the OC list is not comprehensive—it does not include routine periodic changes (such as cost-of-living increases) and may not include developments with limited applicability. Moreover, additions to the list may lag significantly behind their effective dates (as was the case with the CARES Act provisions). Consequently, the list should not be relied on too heavily as a way to track changes. For more information, see EBIA’s 401(k) Plans manual at Sections IV.B (“Form and Operational Qualification Requirements”) and XXVII.G.1 (“Extended Remedial Amendment Periods for Individually Designed Plans”).

Contributing Editors: EBIA Staff.

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