IRS has issued, in Notice 2013-84, 2013-52 IRB, the 2013 Cumulative List of Changes in Plan Qualification Requirements (the “2013 Cumulative List”) to be used by plan sponsors and practitioners submitting determination, opinion, or advisory letter applications for plans during the period beginning Feb. 1, 2014 and ending Jan. 31, 2015. These plans will be primarily single-employer individually designed defined contribution plans and single-employer individually designed defined benefit plans that are in Cycle D, and multiemployer plans as described in Code Sec. 414(f). Generally, an individually designed plan is in Cycle D if the last digit of the employer identification number of the plan sponsor is 4 or 9.
Background. IRS annually publishes a cumulative list to identify statutory, regulatory, and guidance changes that must be taken into account in submissions by plan sponsors to IRS for opinion, advisory, and determination letters whose remedial amendment period begins on the February 1st following issuance of the cumulative list.
Rev Proc 2007-44, 2007-2 CB 54 sets forth procedures for issuing opinion, advisory, and determination letters, and describes the five-year remedial amendment cycle for individually designed plans and the six-year remedial amendment cycle for pre-approved plans.
New guidance. Notice 2013-84 contains the 2013 cumulative list for purposes of the determination letter program for plans submitted for determination letters during the Cycle D submission period. In accordance with Rev Proc 2007-44, IRS will start accepting determination letter applications for Cycle D plans beginning on Feb. 1, 2014. The 12-month submission period for Cycle D plans will end Jan. 31, 2015.
The 2013 cumulative list informs plan sponsors of issues IRS has specifically identified for review in determining whether a plan filing in Cycle D has been properly updated. Specifically, the 2013 cumulative list reflects law changes under the Pension Protection Act of 2006 (PPA ’06, P.L. 109-280); the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery and Iraq Accountability Appropriations Act, 2007 (P.L. 110-28); the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act, P.L. 110-245); the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA, P.L. 110-458); the Small Business Jobs Act of 2010 (SBJA, P.L. 111-240); the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA 2010, P.L. 111-192 ); the Moving Ahead for Progress in the 21st Century Act (MAP-21, P.L. 112-141) and American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240)
Except as noted below, IRS won’t consider in its review of any determination letter application, for the submission period that begins Feb. 1, 2014, any: (1) guidance published after Oct. 1, 2013; (2) statutes enacted after Oct. 1, 2013; (3) qualification requirements first effective in 2014 or later; or (4) statutory provisions that are first effective in 2014, for which there is no guidance identified in the 2013 cumulative list. However, to be qualified, a plan must comply with all relevant qualification requirements, not just those on the 2013 cumulative list.
IRS said that the 2013 cumulative list does include the following guidance issued after Oct. 1, 2013:
- Final regs under Code Sec. 401(k) and Code Sec. 401(m) (see item 3, below), which provide guidance on permitted mid-year reductions or suspensions of safe harbor nonelective contributions in certain circumstances for amendments adopted after May 18, 2009, and revise the requirements for permitted mid-year reductions or suspensions of safe harbor matching contributions for plan years beginning on or after Jan. 1, 2015.
- Notice 2013-74, 2013-52 IRB (see item 4, below), which provides guidance under Code Sec. 402A(c)(4)(E), relating to the expansion of rollovers from 401(k) plans, 403(b) plans, and governmental 457(b) plans to designated Roth accounts in the same plan (“in-plan Roth rollovers”).
With respect to matters addressed by proposed regs identified in Notice 2013-84’s footnotes, IRS’s review of the plan will be based on a reasonable interpretation of the statute, existing final regs, or other published guidance. For this purpose, compliance with proposed regs will be treated as meeting that standard. However, a determination letter cannot be relied on with respect to whether the plan complies with the proposed regs.
Terminating plans must include all law changes in effect at the time of termination.
2013 cumulative list. The 2013 cumulative list consists of statutory provisions and associated guidance which reflect changes to plan qualification requirements, as well as “miscellaneous” guidance. Items from the 2008 cumulative list have been deleted from the 2013 cumulative list. The 2013 cumulative list contains those plan qualification requirements listed in the 2009, 2010, 2011, and 2012 cumulative lists, as well as additional 2013 plan qualification requirements.
The following are the plan qualification requirements which were not on the 2012 or earlier cumulative lists, and which IRS has identified as “new.”
(1) Code Sec. 401(a):
- United States v. Windsor, (2013) 133 S. Ct. 2675. The Supreme Court held that Section 3 of the Defense of Marriage Act, which provides that in determining the meaning of any Act of Congress, or of any ruling, reg, or interpretation of the various administrative bureaus and agencies of the U.S., the word “marriage” means only a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife, is unconstitutional because it violates the principles of equal protection.
- Rev Rul 2013-17, 2013-38 IRB 201, provides that for federal tax purposes, the terms “spouse,” “husband and wife,” “husband,” and “wife” include an individual married to a person of the same sex if the individuals are lawfully married under state law, and the term “marriage” includes such a marriage between individuals of the same sex. In the ruling, IRS adopts a general rule recognizing a marriage of same-sex individuals that was validly entered into in a state whose laws authorize the marriage of two individuals of the same sex, even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.
(2) Code Sec. 401(a)(35): Notice 2013-17, 2013-20 IRB 1082, provides relief from the anti-cutback rules for an amendment to an employee stock ownership plan (ESOP) to eliminate all in-service distribution options previously used to satisfy the diversification requirements of Code Sec. 401(a)(28)(B)(i).
(3) Code Sec. 401(k) and Code Sec. 401(m): Final regs provide guidance on permitted mid-year reductions or suspensions of safe harbor nonelective contributions in certain circumstances for amendments adopted after May 18, 2009, and revise the requirements for permitted mid-year reductions or suspensions of safe harbor matching contributions for plan years beginning on or after Jan. 1, 2015.
(4) Code Sec. 402A: Notice 2013-74 provides guidance under Code Sec. 402A(c)(4)(E), relating to the expansion of rollovers from 401(k) plans, 403(b) plans, and governmental 457(b) plans to designated Roth accounts in the same plan (“in-plan Roth rollovers”). Code Sec. 402A(c)(4)(E) provides for in-plan Roth rollovers of otherwise nondistributable amounts. Notice 2013-74 also provides guidance that applies to all in-plan Roth rollovers under Code Sec. 402A(c)(4) (see ¶ 20).
(5) Code Sec. 411(d)(6): Notice 2013-17 provides relief from the anti-cutback rules for an amendment to an ESOP to eliminate all in-service distribution options previously used to satisfy the diversification requirements of Code Sec. 401(a)(28)(B)(i).
(6) Code Sec. 436: Notice 2013-11, 2013-11 IRB 610, provides guidance on the 25-year average segment rates that are applied to adjust the otherwise applicable 24-month average segment rates that are used to compute the minimum contribution requirements for single-employer defined benefit plans under Code Sec. 430 and ERISA § 303, for plan years beginning in 2013.