The IRS has again extended, through June 30, 2022, the temporary relief originally found in Notice 2020-42 and extended by Notice 2021-3 that removes the physical presence requirement for participant elections to be witnessed by a plan representative or a notary public.[1]

The IRS has issued Notice 2020-86[1] which gives a set of questions and answers related to the following two provisions of the SECURE Act:

• §102 of the SECURE Act increases the 10 percent cap for automatic enrollment safe harbor plans.

• §103 of the Secure Act eliminates certain safe harbor notice requirements for plans that provide for safe harbor nonelective contributions and adds new provisions for the retroactive adoption of safe harbor status for those plans.[2]

The various tables used to compute required minimum distributions from retirement plans have been updated, taking effect beginning in 2022, as the IRS has issued revised regulations under IRC §401(a)(9).[1]

In August 2018, Executive Order 13847, 83 FR 45321, directed the IRS to review the life expectancy and distribution tables to determine if they should be updated to reflect current mortality data, and how often such tables should be updated. In November 2019 the IRS released proposed regulations containing proposed updated tables.

Guidance has been issued by the IRS to deal with the removal of required minimum distributions from various retirement accounts added by Section 2203 of the CARES Act in Notice 2020-51.[1] The Notice indicates that it does the following:

• Permits rollovers of waived required minimum distributions (RMDs) and certain related payments, including an extension of the 60-day rollover period for certain distributions to August 31, 2020;

• Answers questions relating to the waiver of 2020 RMDs; and

• Provides a sample plan amendment that, if adopted, would provide participants a choice whether to receive waived RMDs and certain related payments.[2]

In Notice 2020-42[1] the IRS has provided relief from a physical presence requirement for spousal and other qualified retirement plan related consents in recognition of the COVID-19 emergency. The purpose of the notice is described as follows:

In response to the unprecedented public health emergency caused by the Coronavirus Disease 2019 (COVID-19) pandemic, and the related social distancing that has been implemented, this notice provides temporary relief from the physical presence requirement in Treasury Regulations § 1.401(a)-21(d)(6) for participant elections required to be witnessed by a plan representative or a notary public, including a spousal consent required under § 417 of the Internal Revenue Code (Code). While this temporary relief, which covers the period from January 1, 2020, through December 31, 2020, is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals, as permitted by section 2202 of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, 134 Stat. 281 (2020) (CARES Act), the temporary relief applies to any participant election that requires the signature of an individual to be witnessed in the physical presence of a plan representative or notary.[2]

In Notice 2020-06[1] the IRS has provided some relief to financial institutions due to the late change in the determination of IRA account owners who have required minimum distributions that was part of the SECURE Act.  The SECURE Act was included as part of the Further Consolidated Appropriations Act, 2020 signed into law in late December.

A series of problems led to the Tax Court agreeing with the IRS that an employee stock ownership plan (ESOP) and trust (ESOT) were not qualified in the case of Ed Thielking Inc. v. Commissioner, TC Memo 2020-5.[1]

The IRS has opened up its plan determination letter program to a limited number of existing individually designed plans in Revenue Procedure 2019-20.  The IRS had indicated in various forums that the agency would begin to reopen its determination program to cover certain existing plans.  Until this procedure, the program had been limited to new individually designed plans and those that were looking for a letter at the time the plan was being terminated.

A determination letter is a ruling from the IRS that the language of the plan is in compliance with the requirements for the plan to be treated as a qualified retirement plan.  While the letter does not cover issues that may arise with operation of the plan, it does assure that if the plan is operated in accordance with the plan document and other provisions of the law that it should not be at risk of losing its qualified status—in which case it would no longer be a tax exempt trust. 

Trusts can be used to hold an inherited IRA and still obtain the benefit of the life expectancy of the trust’s beneficiary if certain requirements are met.  In PLR 201902023 the IRS ruled that such a result was obtained via the use of a subtrust.

A 120-page revision to the Employee Plans Compliance Resolution System (EPCRS) has been issued by the IRS in Revenue Procedure 2018-52.  This system involves three distinct programs that deal with compliance issues arising in qualified retirement programs.  These programs are:

• Self Correction Program (SCP)

• Voluntary Correction Program with IRS Approval (VCP)

• Audit Closing Agreement Program (Audit CAP)

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In PLR 201833012 the IRS ruled that it was acceptable for an employer to amend its 401(k) plan to provide a nonelective contribution for employees who make qualifying repayments on their student loans.

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The IRS has published final regulations (TD 9835) that modify the requirements for qualified matching contributions (QMACs) and qualified nonelective contributions (QNECs) for employer retirement plans.  These regulations are adopted essentially unchanged from the proposed versions issued in January 2017.

These payments are used to deal with issues that arise when an employer initially runs the ADP and/or ACP tests for a retirement plan and discovers the plan does not comply with one or both tests for the plan year.

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The IRS has issued the 2017 required amendment (RA) list for individually designed qualified retirement plans (Notice 2017-72).  Despite the name of the document, the required amendments listed in this document are not required to be made by the end of 2017, but rather must be made generally by December 31, 2019 (the end of the remedial amendment period), although some governmental plans may qualify for a later date (see Rev. Proc. 2016-37).

The IRS changed the required amendment period, effective January 1, 2017, with the issuance of Rev. Proc. 2016-37.  As the current notice describes the new system contained in Rev. Proc. 2016-37:

Sections 5.05(3) and 5.06(3) of Rev. Proc. 2016-37 extend the remedial amendment period for individually designed plans to correct disqualifying provisions that arise as a result of a change in qualification requirements. Under section 5.05(3), the remedial amendment period for a plan that is not a governmental plan (as defined in § 414(d)) is extended to the end of the second calendar year that begins after the issuance of the RA List on which the change in qualification requirements appears. Section 5.06(3) provides a special rule for governmental plans that could further extend the remedial amendment period in some cases.

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In Announcement 2017-11 the IRS has provided special provisions to allow qualified employer retirement plans to make Hurricane Harvey related distributions and/or loans.  Following Hurricane Irma, the IRS in Announcement 2017-13 expanded the relief to cover those impacted by Hurricane Irma.

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In Announcement 2017-11 the IRS has provided special provisions to allow qualified employer retirement plans to make Hurricane Harvey related distributions and/or loans.

The general relief is described in the notice as follows:

…[A] qualified employer plan will not be treated as failing to satisfy any requirement under the Code or regulations merely because the plan makes a loan, or a hardship distribution for a need arising from Hurricane Harvey, to an employee or former employee whose principal residence on August 23, 2017, was located in one of the Texas counties identified for individual assistance by the Federal Emergency Management Agency (“FEMA”) because of the devastation caused by Hurricane Harvey or whose place of employment was located in one of these counties on that applicable date or whose lineal ascendant or descendant, dependent, or spouse had a principal residence or place of employment in one of these counties on that date.

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Qualified retirement plan provision in the IRC generally give controlling owner-employees a trade-off—they can benefit under the plan, but only to the extent that an appropriate benefit is offered to the “rank and file.” Not surprisingly, some owners, attempting to maximize their benefit and avoid the cost of funding for other individuals, have attempted to establish structures to “isolate” the rank and file outside of the organization whose employees are covered by the program while still obtaining their services. And, similarly not surprisingly, the law has provisions meant to address such structures.

This type of arrangement was challenged by the IRS in the case of Paza Staffing Services v. Commissioner, Docket No. 6881-12R and is the subject of an unpublished order and decision published on August 17, 2017.   The plan in question was an employee stock ownership plan (ESOP) established by a corporation controlled by Dr. Zapolanski.

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In response to Hurricane Matthew the IRS in Announcement 2016-39 granted the option to qualified plans to give access to retirement funds to individuals impacted by the disaster without requiring certain the plans to go through certain verification procedures required of such plans when making loans or hardship distributions.

Employer retirement plans of various sorts (§§401(k), 403(b) and 457) must follow certain procedures in order to make distributions or loans to account holders.  Distributions can only be made upon the occurrence of certain events that the IRC allows, and then only if the plan itself allows for such a distribution. As well, distributions will generally be subject to tax except to the extent the distribution consists of already taxed amounts.

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In a series of private letter rulings (PLRs 201628004, 201628005 and 201628006) the IRS denied an estate’s attempt to fix a problem that appeared to have been created by accident by the decedent when his financial adviser changed firms

In Revenue Procedure 2015-31 the IRS has made permanent, with some changes, the pilot program it created in Revenue Procedure 2014-32 for a late reporting relief program for certain retirement plans not eligible to participate in the Department of Labor’s Delinquent Filer Voluntary Compliance (“DFVC”) program.  Generally these plans are “one-participant” and foreign plans.

The IRS posted information on its website, “IRS Compliance Questions on the 2015 Form 5500-Series Returns,” indicating that certain portions of the 2015 Form 5500 series forms should not be completed.