List of 2017 Required Amendments Issued by IRS

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.

The IRS notes that the RA list will not contain the following items:

  • Statutory changes in qualification requirements for which the Treasury Department and the IRS expect to issue guidance (which would be included on an RA List issued in a future year);
  • Changes in qualification requirements that permit (but do not require) optional plan provisions (in contrast to changes in the qualification requirements that cause existing plan provisions, which may include optional plan provisions previously adopted, to become disqualifying provisions); or
  • Changes in the tax laws affecting qualified plans that do not change the qualification requirements under § 401(a) (such as changes to the tax treatment of plan distributions, or changes to the funding requirements for qualified plans).

The 2017 RA items that the IRS believes will require a change to most plans of the type affected by the change are:

  • Final regulations regarding cash balance/hybrid plans (79 Fed. Reg. 56442, 80 Fed. Reg. 70680). Cash balance/hybrid plans must be amended to the extent necessary to comply with those portions of the regulations regarding market rate of return and other requirements that first become applicable to the plan for the plan year beginning in 2017. (This requirement does not apply to those collectively bargained plans that do not become subject to these portions of the regulations until 2018 or 2019 under the extended applicability dates provided in § 1.411(b)(5)-1(f)(2)(B)(3).)

Note: The relief from the anti-cutback requirements of § 411(d)(6) provided in § 1.411(b)(5)-1(e)(3)(vi) applies only to plan amendments that are adopted before the effective date of these regulations.

Note: See also Notice 2016-67, 2016-47 I.R.B. 748, which addresses the applicability of the market rate of return rules to implicit interest pension equity plans.

  • Benefit restrictions for certain defined benefit plans that are eligible cooperative plans or eligible charity plans described in section 104 of the Pension Protection Act of 2006, as amended (“PPA”)). An eligible cooperative plan or eligible charity plan that was not subject to the benefit restrictions of § 436 for the 2016 plan year under § 104 of PPA ordinarily becomes subject to those restrictions for plan years beginning on or after January 1, 2017. However, a plan that fits within the definition of a “CSEC plan” (as defined in § 414(y)) continues not to be subject to those rules unless the plan sponsor has made an election for the plan not to be treated as a CSEC plan.

The remaining item in the 2017 RA list are items that would affect most plans, but may still require amendments for specific plans, is:

  • Final regulations regarding partial annuity distribution options for defined benefit pension plans (81 Fed. Reg. 62359). Defined benefit plans that permit benefits to be paid partly in the form of an annuity and partly as a single sum (or other accelerated form) must do so in a manner that complies with the § 417(e) regulations. Section 1.417(e)-1(d)(7) provides rules under which the minimum present value rules of § 417(e)(3) apply to the distribution of only a portion of a participant's accrued benefit.

Section 1.417(e)-1(d)(7) applies to distributions with annuity starting dates in plan years beginning on or after January 1, 2017, but taxpayers may elect to apply § 1.417(e)-1(d)(7) with respect to any earlier period.

Note: The regulations provide relief from the anti-cutback rules of § 411(d)(6) for certain amendments adopted on or before December 31, 2017.

Note: Model amendments that a sponsor of a qualified defined benefit plan may use to amend its plan to offer bifurcated benefit distribution options in accordance with these final regulations are provided in Notice 2017-44, 2017-36 I.R.B. 226.