The American Retirement Association in an Oct. 8 letter to IRS Employee Plans Division Director Robert Choi reiterated its concern over aspects of the final hardship distribution regulations. Those regulations were issued in September.
Terming it an “urgent matter,” the ARA told Choi that “the current rules concerning the timing of interim amendments for pre-approved plans present major challenges to the retirement plan community.” This is not the first time that the ARA has raised this concern with the IRS; it also had done so in a Jan. 14, 2019 comment letter on the regulations when they were in proposed form.
In its Oct. 8 letter, the ARA warns of the possible effect of the final regulations regarding interim amendment deadlines:
“The preamble to the Final Regulations explains that the discretionary provisions of the Final Regulations are integrally related to the changes required under the Final Regulation. The preamble then summarizes the interim amendment deadlines set forth in section 15 of Rev. Proc. 2016-37. Applied in the context of these Final Regulations, these interim amendment rules result in deadlines that, for some adopting employers may only be months away.”
The ARA notes that “sponsors of individually designed plans have two years from the publication of the required amendments list to adopt a conforming amendment,” and that imposing a much shorter deadline for adopters of pre-approved plans — for which the interim amendment deadline is generally the due date of the tax return for the year in which the amendment is required to be effective — “may undercut IRS’ goal of fostering compliance within the retirement industry.”
The letter outlines examples of situations in which the interim amendment deadline “will expire in a matter of months.” This, the ARA warns, “is extremely problematic for plan document providers who must implement the underlying systems, delivery, and communications of the amendments.” It goes further: “This interim amendment cannot simply be adopted by the volume submitter practitioner or prototype sponsoring organization because adopting employers have many options available to them. Thus, in many cases, the adopting employer must formally adopt the amendment.”
The ARA requests a meeting with Choi, as well as “appropriate personnel from IRS and the Department of the Treasury, and the plan document provider community as soon as possible because of the time-sensitivity of this concern.” This, it says, “will allow us to further explain our concerns, resolve outstanding issues and ensure that all parties — the IRS, document providers, mass submitters, and adopting employers — have an accurate and consistent understanding of the timing requirements for pre-approved plan interim amendments.”
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