ARA Recommends Improvements in the Interim Amendment Process for Pre-Approved Plan Docs

The American Retirement Association (ARA) in a May 11 letter to Eric Slack, Director of the IRS Office of Employee Plans, has recommended improvements in the interim amendment process for pre-approved plan documents.

In December 2019, the letter notes, during a conference call relating to the amendment deadline for the final hardship distribution regulations, IRS staff indicated it was reviewing current procedures applicable for pre-approved plans. During the call, practitioners expressed concern about the current interim amendment requirements for such plans; IRS staff asked for suggestions regarding how requirements could be improved.

The ARA notes that the current rules relating to interim amendments “can be confusing and inconsistent,” which affects plan sponsors, document providers, and mass submitters. “This is particularly problematic,” says the letter, concerning Section 401(a) preapproved plans “because the interim amendment deadline is tied to the plan sponsor’s tax return due date, which varies by plan sponsor.” 

The ARA recommends that the Treasury Department and IRS adopt an interim amendment approach for 401(a) pre-approved and 403(b) pre-approved plans that is identical (or similar) to that taken for plan amendments for 401(a) individually designed plans. That is, the letter says, interim amendments for pre-approved plans should not be required until the end of the second calendar year that begins after the issuance of the Required Amendments List in which the change in qualification requirements appears.

The ARA argues that this recommendation “provides a reasonable, uniform interim amendment deadline” for all plan types:

• 401(a) pre-approved plans (including defined contribution and defined benefit plans);
• 403(b) pre-approved plans; and
• 401(a) and 403(b) individually designed plans.  

“A reasonable, uniform interim amendment deadline promotes compliance by plan sponsors, service providers, document providers and mass submitters,” the ARA writes.  

The use of the Required Amendments List for pre-approved plans would serve the same purpose as it does for individually designed plans, says the letter; that is, it would provide clarity regarding law and regulatory changes that require plan amendment. This, the ARA says, would reduce the guesswork for plan sponsors, document providers and mass submitters on what changes require plan amendment. Furthermore, it notes, the IRS would not have to use additional resources if it took this approach, since the IRS already issues the Required Amendments List.

A fixed deadline—the end of the second calendar year that begins after the issuance of the Required Amendments List in which the change in qualification requirements appears— would provide a reasonable period in which to complete the amendment drafting and adoption process, regardless of the timing of legislation and related guidance from the IRS and Treasury Department, the ARA says. “This will lead to more complete and accurate interim amendments,” it argues. “A fixed deadline will assist IRS examiners when determining whether a plan sponsor has timely adopted required interim amendments.”