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IRS Releases 2014 Cumulative List of Changes in Plan Qualification Requirements
Practical Law Legal Update 3-591-3845 (Approx. 7 pages)
IRS Releases 2014 Cumulative List of Changes in Plan Qualification Requirements
by Practical Law Employee Benefits & Executive Compensation
| Published on 09 Dec 2014 • USA (National/Federal) |
The Internal Revenue Service (IRS) issued Notice 2014-77, which provides the 2014 Cumulative List of Changes in Plan Qualification Requirements. The Cumulative List sets out the changes to employee benefit plan requirements that the IRS will review when it determines if a plan has been properly updated. The 2014 Cumulative List applies to plans that are submitted for a determination letter during Cycle E (from February 1, 2015 to January 31, 2016).
IRS Notice 2014-77
The IRS recently issued Notice 2014-77, which provides the 2014 Cumulative List of Changes in Plan Qualification Requirements (Cumulative List)) (IRS Notice 2014-77, (Dec. 6, 2014)). The Cumulative List contains a compilation of changes to employee benefit plan requirements that are embodied in statutes and IRS guidance. The IRS publishes a Cumulative List annually according to Section 4 of IRS Revenue Procedure 2007-44. The 2014 Cumulative List contains the plan qualification requirements from the 2010, 2011, 2012 and 2013 Cumulative Lists, as well as new requirements made in 2014, which are discussed below (the changes that were not in previous Cumulative Lists are labeled as "New" in the 2014 Cumulative List).
Employee benefit plan sponsors, administrators and attorneys should rely on the 2014 Cumulative List when they submit determination letter applications to the IRS during Cycle E, the submission period that begins February 1, 2015 and ends January 31, 2016 (see Practice Note, Applying for an IRS Determination Letter).
The changes contained in the Cumulative List are specifically identified for review by the IRS to determine whether a plan filing in Cycle E has been properly updated. The IRS will not consider in its review of determination letter applications for:
- The 2014 final hybrid plan regulations (other than the delay in the effective date of certain provisions in the 2010 final hybrid plan regulations set forth in 26 C.F.R. Section 1.411(b)(5)-1(f)(2)(i)(B)) unless:
- the plan has been amended to satisfy the 2014 final regulations; and
- the determination letter application indicates that a determination is requested that the plan complies with the final regulations.
- Qualification requirements first effective in 2016 or later.
- Statutory provisions that are first effective in 2015 that are not identified in the Notice.
- Guidance issued and statutes enacted after October 1, 2014, except IRS Notice 2014-66, which, together with a DOL information letter, enable defined contribution plans to provide lifetime income by offering target date funds that include deferred annuities available only to older participants (see Legal Update, Lifetime Income Guidance on Target-date Funds (TDFs) Issued by IRS and DOL).
The 2014 Cumulative List applies mainly to:
- Single employer individually designed defined contribution plans that are in Cycle E.
- Single employer individually designed defined benefit plans that are in Cycle E.
The changes in the Cumulative List do not extend the deadline by which a plan must be amended to comply with statutory, regulatory or guidance changes. For a plan to be qualified, it must comply with all qualification requirements, not just those in the Cumulative List.
The 2014 Cumulative List includes relevant legal changes as set out in:
- The U.S. Troop Readiness, Veterans' Care, Katrina Recovery and Iraq Accountability Appropriations Act.
- The Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008.
- The Worker, Retiree, and Employer Recovery Act of 2008.
- The Small Business Jobs Act of 2010.
- The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PPA 2010).
- The Moving Ahead for Progress in the 21st Century (MAP-21) Act.
- The American Taxpayer Relief Act of 2012.
- The Highway and Transportation Funding Act of 2014 (HATFA).
- The Cooperative and Small Employer Charity (CSEC) Pension Flexibility Act.
The 2014 Cumulative List categorizes these changes under 24 different sections of the Internal Revenue Code (IRC). The new additions to the Cumulative List include the recent changes required by:
- IRS Revenue Ruling 2014-9, which provides two new, simplified safe harbor procedures an administrator of a qualified retirement plan under the Internal Revenue Code may use in order to be deemed to have reasonably concluded that an amount is a valid rollover contribution (see Legal Update, Two New Safe Harbor Procedures For Rollovers to Qualified Plans).
- IRS Notice 2014-19, which provides guidance on the application of the decision in United States v. Windsor and the holdings of IRS Revenue Ruling 2013-17 to qualified retirement plans (see Legal Update, IRS Provides Guidance on the Application of Windsor and Revenue Ruling 2013-17 to Qualified Retirement Plans). For sample language to be used to comply with Windsor, see Standard Clause, Plan Language, Definition of Spouse.
- IRS Notice 2014-37, which provides that safe harbor 401(k) plans may adopt mid-year amendments to comply with the Supreme Court's decision in United States v. Windsor (see Legal Update, Safe Harbor 401(k) Plans May Adopt Mid-year Amendments to Comply with US v. Windsor Decision). For more information on safe harbor plans, see Practice Note, Safe Harbor 401(k) Plans: Overview and Planning Opportunities.
- IRS Revenue Ruling 2014-24, which:
- modifies the list of group trust retiree benefit plans eligible to participate in group trusts to include trusts of certain retirement plans qualified only under the Puerto Rico Code;
- clarifies that assets held by certain separate accounts maintained by insurance companies may be invested in those group trusts; and
- provides limited transition relief.
- IRS Notice 2014-5, which permits certain employers that sponsor a closed defined benefit plan and a defined contribution plan to demonstrate that the aggregated plans comply with the nondiscrimination requirements of Section 401(a)(4) of the Internal Revenue Code (IRC) on the basis of equivalent benefits, even if the aggregated plans do not satisfy the current conditions for testing on that basis (see Legal Update, IRS Notice 2014-5 Provides Temporary Nondiscrimination Relief for Closed Defined Benefit Plans).
- Final IRS regulations that provide guidance necessary to comply with the required minimum distribution (RMD) rules under IRC Section 401(a)(9) (IRC) applicable to a plan that holds a longevity annuity contract (see Legal Update, IRS Issues Final Regulations Simplifying Use of Annuities in Retirement Plans). For more information on the RMD rules, see Practice Note, Required Minimum Distributions from Retirement Plans.
- Proposed rules that would remove the current allocation rule and treat distributions from a Roth account made to multiple destinations as a single distribution beginning on January 1, 2015, and IRS Notice 2014-54, which explains the new allocation rules for after-tax and pre-tax amounts (see Legal Update, IRS Issues Proposed Rules on Allocation of After-tax Amounts from Roth Accounts).
- Final IRS regulations relating to hybrid retirement plans, including cash balance plans and pension equity plans (see Legal Update, IRS Issues Final Regulations Providing Guidance on Hybrid Retirement Plans and Proposed Regulations Providing Anti-Cutback Relief). For more information on cash balance plans, see Practice Note, Cash Balance Plans.
- Final IRS regulations clarifying that distributions by qualified retirement plans to pay for accident or health insurance are generally taxable distributions (see Legal Update, Final Regulations on Tax Treatment of Qualified Retirement Plan Distributions to Pay for Accident or Health Insurance Premiums).
Practical Implications
Employee benefit plan sponsors, administrators and attorneys should rely on the 2014 Cumulative List when they submit determination letter applications during Cycle E, the submission period that begins February 1, 2015 and ends January 31, 2016 (see Practice Note, Applying for an IRS Determination Letter: Timeframe for Filing for an IRS Determination Letter). However, the Cumulative List does not extend the deadline by which a plan must be amended to comply with statutory, regulatory or guidance changes. Except as provided in Notice 2014-77, guidance issued or statutes enacted after October 1, 2014 will not be reviewed by the IRS in determination letter applications. For a collection of resources relating to filing IRS determination letters, see Retirement Plan Determination Letters Toolkit.