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IRS Notice 2016-80 Includes 2016 Required Amendments List
Practical Law Legal Update w-005-0180 (Approx. 5 pages)
IRS Notice 2016-80 Includes 2016 Required Amendments List
by Practical Law Employee Benefits & Executive Compensation
| Law stated as of 19 Dec 2016 • USA (National/Federal) |
The Internal Revenue Service (IRS) issued Notice 2016-80, which includes the 2016 Required Amendments List for Qualified Retirement Plans. Individually designed plans must be amended by the expiration of the remedial amendment period included in the 2016 Required Amendments List (December 31, 2018) for any changes in qualification requirements included on the List.
On December 13, 2016, the IRS issued IRS Notice 2016-80, which includes the 2016 Required Amendments List for Qualified Retirement Plans. Individually designed retirement plans must be amended by December 31, 2018 (the expiration of the remedial amendment period in the 2016 Required Amendments List) for any changes in qualification requirements included on the List.
Recent Changes Affecting Individually Designed Plans: Revenue Procedure 2016-37
In IRS Revenue Procedure 2016-37, the IRS significantly changed its determination letter program for qualified retirement plans (see Legal Update, IRS Provides Determination Letter Guidance in Revenue Procedure 2016-37 and Practice Note, Revised IRS Determination Letter Program for Qualified Plans). Among other changes, Revenue Procedure 2016-37 eliminated the staggered five-year remedial amendment cycles for individually designed retirement plans. The Revenue Procedure also announced that the IRS intends to publish annually a Required Amendments List, which will:
- List the statutory and administrative changes in qualification requirements that require a plan amendment and become effective during the plan year in which the List is published.
- Establish the deadline for a plan to be amended to comply with the requirements that are identified on the List.
Generally, a change in qualification requirements will not appear on the Required Amendments List until guidance has been provided in regulations or in other guidance published in the Internal Revenue Bulletin.
Notice 2016-80
Notice 2016-80 provides additional information on the content and organization of the Required Amendments List.
The Required Amendments List has two parts:
- Part A, which provides the changes in qualification requirements that generally would require an amendment to most plans or most plans of the type affected by the change.
- Part B, which provides the changes in qualification requirements that the Treasury Department and the IRS anticipate will not require amendments in most plans, but might require an amendment because of an unusual plan provision in a particular plan.
Notice 2016-80 explains that if a change affects a particular qualification requirement that most plans incorporate by reference, Part B would include the change because certain plans might not incorporate the qualification requirement by reference. An example of a Part B change discussed in the Notice involves a defined benefit plan that incorporates the limitation of Internal Revenue Code (Code) Section 436(d)(2) (26 U.S.C. § 436(d)(2)) by reference to the statute or regulations (or through the use of the sample amendment in IRS Notice 2011-96). In this situation, no amendment to the plan would be required to comply with the changes made by Section 2003 of the Highway and Transportation Funding Act of 2014 (HATFA) (for more information on HATFA, see Legal Update, President Obama Signs the Highway and Transportation Funding Act of 2014 with Pension Funding Provisions).
The Treasury Department and the IRS anticipate that few plans have language that will need to be amended for annual, monthly, or other periodic changes to:
- The various dollar limits that are adjusted for cost of living increases as provided in Code Section 415(d) (26 U.S.C. § 415(d)).
- The spot segment rates used to determine the applicable interest rate under Code Section 417(e)(3) (26 U.S.C. § 417(e)(3)).
- The applicable mortality table under Code Section 417(e)(3) (26 U.S.C. § 417(e)(3)).
These changes are treated as included on the Required Amendments List for the year in which the changes are effective even though they are not directly referenced on that year's Required Amendments List.
The Required Amendments List will not include:
- Statutory changes in qualification requirements for which the Treasury Department and the IRS expect to issue guidance.
- Changes in qualification requirements that permit (but do not require) optional plan provisions.
- Changes in the tax laws affecting qualified plans that do not change the qualification requirements under Code Section 401(a) (26 U.S.C. § 401(a)).
2016 Required Amendments List
No changes were included in Part A of the 2016 Required Amendments List. Part B includes the restrictions on accelerated distributions from underfunded single-employer defined benefit plans in employer bankruptcy under Code Section 436 (26 U.S.C. § 436). These restrictions were modified by HATFA (HATFA prohibits plan sponsors from using the 25-year average rates for purposes of determining the plan's adjusted funding target attainment percentage (AFTAP); for more information on HATFA, see Legal Update, President Obama Signs the Highway and Transportation Funding Act of 2014 with Pension Funding Provisions).
Remedial Amendment Period
For individually designed plans, Revenue Procedure 2016-37 extended the remedial amendment period for a disqualifying provision resulting from a change in qualification requirements to the end of the second calendar year that begins after the issuance of the Required Amendments List on which the change in qualification requirements appears. The plan amendment deadline is the date on which the remedial amendment period ends for a disqualifying provision.
Under Notice 2016-80, December 31, 2018 is both:
- The last day of the remedial amendment period for disqualifying provisions resulting from a change that appears on the 2016 Remedial Amendments List.
- The plan amendment deadline for a disqualifying provision resulting from a change in qualification requirements that appears on the 2016 Remedial Amendments List.
Practical Implications
Notice 2016-80 provides general information on the content and structure of the Required Amendments List, and also provides the first Required Amendments List issued by the IRS under Revenue Procedure 2016-37. The 2016 Required Amendments List includes HATFA's restrictions on accelerated distributions. This change may require certain single employer defined benefit plans to adopt an amendment.
Plan sponsors should also be aware that plans do not have to adopt amendments to account for every qualification requirement that is included on the Required Amendments List. Sponsors must determine whether a particular change in a qualification requirement requires an amendment to their plan.