Marty Pippins, Manager, Employee Plans Technical Guidance and Quality Assurance, Internal Revenue Service, gave a very helpful presentation at the recent ASPPA Annual Conference in D.C. which I attended. While he refrained from answering some of the questions posed at the meeting, he did provide the audience with some “nuggets” of information which were useful to those of us who assist plan sponsors with plan amendments and plan compliance issues.
One of the topics of discussion had to do with plan amendment requirements pertaining to implementation of retroactive annuity starting dates (“RASDs”). According to Mr. Pippins, many people were under the impression that amendments allowing a plan to operate with a RASD could have been made before the end of 2005, as seemed to have been indicated in Notice 2004-84 (See page 6 “Designation of Disqualifying Provision”).
By way of background, Regulation § 1.417(e)-1 (in accordance with SBJPA) provides that the qualified joint and survivor annuity (“QJSA”) explanation may be furnished on or after the annuity starting date under certain circumstances. A RASD may be used only if the plan specifically provides for the use of the RASD and the participant affirmatively elects to use the RASD. The effective date was for plan years beginning on or after January 1, 2004.
However, Mr. Pippins indicated that Revenue Procedure 2005-66 issued in August of 2005 (discussing interim plan amendment requirements) would have required that an amendment permitting the plan to employ RASDs for the 2004 plan year would have had to have been adopted by the tax filing date for the 2004 year. Mr. Pippins stated that guidance is forthcoming which will likely state that the amendment can be made through the end of 2005.
Mr. Pippins went on to note guidance that would be “coming soon” which would address plan amendment requirements pertaining to the following:
(1) automatic rollover requirements
(2) final 401(k) regulations
(3) Roth 401(k) plan provisions (the guidance will include sample amendments and will supposedly answer whether a plan sponsor can have a Roth-only 401(k) plan and whether Roth 401(k) provisions would need to be adopted before the beginning of the plan year for which they are effective),
(4) 401(a)(9) DB amendment requirements (no interim amendments would be required, he said), and
(5) KETRA.
Mr. Pippins also indicated that the IRS will be issuing a new Cumulative List of Changes in Plan Qualification Requirements. This list will be updated to include all of the qualification changes that have to be reflected in plan documents, and will cover amendment requirements for both defined contribution and defined benefit plans. Mid-November is the targeted date for issuance, he reported.
Finally, he noted an issue pertaining to safe harbor notices for 401(k) plans that has been of keen interest to practitioners, due to the fact that the final 401(k) regulations seem to differ with the safe harbor notice requirements provided under Notice 2000-3 (link via Benefitslink.com). Notice 2000-3 contained a list of 4 items which could be incorporated by reference from the summary plan description into the safe harbor notice:
. . . a plan will not fail to satisfy the content requirement merely because, in the case of the information described in items (ii) (relating to any other contributions under the plan), (iii) (relating to the plan to which safe harbor contributions will be made), (iv) (relating to the type and amount of compensation that may be deferred), and (vii) (relating to withdrawal and vesting provisions) of paragraph 1.a., the notice instead cross-references the relevant portions of an up-to-date summary plan description that has been provided (or concurrently is provided) to the employee.
Final 401(k) regulations had listed only 3 items which could be incorporated by reference from the summary plan description (Reg. section 1.401(k)-3(d)(iii)):
(iii) References to SPD. A plan will not fail to satisfy the content requirements of this paragraph (d)(2) merely because, in the case of information described in paragraph (d)(2)(ii)(B) of this section (relating to any other contributions under the plan), paragraph (d)(2)(ii)(C) of this section (relating to the plan to which safe harbor contributions will be made) or paragraph (d)(2)(ii)(D) of this section (relating to the type and amount of compensation that may be deferred under the plan), the notice cross-references the relevant portions of a summary plan description that provides the same information that would be provided in accordance with such paragraphs and that has been provided (or is concurrently provided) to employees.
The 4th item was apparently dropped from the final regulations and pertains to incorporation of information relating to withdrawals and vesting. Mr. Pippins indicated that he was unaware of the reason for the change, but would look into the IRS possibly providing some “grace” for employers who might have given “defective” notices. Apparently, many employers have already issued the notice and have done so without complying with the final regulations. Employers were urged to comply with the new rules if they have not promulgated the notice yet.
Disclaimer: These are unofficial comments from an IRS official as of the time of the discussion, and do not necessarily represent agency policy. In other words, don’t rely on this until you see it in writing in an official IRS promulgation.