On August 3, 2022, the IRS issued Notice 2022-33, which extends the deadlines for qualified pension plans, 403(b) plans, and government pension plans (including 457(b) plans) to enact amendments reflecting certain optional and mandatory changes under the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and the Bipartisan American Miners Act of 2019 (Miners Act). The time extensions provide welcome relief to plan sponsors, who now typically have until the end of 2025 (or later in the case of government plans) to amend their plans to reflect these provisions.
Main provisions concerned
The SECURE Act, CARES Act, and Juveniles Act amended a number of key Internal Revenue Code provisions applicable to employer-sponsored retirement plans. Provisions of the SECURE Act that are affected by the amendment’s delayed adoption date include:
- an increase in the age at which participants must begin required minimum distributions (RMDs) from 70½ to 72 years
- changes to rules for RMDs to beneficiaries of defined contribution plans (such as 401(k) or profit-sharing plans)
- a requirement that non-collectively bargained 401(k) plans allow part-time employees who complete at least 500 hours of service in each of three consecutive years to have the option of deferring the plan electively (periods prior to January 1, 2021, should not be taken into account)
- allow a plan to allow withdrawals without penalty for qualifying birth or adoption distributions up to $5,000
- an increase in the maximum safe harbor contribution for auto-enrollment from 10% to 15% of eligible compensation
The deferred adoption dates of the Amendments also apply to:
- waiver allowed for RMDs for defined contribution plans for 2020 under the CARES Act
- the permitted reduction of the minimum age for in-service distributions of defined benefit plans from 62 to 59½ under the Juveniles Act
Under previous IRS guidance, the deadline for non-government qualified retirement plans and 403(b) plans not maintained by a public school to be modified to adopt one of these mandatory or optional changes was the last day the first plan year beginning on or after January 1, 2022 (for example, December 31, 2022, if the plan year is the calendar year). Government plans — including 457(b) plans, public school-run 403(b) plans, and collectively bargained plans — generally had until the last day of the plan’s first year beginning on or after January 1, 2024. (except those collectively bargained plans were required to adopt the CARES Act RMD waiver, if applicable, by the end of 2022).
Notice 2022-33 extends these deadlines so that non-government qualified pension plans and 403(b) plans (including collectively bargained plans) now have until December 31, 2025, that their plan year whether or not the calendar year, to adopt amendments to the regime reflecting mandatory provisions and any optional provisions implemented. The deadline for government plans (including 457(b) plans) is now 90 days after the close of the third regular legislative session of the legislature with the power to amend the plan beginning after December 31, 2023 .
Note that any changes shall apply retroactively to the effective date of the applicable provision. (In the case of an optional amendment, the effective date is the date on which the provision was implemented.) In addition, during the period after the effective date but before the adoption of any modification, the Plans must be operated in good faith compliance with the law and applicable IRS guidelines.
Opinion 2022-33 does not not extend the CARES Act timeline for enacting plan changes reflecting special COVID-related relief for qualified individuals, such as the ability to take in-service withdrawals, increasing the maximum limit of plan loans, the temporary suspension of loan repayments and the additional period for loan repayment after such suspension. Plan amendments adopting these provisions must always be made before the end of the plan’s first year beginning on or after January 1, 2022 (i.e. December 31, 2022 for calendar year plans).
Contact your Holland & Knight benefits advisor if you have any questions about modifying your plan(s) to adopt these mandatory or optional changes.