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Legislative Highlight - IRS Publishes 2023 Cumulative List of Changes in Plan Qualification Requirements for Defined Contribution Qualified Pre-Approved Plans

Background

Plans using the pre-approved model must make remedial amendments to remain in compliance with the standard pre-approved plan. Every pre-approved plan has a recurring remedial amendment cycle, and a provider of a pre-approved plan may apply for a new opinion letter for the plan for each remedial amendment cycle. The 2023 Cumulative List includes the amendments that must be made for plans seeking approval between February 1, 2024 and January 31, 2025.

SECURE 2.0’s Impact

The SECURE 2.0 Act made several changes to plan qualification requirements. The IRS will review a defined contribution qualified pre-approved plan document that is submitted for Cycle 4 only for those changes in qualification requirements made pursuant to the SECURE 2.0 Act that are listed in section V of the notice. Providers should not include in any plan documents submitted with their Cycle 4 opinion letter applications terms reflecting SECURE 2.0 Act provisions that are not listed in section V.

2023 Cumulative List

Many of the newest changes relate to the provisions of the SECURE 2.0 Act of 2022. A few key changes are listed below.
 

• Required Minimum Distributions (RMDs) – The RMD age for participants born or on after January 1, 1951, must be increased to 73 from 72, per section 107 of SECURE 2.0.
   
• Qualifying Longevity Annuity Contract - The amount that can be spent from a defined contribution plan to purchase a qualified life annuity contract was increased to $200,000 from $125,000 and the percentage maximum was removed, per section 202.
   
• Transfers and Distributions - The SECURE Act provides that defined contribution plans may permit certain transfers and distributions of lifetime income investment options in cases in which the investment options are no longer authorized to be held as investment options under the plan.
   
• Cash Out Limit - Plans are now permitted to increase their involuntary cash out limit to $7,000 from $5,000.
• Domestic Abuse Distribution - Victims of domestic abuse may withdraw up to $10,000 (indexed) from a defined contribution plan without an additional 10% penalty.
   
• Emergency Expense Distribution - Other changes relate to the penalty-free $1,000 emergency personal expense distribution and recontribution of that amount within three years.

Notice 2024-03 will be published in the Internal Revenue Bulletin 2024-2 on January 8, 2024. The 2023 Cumulative List assists providers applying to the IRS for opinion letters for the fourth remedial amendment cycle for defined contribution qualified pre-approved plans (Cycle 4) under the IRS’s pre-approved plan program. If you have any questions regarding the 2023 Cumulative List, please contact your local Spectrum representative.