Interim Amendment Needed for Hardship Changes in Pre-Approved Plans

The IRS has issued Revenue Procedure 2020-9, stating that all plan amendments due to a change made by the final regulations under Sections 401(k) and 401(m) of the Internal Revenue Code relating to hardship distributions of elective deferrals, and that are effective no later than January 1, 2020, are integral to satisfying the qualification requirements of the Internal Revenue Code.

Final hardship regulations state that the Department of the Treasury and the IRS expect that many plans’ hardship distribution provisions will need to be amended to reflect certain provisions of the final regulations. Plan amendments required under the final regulations are: (1) an amendment to remove a plan provision suspending an employee’s contributions following a hardship distribution of elective deferrals and (2) an amendment requiring an employee’s representation relating to his or her need for a hardship distribution, if the plan does not already provide for such a representation.

The IRS recently published Notice 2019-64, which details the 2019 required amendments list for qualified retirement plans. The notice stated the deadline for amending individually designed plans qualified under Section 401(a) and individually designed plans that satisfy the requirements of Section 403(b) is December 31, 2021.

Revenue Procedure 2020-9 also extends the deadline, applicable to pre-approved plans, for adopting an interim amendment relating to hardship regulations. The deadline is extended to December 31, 2021.