IRS Reminds Plan Sponsors of Plan Amendment Deadlines

In a recent newsletter, the IRS reminded plan sponsors about plan amendment deadlines that were extended in a “grab bag” notice the agency released in December 2023.

The document, “Miscellaneous Changes Under the SECURE 2.0 Act of 2022,” provided clarity on automatic features, tax credits, Roth matching contributions and more.

The notice also extended deadlines for 401(k), 403(b) and other retirement plans to amend their plan documents in accordance with the Setting Every Community Up for Retirement Enhancement Act of 2019, the SECURE 2.0 Act, the Coronavirus Aid, Relief, and Economic Security Act and the Taxpayer Certainty and Disaster Tax Relief Act.

The IRS states the deadline to amend a qualified plan that is not a governmental plan or a collectively bargained plan is December 31, 2026. This includes 403(b) plans that are not maintained by a public school.

For collectively bargained plans, the deadline to amend is December 31, 2028, and the deadline for governmental plans is December 31, 2029. For 403(b) plans that are collectively bargained plans of 501(c)(3) organizations, plan amendments must be made by the 2028 deadline, and 403(b) plans that are sponsored by public schools must make amendments by the 2029 deadline.

The IRS anticipates that the longer deadline for governmental plans will accommodate the needs of states without annual legislative sessions.

Eligible 457(b) plans sponsored by a state or local government either must be amended by December 31, 2029, or, if applicable, the first day of the plan year beginning more than 180 days after the date the Secretary of the Treasury notifies the plan that it was administered in a manner inconsistent with Section 457(b).

For IRAs, the deadline to amend the trust governing an IRA that is an individual retirement account or the contract issued by an insurance company with respect to an IRA that is an individual retirement annuity is December 31, 2026, or a later date the Secretary of the Treasury prescribes in guidance.

The IRS clarified that any amendments made after the deadlines are not entitled to the anti-cutback relief provided in Section 411(d)(6) of the Internal Revenue Code, which protects a participant’s accrued benefits, early retirement benefits, retirement type subsidies and other forms of optional benefit offered under qualified retirement plans.

In addition, the amendments must apply retroactively to the effective date of SECURE 2.0 or the other laws mentioned. The plan must also be operated as if the amendment were in effect during the period beginning on the effective date of SECURE 2.0 or the other laws mentioned.