On December 20, 2023, the Internal Revenue Service (IRS) issued Notice 2024-3, which provides the 2023 Cumulative List of Changes in Plan Qualification Requirements for Defined Contribution Qualified Pre-approved Plans (2023 Cumulative List). The 2023 Cumulative List is to be used by pre-approved plan document providers to make the required updates for the fourth remedial amendment cycle (Cycle 4) for defined contribution (DC) qualified pre-approved plans. Pre-approved plan providers seeking Cycle 4 IRS opinion letters for these plans may submit the applications from February 1, 2024, through January 31, 2025. IRS opinion letters provide reliance to plan sponsors that the pre-approved plans they adopt meet all legal requirements for that restatement cycle.

The 2023 Cumulative List reflects statutory changes or changes in requirements from recent laws since the last Cumulative List (2017) for DC qualified pre-approved plan restatements, including the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act); the SECURE 2.0 Act of 2022 (SECURE 2.0); the Coronavirus Aid, Relief, and Economic Security Act (CARES Act); the Bipartisan American Miners Act of 2019 (Miners Act); and the Bipartisan Budget Act of 2018 (BBA); as well as recent disaster relief laws, final regulations, and various proposed regulations that may be relied on before final regulations are published. However, the 2023 Cumulative List does not extend the deadline by which a plan must be amended to comply with any change in qualification requirements.

The updates to DC plan documents submitted for Cycle 4 IRS pre-approval should only include provisions listed in Notice 2024-3, some of which are required and others of which are optional.

Key changes that DC qualified pre-approved plans may need to reflect in their Cycle 4 plan documents include:

Required minimum distributions (RMD)

Updating the RMD age from age 70½ to age 72 (SECURE Act), and to age 73 (SECURE 2.0); the temporary waiver of DC plan RMDs for the 2020 calendar year (CARES Act); and new RMD rules for designated beneficiaries (SECURE Act).

Involuntary cashout limit

Increasing the involuntary cashout limit from $5,000 to $7,000 (SECURE 2.0).

In-service distributions from money purchase pension plan accounts

Lowering the age an employee may take an in-service distribution from age 62 to age 59½ (Miners Act).

Distribution provisions

Not applying the 10% additional early distribution tax on qualified birth or adoption distributions up to $5,000 (SECURE Act); emergency personal expense distributions up to $1,000 (SECURE 2.0); or distributions up to $10,000, adjusted for inflation, to domestic abuse victims (SECURE 2.0). Such distributions may generally be recontributed to the plan or another eligible retirement plan within three years if the plan accepts rollovers.

Forfeitures

Reflecting the rules related to the use of forfeitures (proposed regulation).

Witnessing spousal consent

Providing an alternative to in-person witnessing of spousal consents by a notary public or plan representative and clarifying that rules for the use of an electronic medium for participant elections also apply to spousal consents (proposed regulation).

Hardship distributions

Deleting the six-month prohibition on participant contributions after a hardship distribution and modifying the hardship distribution rules to expand the sources available for hardship distributions to include qualified nonelective contributions (QNECs), qualified matching contributions (QMACs), and earnings on those contributions and participant elective deferral contributions, and to provide that a distribution does not fail to be a hardship distribution solely because the employee does not first take any available loan from the plan (BBA, final regulation).

Definitions of QNEC and QMAC

Amending the definitions of QNEC and QMAC to provide that they must satisfy applicable nonforfeitability and distribution requirements at the time they are allocated to participants’ accounts, not when they are contributed to the plan (final regulation).

Safe harbor plans

• Qualified automatic contribution arrangement safe harbor plans. Increasing the cap on automatic elective deferral contributions from 10% to 15% (SECURE Act).
• Nonelective contribution safe harbor plans. Eliminating certain safe harbor notice requirements and adding new provisions for retroactive adoption of safe harbor status (SECURE Act).
• Mid-year amendments to safe harbor 401(k) or 401(m) plans. Clarifying requirements for mid-year amendments that reduce only contributions made on behalf of highly compensated employees (Notice 2020-52).

Long-term, part-time employees

Adding the new eligibility and vesting service requirements for long-term, part-time employees to participate in a 401(k) plan (SECURE Act, SECURE 2.0, proposed regulation).

Eligible rollover distributions

Amending the rules relating to eligible rollover distributions from DC plans (proposed regulation).

Roth contribution designations

Permitting employees to elect to designate nonforfeitable (100% vested) employer matching or nonelective contributions as Roth contributions (SECURE 2.0).

Catch-up contributions

Increasing the annual limit on catch-up contributions for individuals between ages 60 and 63 beginning with the 2025 taxable year to the greater of $10,000 or 150% of the regular catch-up limit for 2024,¹ indexed for inflation (SECURE 2.0).

Disaster-related rules

Reflecting applicable special disaster-related rules for the use of retirement funds (BBA, CARES Act, SECURE 2.0, et al.).

What’s next?

The IRS pre-approved plan review process will take about two years after opinion letter applications are submitted, followed by the release of the opinion letters and a two-year restatement window during which plan professionals will restate individual plans for plan sponsors to adopt by the end of the two-year-window deadline. The IRS will announce when the two-year restatement window will be near the end of its review process.

Please contact your Milliman consultant to determine how these provisions may impact your plan(s).

¹ A recently released discussion draft of technical corrections to SECURE 2.0 would change the reference to the regular limit year from 2024 to 2025.