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IRS Extends the Deadline for Amending Eligible Retirement Plans

Notice 2022-45 was released by the IRS which extends the deadline for amending eligible retirement plans. This includes individual retirement arrangements (IRAs) and annuity contracts to reflect the provisions of the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) and the Relief Act (Taxpayer Certainty and Disaster Tax Relief Act of 2020). These provide special tax treatment with respect to a coronavirus (COVID-19) related distribution or a qualified disaster distribution, respectively.

Under Notice 2022-45, December 31, 2025, is the extended amendment deadline applicable to a qualified retirement plan or section 403(b) plan that is not a governmental plan or an IRA. Governmental retirement plans, including governmental plans under section 457(b)) have later deadlines. Please read the full notice for additional details that may be of importance to you.

 

BACKGROUND


A. Section 2202 of the CARES Act

Under section 2202 of the CARES Act, enacted on March 27, 2020, and modified by section 280 of the COVID-related Tax Relief Act of 2020,2 qualified individuals receive favorable tax treatment with respect to coronavirus-related distributions from eligible retirement plans (as defined in section 402(c)(8)(B) of the Code). A coronavirus-related distribution is any distribution from an eligible retirement plan made on or after January 1, 2020, and before December 31, 2020, to a qualified individual. A coronavirus-related distribution is not subject to the additional tax under section 72(t), generally is includible in income over a 3-year period, and, to the extent, the distribution is eligible for tax-free rollover treatment and is recontributed to an eligible retirement plan within a 3-year period, is not includible in income. Section 2202 of the CARES Act also increases the allowable plan loan amount under section 72(p) of the Code and permits a suspension of payments for plan loans made to qualified individuals that are outstanding on or after March 27, 2020. See Notice 2020-50, 2020-28 IRB 35, for a detailed description of this relief, including a discussion of related plan amendment deadlines.

Under section 2202(c) of the CARES Act, an eligible retirement plan will not be treated as failing to operate in accordance with its terms merely because the plan implements the provisions of section 2202, or any regulations thereunder if the plan is amended within a prescribed time period and the amendment applies retroactively to the beginning of the period. The period begins on the date that section 2202 (or any regulation thereunder) takes effect, and ends on or before the earlier of (1) the date the amendment is adopted, or (2) the last day of the first plan year beginning on or after January 1, 2022 (or January 1, 2024, in the case of a governmental plan within the meaning of section 414(d) of the Code), or a later date prescribed by the Secretary of the Treasury or the Secretary’s delegate (Secretary). A plan satisfying these conditions will not fail to meet the requirements of section 411(d)(6) of the Code and section 204(g) of ERISA by reason of that amendment, except as provided by the Secretary.

 

To continue reading the full official IRS update, click here.

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