Treasury Department Weighs in Informally on Hardship Amendment Deadline for Pre-Approved Retirement Plans

Treasury Benefits Tax Counsel Carol Weiser, speaking at the American Society of Pension Professionals and Actuaries (ASPPA) annual retirement industry conference this week, shared the IRS’ interpretation of when plans established on pre-approved documents—prototype or volume submitter—must be amended for changes to hardship distribution rules found the Bipartisan Budget Act of 2018.

The hardship distribution changes include an end to previous requirements that participants must take all available plan loans and suspend elective deferrals for six months, as well as broadening the contribution types—now to include earnings—that are available for hardship distribution. Some changes could be implemented in 2018 or 2019, and, while some changes are optional, all required changes must apply to hardship distributions taken on, or after, January 1, 2020.

Ms. Weiser indicated that all employers using pre-approved plan documents will have an extended amendment deadline tied to the sponsoring business’s tax return deadline. Specifically, Ms. Weiser stated that the amending deadline will be the tax return due date plus extensions for an employer’s tax year that includes January 1, 2020.

For example, a C corporation that operates on a calendar year would have a hardship distribution amendment deadline of April 15, 2021, 3½ months after the December 31, 2020, end of its business tax year (if no filing extension).

By comparison, a C corporation that operates on a fiscal year that ends January 31, 2020, would need to amend for the hardship distribution changes by May 15, 2020 (if no filing extension).

Ms. Weiser acknowledged that the earlier amendment deadline for employers with off-calendar tax years is not ideal considering the timing of the IRS’ final regulations, and that the IRS will further consider the issue.