IRS Updates Its Operational Compliance List for Retirement Plans:

On July 8, 2020, the IRS published the latest version of its Operational Compliance List (“OCL”). The OCL is intended to help retirement plan sponsors and practitioners achieve operational compliance (i.e. ensure consistency between plan administration and the governing plan document), by identifying changes in plan qualification requirements that became effective during a calendar year. More specifically, the OCL: (1) identifies matters involving mandatory or discretionary plan amendments, depending on a particular plan’s provisions; and (2) may reference other significant guidance that affects daily plan operations.
The OCL is available only on the IRS’s webpage, and it does not include periodic changes that routinely occur (e.g., cost-of-living increases to annual retirement plan limits). The IRS also notes that the OCL “is not intended to be a comprehensive list of every item of IRS guidance or new legislation for a year that could affect a particular plan.” Thus, plan sponsors and their advisors need to keep up with all changes in this field on a very regular basis, rather than just relying on each year’s OCL.
In addition to reiterating prior years’ OCL legal requirements (for 2016 – 2019), the latest version outlines changes that have become effective during 2020. For defined contribution plans, depending on the type of plan, those changes involve the following areas:

  • Hardship distributions;
  • Increasing the ten percent cap for automatic enrollment safe harbor plans; 
  • Electing safe harbor 401(k) plan status;
  • Portability of lifetime income distribution options;
  • Employees of church-controlled organizations participating in certain retirement income accounts;
  • Penalty-free withdrawals from retirement plans for individuals, in the event of birth or adoption;
  • Increase in the applicable age for required minimum distributions; and
  • Modification of required distribution rules for designated beneficiaries.

The latest OCL will be updated to includeguidance relating to certain statutory provisions (e.g., the SECURE Act), as well as to include the CARES Act and related guidance.  (Both of those laws were summarized in previous editions of The Speed Reader.)