IRS 2023 Changes List for Pre-Approved Plans Is Out

The Internal Revenue Service issued the 2023 Cumulative List of Changes in Plan Qualification Requirements for Defined Contribution Qualified Pre-approved Plans, a list of plan amendments required for plans relying on a safe harbor plan.

The IRS permits qualified plans to model themselves off of a safe harbor “pre-approved plan” as a method of obtaining initial plan approval. According to the IRS, plans using this safe harbor normally “will have fewer choices over the design of the plan. The employer must not make any modifications to the plan and can rely on the opinion letter issued to the pre-approved plan as if it were its own determination letter.”

Since related tax and benefit laws are often updated, plans using the pre-approved model must make remedial amendments to remain in compliance with the standard pre-approved plan. The 2023 Cumulative List lays out the amendments that must be made for plans seeking approval between February 1, 2024, and January 31, 2025.

Plans have to make required amendments and apply for a new letter in their “remedial cycle.” Many of the newest changes in the 18-page document relate to provisions of the SECURE 2.0 Act of 2022. The amendments should also account for the following SECURE 2.0 provisions, among other requirements:

• The required minimum distribution age for participants born on or after January 1, 1951, must be increased to 73 from 72, per Section 107 of SECURE 2.0;
• The amount that can be spent from a defined contribution plan to purchase a qualified life annuity contract was increased to $200,000 from $125,000, and the percentage maximum was removed, per Section 202;
• Plans are now permitted to increase their involuntary cash-out limit to $7,000 from $5,000, per Section 304;
• Victims of domestic abuse may withdraw up to $10,000 (indexed) from a DC plan without an additional 10% penalty, per Section 314; and
• Other changes relate to the penalty-free $1,000 emergency personal expense distribution and recontribution of that amount within three years, per Section 115.

Other required amendments have their origin in separate legislation from SECURE 2.0. For example, the Bipartisan American Miners Act of 2019 reduced the minimum age when a pension can make a distribution to a participant who is still employed by the sponsor to 59.5 from 62.