IRS 2019 Required Amendments Address Hardship Distribution Changes

Jeff Storch | 02.13.20

The IRS has issued the 2019 Required Amendments List (RA) list for individually designed qualified retirement plans, in Notice 2019 – 64. One required amendment affects plans that offer hardship distributions. As discussed below, any necessary amendments generally must be enacted by December 31, 2021.

Internal Revenue Code (Code) Section 401(b) provides a remedial amendment period during which a qualified retirement plan may be amended retroactively to comply with the qualification requirements under Code Section 401(a). Notice 2019 – 64 states that December 31, 2021, generally is the last day of the remedial amendment period with respect to a disqualifying provision arising as a result of a change in qualification requirements that appears on the 2019 RA List. 

The RA List is divided into two parts. 

• Part A covers changes in requirements that generally would require an amendment to most plans or to most plans of the type affected by the change. 
• Part B includes changes in requirements that the Treasury Department and the IRS anticipate will not require amendments to most plans, but might require an amendment because of an unusual plan provision in a particular plan. 

The 2019 RA List had nothing for Part B and only two items for Part A: one affecting hardship distributions and one regarding cash balance/​hybrid defined benefit plans. This post briefly addresses the hardship distribution. 

Part A of the Notice indicates that the 2019 final regulations relating to hardship distributions generally would require an amendment to qualified plans that: 

(1) provide for a suspension of an employee’s elective deferrals or employee contributions as a condition for obtaining a hardship distribution of elective deferrals; or 

(2) do not require a representation from an employee who requests a hardship distribution that he or she has insufficient cash or other liquid assets reasonably available to satisfy the need. 

Plans containing these provisions must be amended as necessary to eliminate the suspension and provide for the representation, for hardship distributions made on or after January 1, 2020. The amendments generally must be adopted by December 31, 2021.