IRS Guidance

The IRS has posted at its website the 2021 tax year version of Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and Form 5498, IRA Contribution Information. As the title implies, Form 1099-R is filed by financial organizations and service providers to report to account owners and the IRS distributions from tax-qualified retirement savings arrangements. Form 5498 more narrowly reports IRA-related information—including contributions to IRAs, SEP and SIMPLE IRA employer plans, end-of-year fair market values, rollovers, conversions, recharacterizations, etc.

The IRS issued Notice 2021-03, extending previous guidance released under Notice 2020-42, which provided temporary relief from the physical presence requirements for certain elections that are made by participants and beneficiaries in qualified retirement plans and other tax-favored retirement arrangements. The extension is being issued in consideration of continued business shutdowns and social distancing in response to the coronavirus (COVID-19) pandemic and provides relief through June 30, 2021. This includes signatures of those making an election that ordinarily need to be witnessed in the physical presence of a plan representative or notary public, including spousal consent and certain forms of distribution from retirement plans.

The IRS has issued Revenue Ruling 2020-23 to address how employers may terminate 403(b) plans that contain custodial accounts. This guidance gives plan administrators direction on how they can distribute plan assets to participants in order to satisfy plan termination requirements. The revenue ruling also gives the option for plan participants to preserve their accounts—as 403(b) accounts—following a plan termination, or to roll them over to an eligible retirement plan.

The IRS has issued News Release PR-2020-03, providing for the postponement of certain tax-related deadlines for victims of September 13, 2020, storm and flood events on the island of Puerto Rico. In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in Treasury Regulation 301.7508A-1(c)(1), which include filing Form 5500 for retirement plans, completing rollovers, making retirement plan loan payments, etc.

The IRS has issued Notice 2020-86, providing guidance for implementing provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. Specifically, the SECURE Act provisions addressed deal with features and procedures of 401(k) and 403(b) plans that incorporate safe harbor designs for satisfying nondiscrimination testing requirements, and automatic enrollment and automatically increased deferral rates.

The IRS has issued final regulations implementing a provision of the 2017 Tax Cuts and Jobs Act (TCJA) that permits an extended period—beyond 60 days—to roll over the proceeds of certain retirement plan loans that are offset and treated as distributions. This guidance was issued in proposed form on August 20, 2020, followed by a 45-day comment period. Publication as final in the Federal Register is pending.

On November 12, 2020, the IRS published final regulations updating life expectancy tables that are used for required minimum distributions (RMDs) and for other purposes. These new tables reflect an increase in life expectancies since the last tables were issued nearly 20 years ago.

On November 30, 2021, the IRS released Notice 2021-64 containing the 2021 required amendments list. This annually issued list describes changes in retirement plan qualification requirements and amendment deadlines for individually designed qualified and individually designed 403(b) plans. Some items require plans to be amended, while others do not. The list of changes to qualification requirements are as follows.

The IRS has issued Notice 2020-80, which requests comments on spousal and annuity rights that may potentially apply to 403(b) custodial accounts that are distributed to participants in-kind upon termination of a 403(b) plan.

The retirement industry eagerly received the IRS guidance on applying provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act with the issuance of Notice 2020-50 on June 19. It has provided important details on compliance with this legislation—which offers financial and tax relief to millions of Americans affected by the coronavirus (COVID-19) pandemic.