n-04-84.pdf

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Part III – Administrative, Procedural and Miscellaneous

2004 Cumulative List of Changes in Plan Qualification Requirements

Notice 2004-84

I. PURPOSE

This notice contains the 2004 Cumulative List of Changes in Plan Qualification
Requirements (2004 Cumulative List) described in section 10 of the draft revenue
procedure in Announcement 2004-71, 2004-40 I.R.B. 569. The Internal Revenue
Service intends to annually publish a Cumulative List to identify statutory,
regulatory and guidance changes that must be taken into account in plan
sponsor’s submissions to the Service for opinion, advisory and determination
letters whose remedial amendment period is proposed to end on January 31 of
the second calendar year following release of the list.

The 2004 Cumulative List is to be used primarily by plan sponsors and
practitioners in drafting defined contribution pre-approved plans (that is, defined
contribution plans that are master and prototype (M&P) or volume submitter (VS)
plans) for their first submission under the proposed remedial amendment cycle.
As a consequence, the 2004 Cumulative List only includes statutory changes and
guidance that would apply to the types of defined contribution plans that may be
used as pre-approved plans. The 2004 Cumulative List only contains statutory
changes and guidance that have become effective after December 31, 2001, the
date listed in section 7 of the draft revenue procedure attached to Announcement
2004-71. The 2004 Cumulative List informs plan sponsors and practitioners of
issues the Service has specifically identified for review in determining whether a
pre-approved plan has been properly updated to reflect statutory changes and
guidance that have become effective after December 31, 2001, and thus were
not previously considered by the Service in issuing opinion and advisory letters.
In order to be qualified, a plan must comply with all relevant qualification
requirements, not just those on the 2004 Cumulative List. The Service will not
review plan language for guidance issued after December 14, 2004, unless it is
on the 2004 Cumulative List. Thus, sponsors of pre-approved plans may not rely
on opinion or advisory letters with respect to any guidance issued after
December 14, 2004, unless that guidance is on the 2004 Cumulative List.

The 2004 Cumulative List in section IV does not extend the deadline by which a
plan must be amended to comply with any statutory, regulatory, or guidance
changes. However, section V of this notice provides a remedial amendment
period under § 401(b) of the Internal Revenue Code (Code) for amendments with

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respect to retroactive annuity starting dates described in § 417(a)(7)(A) of the
Code.

II. BACKGROUND

In Announcement 2004-71, the Service published for comment a draft revenue
procedure containing the proposed procedures for issuing determination letters
on five-year cycles with respect to the qualified status under § 401(a) of the Code
for individually designed plans (that is, plans that have not been pre-approved).
It is intended that pre-approved plans would generally have a regular, six-year
remedial amendment/approval cycle. The announcement also contains a
discussion of the Cumulative List.

III. APPLICATION OF 2004 CUMULATIVE LIST

This notice is being issued in conjunction with the opening of the Economic
Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107-16 (EGTRRA)
opinion and advisory letter program for defined contribution pre-approved plans.
The Service proposes to open the program for defined contribution M&P and VS
specimen plans on February 1, 2005. The 12-month submission period for M&P
and VS specimen plans is intended to end January 31, 2006.

The 2004 Cumulative List reflects law changes under EGTRRA with technical
corrections made by the Job Creation and Worker Assistance Act of 2002
(JCWAA), Pub. L. 104-147, as well as regulations and guidance published by the
Service that are effective after December 31, 2001. The Service intends the
2004 Cumulative List to be used primarily by plan sponsors and practitioners in
drafting defined contribution pre-approved plans for their first submission under
the proposed remedial amendment cycle.

IV. 2004 CUMULATIVE LIST OF CHANGES IN PLAN QUALIFICATION
REQUIREMENTS

The following list consists of statutory provisions and associated guidance which
reflect changes to plan qualification requirements. Miscellaneous guidance is
also provided. There are some items on the list that refer to guidance not yet
published; nevertheless, it is expected that such guidance will be published in
time to be incorporated into plan documents by pre-approved plan sponsors and
practitioners early in 2005. These not-yet published guidance items have been
included in the 2004 Cumulative List in order to allow this incorporation in the first
submission in the proposed remedial amendment/approval cycle for pre-
approved plans rather than having to wait until the next cycle.

The following guidance contains sample or model amendments: Notice 2001-57,
2001-1 C.B. 279 (miscellaneous EGTRRA amendments); Rev. Proc. 2002-29,

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2002-2 C.B. 1176 (required minimum distribution amendments); and Rev. Proc.
2003-13, 2003-1 C.B. 317 (required language for deemed IRAs).

1.
72(p): Section 1.72(p)-1 of the Income Tax Regulations relating to plan
loans was published on December 3, 2002 (67 Fed. Reg. 71821).

2.
401(a)(4): Amendments to § 1.401(a)(4)-8 of the Regulations relating to
new comparability plans were published on June 29, 2001 (66 Fed. Reg.
34535).
• Rev. Rul. 2001-30, 2001-2 C.B. 46.

3.
401(a)(9):
• Sections 1.401(a)(9)-1 through –9 of the Regulations were published
on April 17, 2002 and June 15, 2004 (67 Fed. Reg. 18834 and 69 Fed.
Reg. 33288).

4.
401(a)(17): Section 401(a)(17) of the Code was amended by § 611(c) of
EGTRRA to increase the compensation limit to $200,000.
• Notice 2001-56, 2001-2 C.B. 277.

5.
401(a)(31):
• Section 401(a)(31) was amended by § 643(b) of EGTRRA to allow
employees’ after-tax contributions to be rolled over under certain
circumstances.
• Section 401(a)(31)(B) was amended by § 657(a) of EGTRRA (as
amended by § 411(t) of JCWAA) to provide for the automatic rollover
of certain mandatory distributions. The effective date is March 28,
2005. Guidance is expected to be published soon which will include a
sample amendment.
• Sections 641, 642 and 643 of EGTRRA (as amended by § 411(q) of
JCWAA) amended the definition of eligible retirement plan in § 402 to
include a § 403(b) annuity contract and eligible governmental § 457(b)
plan.
• Rev. Rul. 2004-12, 2004-7 I.R.B. 478.
• Section 636(b) of EGTRRA modified the definition of eligible rollover
distribution to exclude hardship distributions.

6.
401(k):
• Section 401(k)(2) and § 401(k)(10) of the Code were amended by §
646(a)(1) of EGTRRA to permit distributions of elective deferrals from
a § 401(k) plan upon severance from employment.
• Notice 2002-4, 2002-1 C.B. 298.
• Section 636(a) of EGTRRA directed the Secretary of the Treasury to
revise the regulations relating to safe harbor hardship distributions of
elective deferrals from § 401(k) plans so that the time the employee is

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prohibited from making elective and employee contributions is
reduced from one year to six months.
• Notice 2001-56.
• Notice 2002-4.
• Section 401(k)(11) of the Code was amended by § 611(f) of EGTRRA
to increase the maximum amount of qualified salary reduction
contributions that can be made to SIMPLE 401(k) plans.
• Section 402(g) of the Code was amended by § 611(d) of EGTRRA to
increase the applicable dollar amount.
• Guidance regarding the ability to make deferrals with respect to post
severance compensation is expected to be issued soon.
• Section 401(m)(9) of the Code was amended by § 666 of EGTRRA to
eliminate the multiple use test.
• Final regulations under § 401(k) and § 401(m) are expected to be
published by the end of the 2004 calendar year.

7.
402A: Section 402A of the Code was added by § 617 of EGTRRA to offer
optional treatment of elective deferrals as designated Roth contributions
to defined contribution plans, effective for taxable years beginning after
December 31, 2005.
• Proposed amendments to § 401(k) regulations which reflect § 402A
will be issued soon, and final regulations are expected to be published
in mid-2005.
• It is expected that plan amendments will be required to reflect
the portions of the § 401(k) regulations which reflect § 402A,
when they are finalized.

8.
408(q): Section 408(q) of the Code was added by § 602 of EGTRRA (as
amended by § 411(i) of JCWAA) to allow for deemed individual retirement
accounts (IRAs) in an eligible retirement plan.
• Section 1.408(q)-(e)(8)(T) of the Regulations was published on July
22, 2004 (69 Fed. Reg. 43735).

9. 411(a)
: Section 411(a) of the Code was amended by § 633 of EGTRRA
(as amended by § 411(o) of JCWAA) to provide for faster vesting of
matching contributions.

10. 411(a)(11)
: Section 411(a)(11)(D) of the Code was added by § 648(a) of
EGTRRA (as amended by § 411(r) of JCWAA) to allow amounts
attributable to rollover contributions to be disregarded in determining the
value of an account balance for involuntary distributions.

11. 414(v)
: Section 414(v) of the Code was added by § 631 of EGTRRA (as
amended by § 411(o) of JCWAA) to allow for catch-up contributions for
individuals age 50 or older.

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• Regulations under § 1.414(v) were published on July 8, 2003 (68 Fed.
Reg. 40510).
• Notice 2002-4.

12. 415(c)
: Section 415(c) of the Code was amended by §§ 611(b) and 632
of EGTRRA (as amended by § 411(p) of JCWAA) to increase the
maximum annual additions permitted to the lesser of $40,000 or 100% of
compensation.
• Rev. Rul. 2001-51, 2001-2 C.B. 427.
• Rev. Rul. 2002-27, 2002-1 C.B. 925 provided that “compensation”
within the meaning of § 415(c) could in certain situations include
“deemed § 125 compensation”.
• Guidance regarding post-severance compensation issues is expected
to be issued soon.

13. 416
: Section 416 of the Code was amended by § 613 of EGTRRA (as
amended by § 411(k) of JCWAA) to make several changes to the top-
heavy rules.
• Section 416(g)(4)(H) of the Code was added by § 613(d) of EGTRRA
to provide certain safe harbor § 401(k) plans and § 401(m) plans an
exemption from the top-heavy rules.
• Rev. Rul. 2004-13, 2004-7 I.R.B. 485.

14. 4975
: Section 4975 of the Code was amended by § 612 of EGTRRA to
allow plan loans for Subchapter S shareholder-employees.

15. Miscellaneous
• Rev. Rul. 2002-42, 2002-1 C.B. 76, provides guidance with respect to
a situation where a money purchase pension plan is merged or
converted into a profit sharing plan.
• Rev. Proc. 2002-21, 2002-1 C.B. 911, provides guidance with respect
to defined contribution retirement plans maintained by professional
employer organizations.
• Rev. Proc. 2003-86, 2003-2 C.B. 1211, amplifies Rev. Proc. 2002-21
relating to relief provided for certain defined contribution plans
maintained by professional employer organizations.
• Rev. Rul. 2004-10, 2004-7 I.R.B. 484, provides guidance with respect
to charging administrative expenses to former and current employees.

V. REMEDIAL AMENDMENT PERIOD FOR RETROACTIVE ANNUITY
STARTING DATE AMENDMENT

Background

Section 401(b) provides a remedial amendment period during which an
amendment to a disqualifying provision may be made retroactively effective,

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under certain circumstances, to comply with the requirements of § 401(a).
Section 1.401(b)-1(b)(1) provides that a disqualifying provision includes an
amendment to an existing plan which causes the plan to fail to satisfy the
requirements of the Code applicable to the qualification of the plan as of the date
the plan or amendment is first made effective.

As provided in § 1.401(b)-1(d), the remedial amendment period for a
disqualifying provision described in § 1.401(b)-1(b)(1) begins, in the case of an
amendment to an existing plan, on the date the plan amendment is adopted or
put into effect (whichever is earlier). Generally, the remedial amendment period
for a disqualifying provision described in § 1.401(b)-1(b)(1) ends with the due
date (including extensions) for filing the income tax return for the employer's tax
year that includes, in the case of an amendment to an existing plan, the date the
plan amendment is adopted or put into effect (whichever is later). Section
1.401(b)-1(f) grants the Commissioner the discretion to extend the remedial
amendment period.

Section 1.401(b)-1(b)(3) provides that the Commissioner may also designate as
a disqualifying provision under § 401(b) a plan provision that either (1) results in
the failure of the plan to satisfy the qualification requirements of the Code by
reason of a change in those requirements, or (2) is integral to a qualification
requirement that has been changed.

Section 1.401(b)-1(c) provides that a disqualifying provision includes the absence
from a plan of a provision required by, or, if applicable, integral to the applicable
change to the qualification requirements of the Code, if the plan was in effect on
the date the change became effective with respect to the plan.

Pursuant to § 417(a)(7)(A), § 1.417(e)-1 of the Regulations provide that the
qualified joint and survivor annuity (QJSA) explanation may be furnished on or
after the annuity starting date under certain circumstances (that is, retroactive
annuity starting date). The retroactive annuity starting date may be used only if
the plan provides for such provision and the participant affirmatively elects to use
the retroactive annuity starting date. The effective date is plan years beginning
on or after January 1, 2004.

Designation of Disqualifying Provision

Plan provisions relating to a retroactive annuity starting date are hereby
designated as disqualifying provisions under § 1.401(b)-1(b)(3). This will allow
plan sponsors to adopt retroactive annuity starting date amendments in the 2005
plan year.

Drafting Information

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The principal author of this notice is Dana A. Barry of the Employee Plans, Tax
Exempt and Government Entities Division. For further information regarding this
notice, please contact the Employee Plans’ taxpayer assistance telephone
service at 1-877-829-5500 (a toll-free number) between the hours of 8:00 a.m.
and 6:30 p.m. Eastern Time, Monday through Friday (a toll free call). Ms. Barry
may be reached at (202) 283-9888 (not a toll-free call).