In September of 2014, we here at Legacy Retirement Solutions, LLC (“Legacy”) published an article in our monthly newsletter that both summarized and humbly questioned the restrictive position taken by the Internal Revenue Service (“IRS”) with regard to the permissibility of mid-plan year amendments to “safe harbor” 401(k) plans. Then, on January 29, 2016, the IRS released Notice 2016-16 which, with limited exception, eliminated this restriction. Coincidence?

In a recent Employee Plans Newsletter, the Internal Revenue Service (“IRS”) surprised many plan sponsors and practitioners when it described its position on certain document retention and certification obligations associated with participant loans and hardship distributions. This description was surprising because the IRS emphasized the plan sponsors’ duties to retain formal documentation of these transactions. However, many plan sponsors rely exclusively on their “recordkeepers” and “third-party retirement plan administrators” to process such distributions which could often result in the failure of the plan sponsor to maintain the documentation necessary to satisfy the expectations of the IRS in this regard. The remainder of this article discusses the guidance and what it means for plan sponsors.