The Internal Revenue Service (“IRS”) has issued Notice 2014-37 to provide guidance on amendments to reflect the outcome of United States v. Windsor, which invalidated Section 3 of the Defense of Marriage Act regarding the definition of marriage. The Notice addresses amendments adopted after the beginning of a plan year and effective during a plan year (a “mid-year amendment”) to a Section 401(k) or 401(m) safe harbor plan. Such mid-year amendments will not jeopardize the plan’s safe harbor status.
Notice 2014-37 expands on guidance previously provided in Q&A-8 of Notice 2014-19, which was released last month. Q&A-8 of Notice 2014-19 provides the following:
Q-8. What is the deadline to adopt a plan amendment pursuant to this notice?
A-8. The deadline to adopt a plan amendment pursuant to this notice is the later of (i) the otherwise applicable deadline under section 5.05 of Rev. Proc. 2007-44, or its successor, or (ii) December 31, 2014. Moreover, in the case of a governmental plan, any amendment made pursuant to this notice need not be adopted before the close of the first regular legislative session of the legislative body with the authority to amend the plan that ends after December 31, 2014.
Under Section 1.401(k)-3(e)(1) of the Treasury Regulations, a 401(k) safe harbor plan must be adopted before the beginning of the plan year and be maintained throughout a full 12-month plan year, except as otherwise provided in the regulation regarding a reduction or suspension of safe harbor contributions or in guidance of general applicability. Similar requirements apply under Section 1.401(m)-3(f)(1) with regard to safe harbor matching contributions. The IRS has been asked whether a Section 401(k) or 401(m) safe harbor plan may adopt a mid-year amendment pursuant to Q&A-8 of Notice 2014-19.
Notice 2014-37 provides that a plan will not fail to satisfy the requirements to be a Section 401(k) or 401(m) safe harbor plan merely because the plan sponsor adopts a mid-year amendment pursuant to Q&A-8 of Notice 2014-19. In other words, a mid-year amendment to address the definition of marriage in a plan as a result of the Windsor decision will not cause a safe harbor 401(k) or 401(m) plan to lose its safe harbor status.