The Internal Revenue Service (IRS) is temporarily suspending the IRS Prototype Opinion Letter Program for individual retirement accounts and individual retirement annuities (IRAs) effective March 14, 2022. As noted in Announcement 2022-6, the IRS will not be accepting applications for opinion letters on prototype traditional, Roth, and SIMPLE IRAs or SEP (including SARSEP) and SIMPLE IRA plans until further notice.

This temporary suspension comes as no surprise as the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) made significant changes to IRAs, and questions regarding some of the SECURE Act’s more complex changes still remain. We previously provided guidance summarizing the SECURE Act’s impact on IRAs in these LawFlashes:

The deadline to amend IRA documents for provisions of the SECURE Act or the regulations thereunder is December 31, 2022 (or such later date as the Treasury secretary may prescribe). In the nearly two years since the passage of the SECURE Act, IRA providers—particularly those that use prototype documents—have been grappling with what to do with their IRA documents.

IRA providers have been waiting for the IRS to release additional guidance in the form of regulations, updated model forms, and updated Listings of Required Modifications (LRMs). While some IRA providers started the process of amending their IRA documents, some IRA providers decided to hold off on making any updates to their IRA documents until after the IRS has provided such guidance.

The US Department of the Treasury and the IRS recently released long-awaited proposed regulations that provide guidance on the SECURE Act’s required minimum distribution (RMD) changes affecting IRAs and certain tax-qualified retirement plans, annuity contracts, and custodial accounts. Comments on the proposed regulations are being accepted until May 25, 2022 and a public hearing on the proposed regulations is scheduled for June 15, 2022. We expect to publish a more comprehensive overview of the proposed regulations soon.

IRS Announcement 2022-6 Answers Key Questions

Fortunately, IRS Announcement 2022-6 clarifies some questions for IRA providers regarding IRA documentation during this in-between time.

  • Can an IRA provider apply to the IRS for an opinion letter approving its prototype IRA documents? No. Effective March 14, 2022, the IRS will not accept applications for an opinion letter from prototype IRA, SEP, or SIMPLE IRA plan sponsors. Any such application submitted by an IRA provider to the IRS will be returned. The IRS is revising the prototype IRA opinion letter program and will announce when applications may be submitted under the revised program.
  • Can an IRA provider that has already received a favorable opinion letter for a prototype IRA continue to rely on it? Yes. Until further notice, IRA providers may continue to rely on a previously received favorable opinion letter for their prototype IRAs.
  • Can an IRA provider amend its IRA documents to make updates for the SECURE Act and other recent legislation? Yes. IRA providers may amend their documents to reflect recent legislation without affecting their reliance on a previously received favorable opinion letter.
  • Can an IRA provider use the existing IRS model forms for current IRAs and plans or to establish new IRAs and plans? Yes. Taxpayers may use the existing model forms listed in IRS Announcement 2022-6 to maintain current plans and IRAs or to establish new plans and IRAs. The IRS will announce when revised model forms must be used.

The IRS intends to issue updated model forms and LRMs as well as a new revenue procedure for requesting an IRS opinion letter on prototype IRAs. While the timing of the updated guidance has not been released, we would not be surprised if the guidance were not issued until after the proposed regulations are finalized.

Lingering Question

One question that remains is whether prototype IRA providers that want to make changes to their IRA documents unrelated to recent legislation can amend their IRA documents and continue to rely on a previously received favorable opinion letter. It is not clear from the announcement whether this is permissible. Hopefully, the IRS will provide clarification on this point.

What Does This Mean for IRA Providers?

For many IRA providers, IRS Announcement 2022-6 will offer some relief in knowing that they can continue to rely on their previously received favorable opinion letters for their prototype IRAs even if they decide to amend their documents for recent legislation. IRA providers that were planning to submit applications to the IRS for approval of their prototypes will have to wait until the IRS reopens the prototype IRA opinion letter program. Given the lengthy process involved in amending documents and receiving IRS approval (and state insurance department approvals for annuity contract endorsements), some IRA providers may decide to go ahead and get started with the amendment process.