For retirement plan sponsors, time could be getting short to complete their responsibilities for 2022 retirement plan year-end amendments and operational compliance.
By the end of the year, plan sponsors must review their plan documents and plan operations, wrote Elizabeth Drake, principal at Groom Law Group, in a blog post for plan sponsors that includes information on compliance dates, rules and requirements for which employers are responsible.
Plan sponsors must review any changes to their plan, “check in with their service providers to see if there were any administrative or operational changes that may need to be updated in the plan document and then determine whether the [retirement] plan document needs to be amended or updated,” explains Drake.
She added plan sponsors must pay close attention to discretionary plan amendments.
The most significant end-of-year responsibility for plan sponsors is to ensure that any changes made to plan design, contribution rules and/or distribution provisions, including any in-service withdrawals for employees, is reflected in the plan documents, Drake says.
“Make sure that you’ve gone back [to check] and that [any changes are] reflected in your plan documents so that your plan is amended.”
Year-End Plan Amendments
Plan sponsors have twin responsibilities for year-end: 2022 plan design changes and compliance amendments for changes in law. The discretionary plan amendments are changes not mandated by law, Drake added.
Plan sponsors must ensure all changes that impact the internal retirement plan document—changes to plan administration and to plan provisions pursuant to collective bargaining agreements—are included by the relevant compliance date.
“Generally, if you have a calendar year [401(k) plan], you have until December 31,” explains Drake.
According to her blog post, “An earlier deadline applies to plan sponsors who choose to adopt a 401(k) Safe Harbor plan design for 2022, using a 3% nonelective contribution. The Safe Harbor plan provisions must be adopted, and disclosures provided to participants, at least 30 days before the end of the plan year — by December 1, 2022, for calendar-year plans.”
A 401(k) Safe Harbor plan is a tax-qualified plan, like a traditional 401(k), but differs in that it must provide for employer contributions that are fully vested when made, IRS rules state.
Drake also advised plan sponsors to check with their legal counsel on uncertainties or to resolve any remaining questions.
“Generally, if you’ve made a change in your plan design, or if there are operational changes that are reflected in your plan document, you have until the end of the year to amend your plan retroactively to the beginning of the year to reflect those changes,” she explained.
Statutory and regulatory changes in requirements for 401(a) and 403(b) plans are maintained by the IRS in an operational compliance list on the IRS website.
Drake says the Groom law website post is a resource for plan sponsors because, as “year-end approaches, [some] retirement plan sponsors get this feeling of, ‘Have I missed anything? Is there anything I need to do before the end of the year?’ Each year, retirement plan sponsors want some assurances that they haven’t missed anything.”
The new operational compliance requirements for 2022 include one item—updated minimum required distribution tables—for 401(a) and 403(b) defined contribution plans.
“Regardless of the legal deadline for amending plan documents, plan amendments must accurately reflect how the plan was administered for tax-qualification purposes and, potentially, in the event of a participant claim or government inquiry,” Drake wrote in the post.
For many plan sponsors, multitudes of plan amendments for 2022 are not required. There are a few required plan amendments for 2022, with changes that follow the passage of significant retirement legislation by Congress—the Coronavirus Aid, Relief and Economic Security Act and the Setting Every Community Up for Retirement Enhancement Act—for which plans sponsors must account, explains Drake.
“At the beginning of this year, we started out thinking there would be a lot of year-end amendments for changes in law,” Drake says. “Many of those amendments have been delayed, but it doesn’t mean [plan sponsors] can put the plan aside and forget it, [because] there are always certain changes that need to be considered.”
While the retirement industry waited on IRS guidance to proceed, the tax regulator extended the dates for compliance amendments for changes in law, until 2025.
Prior to the relief provided in IRS Notice 2022-33 and Notice 2022-45, plan amendments to reflect provisions of the SECURE Act, the Bipartisan American Miners Act of 2019, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the CARES Act were generally required by the end of the 2022 plan year, with a plan year deadline for governmental plans, wrote Drake.
“The IRS extended these deadlines for non-governmental tax-qualified and 403(b) plans to December 31, 2025,” Drake writes in the post. “For governmental qualified and 403(b) plans, the extended deadline is 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023—potentially later under a special rule for governmental 457(b) plans.”
Additional information for plan sponsors is here:
- Year-End Amendments Extended – CARES and 2020 Relief Act.
- IRS Provides Three-Year Extension for SECURE Act Amendments and Additional Limited Relief.
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