Year-End Reminders for Defined Contribution Plans:

As the end of 2021 quickly approaches, retirement plan sponsors should promptly consider several important potential tasks. Examples include the following:

  • December 1 Deadline for Certain Plan Communications to Participants: Depending on a plan’s design, one or more of the following annual notices might be required: safe harbor notice, qualified default investment alternative (“QDIA”) notice, and/or automatic enrollment notice. For calendar-year plans, if applicable, those notices for 2022 generally must be furnished to participants by December 1, 2021.
  • Special 403(b) Plan Notices:  403(b) plan sponsors must ensure that a “universal availability” notice is provided to participants at least once per year. Also, if a 403(b) plan sponsor has adopted an IRS pre-approved plan document, then an Annual Additions Contribution Limit Notice is likely required (depending on the plan’s terms).   
  • Summary Annual Report (“SAR”): The SAR summarizes information reported on a plan’s Form 5500. Many plans will have to furnish participants (and beneficiaries of deceased participants) with the 2020 SAR by December 15, 2021, as that deadline will apply to plan sponsors whose 2020 Form 5500 was filed upon a proper extension to October 15, 2021.
  • Annual Participant Fee Disclosures: All plans that allow for participant-directed investments must deliver a participant fee disclosure (i.e., an ERISA Section 404(a)(5) notice) at least annually to participants and beneficiaries who can direct the investment of their plan account. Now might be the time to deliver this notice, if not already delivered during 2021.  
  • Plan Amendments: For calendar-year plans, any discretionary amendments that became effective in 2021 generally must be executed by December 31, 2021. Two specific exceptions to that rule apply regarding the SECURE Act and the CARES Act. To adopt the SECURE Act’s mandatory or discretionary provisions, and to adopt the CARES Act’s discretionary distribution and/or loan provisions, plan sponsors do not have to execute a plan amendment incorporating those laws until the end of the 2022 plan year. Also note that certain discretionary amendments for safe harbor 401(k) plans must be executed before the beginning of the plan year in which they become effective.
  • Compliance Testing:  In January of 2022, many recordkeepers and third party administrators will provide their retirement plan clients with questionnaires. Clients’ responses to the questionnaires’ requests for information (e.g., census data) will form the basis for 2021 compliance testing. Even safe harbor plans must undergo certain testing for 2021. Plan sponsors who do not receive a questionnaire in January from the entity that will perform 2021 compliance testing should request the questionnaire by approximately the end of January.
  • Miscellaneous Items for Year-End:  Participants generally must begin receiving distributions from their retirement plan by April 1 of the calendar year following the later of the year in which they attain age 72 or the year in which they retire. Also, any participant loans that require Form 1099-R reporting for 2021 should be addressed. In addition, if a plan’s 2020 ADP and/or ACP tests failed, any resulting corrective distributions must be made by December 31, 2021.

The failure to comply with some of those requirements can be addressed under the IRS’s correction programs for retirement plans. Please let me know if you have any questions about those programs, as I work with them on a daily basis.