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.
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).
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.
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.
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.
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.