As the end of 2023 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 notice, and/or automatic enrollment notice. For calendar-year plans, if applicable, those notices for 2024 generally must be furnished to participants by December 1, 2023.
- 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 2022 SAR by December 15, 2023, as that deadline will apply to plan sponsors whose 2022 Form 5500 was filed upon a proper extension to October 16, 2023.
- 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 2023.
- Discretionary Plan Amendments: For calendar-year plans, any discretionary amendments that already became effective in 2023, or that will become effective in 2023, generally must be executed by December 31, 2023. (A discretionary amendment is one that is not legally-required, such as a change in a plan’s eligibility provisions.) In addition, certain discretionary amendments for calendar-year safe harbor 401(k) plans that will become effective in 2024 must be executed before January 1, 2024.
- Legally-Required Plan Amendments: Many plan sponsors do not have to execute amendments for the SECURE Act, the CARES Act, and the SECURE 2.0 Act until as late as 2025. Plan sponsors may wish to contact their plan’s service providers as soon as possible, however, to discuss which of those laws’ provisions are already effective and which provisions will become effective as of January 1, 2024. See the February 2023 edition of The Speed Reader for my summary of the SECURE 2.0 Act’s main provisions.
- Compliance Testing: In January of 2024, 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 2023 compliance testing. Even safe harbor plans must undergo certain testing for 2023. Plan sponsors who do not receive a questionnaire in January from the entity that will perform 2023 compliance testing might wish to request the questionnaire by the end of January.
- Long Term, Part-Time Employees: Under the SECURE Act, these employees (i.e., part-time employees who complete at least 500 hours of service during three consecutive 12-month periods) must be eligible to participate in the plan for purposes of elective deferrals, subject to any applicable age requirement under the plan. The consecutive 12-month periods began on January 1, 2021. Therefore, the first entry date on which a part-time employee could become eligible under this rule is January 1, 2024.
- 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 2023 should be addressed. In addition, if a plan’s 2022 ADP and/or ACP tests failed, any resulting corrective distributions must be made by December 31, 2023.
The failure to comply with most of those requirements can be addressed under the IRS’s formal correction programs for retirement plans.