As the end of 2020 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 2021 generally must be furnished to participants by December 1, 2020.
- Summary Annual Report (“SAR”): The SAR summarizes information reported on a plan’s Form 5500. Many plans will have to furnish participants and beneficiaries with the 2019 SAR by December 15, 2020, as that deadline will apply to plan sponsors whose 2019 Form 5500 was filed upon a proper extension to October 15, 2020.
- 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 2020.
- Plan Amendments: For calendar-year plans, any discretionary amendments that became effective in 2020 must be executed by December 31, 2020. A specific exception to that rule for 2020 concerns the CARES Act. Plans that adopted the CARES Act’s distribution and/or loan provisions do not have to execute a plan amendment incorporating those provisions 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 2021, 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 2020 compliance testing. Even safe harbor plans must undergo certain testing for 2020. Thus, plan sponsors who do not receive a questionnaire in January from the entity that will perform 2020 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. The CARES Act waived required minimum distributions that otherwise would have been due in 2020 with respect to certain plans (e.g., 401(k) plans and 403(b) plans). If any participant chose to receive such a distribution for 2020, however, a Form 1099-R should be issued. Also, any participant loans that require Form 1099-R reporting for 2020 should be addressed. In addition, if a plan’s 2019 ADP and/or ACP tests failed, any resulting corrective distributions must be made by December 31, 2020.
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.