As 2018 comes to an end, we are pleased to present you with our traditional End of Year Plan Sponsor “To Do” Lists. This year, we are publishing our “To Do” Lists in four separate Employee Benefits Updates. Part 1 covered health and welfare plan issues, Part 2 covered the annual cost of living adjustments, this Part 3 covers qualified plan issues, and Part 4 will cover executive compensation issues. Each Employee Benefits Update provides you with a “To Do” List of items on which you may want to take action before the end of 2018 or in early 2019. As always, we appreciate your relationship with Snell & Wilmer and hope that these “To Do” Lists help focus your efforts over the next few months.

For your convenience, we have broken this “To Do” List into five categories, which are accessible via the menu on the left.

All Qualified Plans “To Do” List

• Adopt Design Changes by the End of the Plan Year: If an employer made any design changes during the year, the plan generally must be amended to reflect those design changes by the last day of the 2018 plan year (i.e., December 31, 2018 for calendar year plans).
• Consider the Required Amendments List: The Internal Revenue Service (“IRS”) eliminated the five-year determination letter remedial amendment cycles for individually designed plans and limited the scope of the determination letter program for such plans effective as of January 1, 2017. The IRS now provides plan sponsors with an annual Required Amendments List (“RA List”) that includes the changes in qualification requirements that are first effective in the year in which the RA List is published. Plan sponsors generally have until the end of the second year following the year in which the IRS releases the RA List to make the required amendments.
  • The 2016 RA List does not include any changes that generally would require amendments to most plans. It includes only one change that relates to certain defined benefit plans. For more information about the 2016 RA List, see our February 3, 2017 SW Benefits Blog, “IRS Issues First Required Amendments List for Qualified Plans.”
  • The 2017 RA List contains changes to the qualification requirements that affect most plans. In particular, the 2017 RA List provides for required changes with respect to the final regulations regarding cash balance/hybrid plans and partial annuity distribution options for defined benefit plans. For more information about the 2017 RA List, please see our December 18, 2017 SW Benefits Blog, “IRS Publishes 2017 Required Amendments List.”
  • The IRS published the 2018 RA List on November 21, 2018. The IRS did not list any changes in qualification requirements on the 2018 RA List and therefore plan sponsors have no required amendments based on the 2018 RA List.
• Consider the Operational Compliance List: The IRS provides an Operational Compliance List to help plan sponsors identify changes in qualification requirements that may require mandatory or discretionary amendments to plans or that may contain other significant guidance that affects the operation of plans. The Operational Compliance List is available only on the IRS webpage at https://www.irs.gov/retirement-plans/operational-compliance-list. Plan sponsors should review the Operational Compliance List and consider whether any plan amendments are required for the items included on the Operational Compliance List.
• Consider Impact of New Disability Claims Regulations: On December 19, 2016, the DOL issued regulations that revise the ERISA claims procedure regulations for employee benefit plans that provide disability benefits (the “New Disability Claims Regulations”). The New Disability Claims Regulations were scheduled to take effect for all claims for disability benefits filed on or after January 1, 2018, but that date was ultimately delayed to April 1, 2018.  The New Disability Claims Regulations are based on the Affordable Care Act’s enhanced claims and appeals regulations for group health plans.  The scope of these rules is broader than employers may realize and encompasses qualified retirement plans.  For more information on the requirements under the New Disability Claims Regulations, please see our January 18, 2018 SW Benefits Blog, “New Disability Claims Regulations Take Effect for All Plans April 1, 2018” and our August 29, 2017 SW Benefits Blog, “The New Disability Claims Regulations: They Don’t Only Apply to Disability Plans.”
• Update Section 402(f) Notice: The IRS recently updated its Section 402(f) safe harbor notices that retirement plans may use to satisfy the advance notice requirements to participants who are recipients of eligible rollover distributions. The updated notices reflect legislative changes including the extended rollover deadline for qualified plan loan offsets under the Tax Cuts and Jobs Act. For more information, please see our October 26, 2018 SW Benefits Blog, “IRS Issues Updated Tax Notice for Qualified Retirement Plan Distributions.”
• Make Required Minimum Distributions: Required minimum distributions must be made when a participant attains age 70½ and must be made annually by December 31. A special rule permits the delay of the first required minimum distribution until April 1 of the year following the year in which the participant attains age 70½.
• Update Summary Plan Description if Needed: Summary Plan Descriptions (“SPDs”) must be updated once every five years if the plan has been amended during the five-year period and once every 10 years for other plans.
• Review 2019 Plan Limits: Become familiar with the 2019 plan limits. See Part 2 – Annual Cost of Living Adjustments for more information.

Section 401(k) Plans “To Do” List

• Comply with Items on All Qualified Plans “To Do” List: The items on the All Qualified Plans “To Do” List also apply to Section 401(k) plans.
• Consider Changes to Hardship Distributions: The Bipartisan Budget Act of 2018 (the “Budget Act”) makes changes to hardship distributions beginning on the first day of the plan year that begins in 2019 (January 1, 2019 for calendar year plans). The Budget Act (1) permits a participant to obtain a hardship distribution without obtaining all available plan loans, (2) removes the requirement to suspend elective deferrals for six months following a hardship distribution and (3) expands the available sources from which a participant may elect to receive a hardship distribution to include qualified nonelective contributions, qualified matching contributions and earnings on qualified nonelective contributions, qualified matching contributions and elective deferrals.
• Consider Providing 2017 Disaster Relief: The IRS provided disaster relief in 2017 for individuals affected by Hurricanes Harvey, Irma and Maria and by the 2017 California Wildfires. As part of this relief, the IRS relaxed the existing standards for hardship distributions and loans from qualified retirement plans for those affected by these disasters. Employers are permitted to offer hardship distributions and loans even if their plans do not provide for them. Employers who do so must amend their plans to allow for these hardship distributions and loans by December 31, 2018.
• Consider Providing Additional 2017 Disaster Relief: Congress enacted additional disaster relief to those affected by Hurricanes Harvey, Irma and Maria and by the 2017 California Wildfires. In particular, Congress has permitted eligible retirement plans to make qualified disaster distributions to participants of up to $100,000 (across all IRAs and employer plans). These distributions are not subject to the excise taxes that otherwise would apply to early distributions from retirement plans. Participants can retain the distribution and mitigate the tax burden by including the amount of the distribution in gross income over a three-year period. In the alternative, the participants can pay the amount of the distribution back to the plan within three years without subjecting the distribution to income taxes. Congress also permits employers to relax plan loan limitations for participants with a principal residence in the disaster areas. Employers can permit these participants to request a loan of up to $100,000 (rather than the standard loan limitation of the lesser of (1) 50 percent of the participant’s vested account balance or (2) $50,000). Employers that offer disaster distributions or loan relief to participants must so amend their plans by December 31, 2019.
• Consider Providing 2018 Disaster Relief: On November 14, 2018, the IRS issued proposed regulations that include disaster relief for individuals affected by Hurricanes Michael and Florence. This proposed disaster relief would extend the relief provided in 2017 (described above) to victims of Hurricanes Florence and Michael. The proposed regulations also include additional relief for losses incurred as a result of a federally declared disaster (such as Hurricanes Michael and Florence or the 2018 California Wildfires).
• Provide Section 401(k)/401(m) Safe Harbor Notice by December 2, 2018 for Calendar Year Plans: If a plan has a Section 401(k)/401(m) contribution safe harbor, an employer must provide the safe harbor notice at least 30 days, but not more than 90 days, before the beginning of each plan year (i.e., December 2, 2018 for calendar year plans).
• Provide Annual Automatic Enrollment Notice by December 2, 2018 for Calendar Year Plans: If a plan has an automatic contribution arrangement, an eligible automatic contribution arrangement (“EACA”), a qualified automatic contribution arrangement (“QACA”), or any combination thereof, an employer must give an annual automatic enrollment notice at least 30 days, but not more than 90 days, before the beginning of each plan year (i.e., December 2, 2018 for calendar year plans).
• Provide Annual Qualified Default Investment Alternative (“QDIA”) Notice by December 2, 2018 for Calendar Year Plans: If an employer is relying on the QDIA safe harbor, it must give an annual notice at least 30 days, but not more than 90 days, before the beginning of each plan year (i.e., December 2, 2018 for calendar year plans).
• Provide Participant Fee Disclosure Information: Plans are required to provide to participants and beneficiaries on an annual basis a comparative chart of detailed investment-related information about the plan’s designated investment alternatives. DOL guidance requires this information to be provided at least annually.
• Provide Participant Benefit Statements: Defined contribution plans must provide individual benefit statements at least annually, although plans that permit participants to direct the investment of their accounts must provide the statement at least quarterly. Defined contribution plans also must provide the statement upon request.
• Distribute Summary Annual Report: Employers should distribute a summary annual report, which is a summary of the information reported on the Form 5500. The summary annual report is generally due nine months after the plan year ends. If the Form 5500 was filed under an extension, the summary annual report must be distributed within two months following the extended date on which the Form 5500 was due.
• If Adding Qualified Automatic Contribution Arrangement or Eligible Automatic Contribution Arrangement for 2019, Adopt Amendment Before the 2019 Plan Year: Neither a QACA nor an EACA may be adopted mid-year. Accordingly, if an employer wishes to add a QACA or an EACA to its plan for the 2019 plan year, it must adopt an amendment by December 31, 2018 for calendar year plans.
• Consider Amendments to Safe Harbor Plans: Employers may make mid-year changes to a safe harbor plan in light of guidance the IRS issued in 2016. Mid-year amendments are limited and, in many cases, will require an updated safe harbor notice. To the extent an employer wants to make changes to a safe harbor plan, it should consider doing so before year end and, depending on the change, before providing the safe harbor notice described above. For additional information on permissible mid-year changes to a safe harbor plan, see our February 22, 2016 SW Benefits Blog, “The IRS Significantly Increased the Availability of Mid-Year Changes to Safe Harbor Plans.”
• Update Prospectus if Needed: Reporting issuers of equity securities that have registered securities under a defined contribution plan or interests in the plan must update the prospectus to reflect any material changes to the plan information during any period in which offers or sales are being made. Material changes should be disclosed in a prospectus or an update or supplement that is delivered to participants before the effective date of the change.

Defined Contribution Plans (Other Than Section 401(k) Plans) “To Do” List

• Comply with Items on All Qualified Plans “To Do” List: The items on the All Qualified Plans “To Do” List also apply to defined contribution plans.
• Consider Providing Disaster Relief and Amending Plan as Necessary: Please see our description of this issue under “Section 401(k) Plans ‘To Do’ List” above.
• Provide Annual Qualified Default Investment Alternative (“QDIA”) Notice by December 2, 2018 for Calendar Year Plans: If an employer is relying on the QDIA safe harbor, it must give an annual notice at least 30 days, but not more than 90 days, before the beginning of each plan year (i.e., December 2, 2018 for calendar year plans).
• Provide Participant Fee Disclosure Information: Plans are required to provide to participants and beneficiaries on an annual basis a comparative chart of detailed investment-related information about the plan’s designated investment alternatives. DOL guidance requires this information to be provided at least annually.
• Provide Participant Benefit Statements: Defined contribution plans must provide individual benefit statements at least annually, although plans that permit participants to direct the investment of their accounts must provide the statement at least quarterly. Defined contribution plans also must provide the statement upon request.
• Distribute Summary Annual Report: Employers should distribute a summary annual report, which is a summary of the information reported on the Form 5500. The summary annual report is generally due nine months after the plan year ends. If the Form 5500 was filed under an extension, the summary annual report must be distributed within two months following the extended date on which the Form 5500 was due.
• Update Prospectus if Needed: Reporting issuers of equity securities that have registered securities under a defined contribution plan or interests in the plan must update the prospectus to reflect any material changes to the plan information during any period in which offers or sales are being made. Material changes should be disclosed in a prospectus or an update or supplement that is delivered to participants before the effective date of the change.

“Defined Benefit Plans “To Do” List

• Comply with Items on All Qualified Plans “To Do” List: The items on the All Qualified Plans “To Do” List also apply to defined benefit plans.
• Consider Impact of New Mortality Tables: The IRS and Treasury issued updated mortality tables that are to be used for funding defined benefit plans and for calculating lump sum and other accelerated distributions. The new mortality tables are generally effective for plan years beginning on or after January 1, 2018. Plan sponsors, however, were able to delay the new mortality tables for a period of one year for funding calculations. Plan sponsors should consult with their actuaries to understand the impact of the mortality tables on their plans. Plan sponsors also should review their plans to determine whether the existing plan language will automatically incorporate the new mortality tables into the plan or whether a plan amendment is needed.
• Post Portions of Form 5500 on Company’s Intranet: A plan sponsor of a defined benefit plan that maintains an intranet website for the purpose of communicating with employees (and not the public) is required to post portions of the defined benefit plan’s Form 5500 on the intranet.
• Comply with Annual Funding Notice to Participants: Single employer defined benefit plan sponsors must provide participants with an annual notice of the plan’s funding status within 120 days of the end of the plan year to which the notice relates. Plans with fewer than 100 participants do not have to provide the notice until the Form 5500 annual report is due for the plan year.
• Comply with Participant Notice Requirement if Adjusted Funding Target Attainment Percentage Is Less than 80 Percent: In addition to the annual funding notice described above, Section 101(j) of ERISA requires a plan administrator to provide a notice to participants if the plan is subject to any restrictions on the payment of benefits. These restrictions become applicable if the plan’s adjusted funding target attainment percentage is less than 80 percent. Plan administrators are not required to provide this notice to participants and beneficiaries who are in pay status.
• Provide Participant Benefit Statements: Defined benefit plans should provide individual benefit statements every three years or upon request. Alternatively, defined benefit plans may satisfy the requirement by annually notifying participants that the pension benefit statement is available and how they may obtain such statement.
• Provide Suspension of Benefits Notice, if Applicable: If required by the terms of the plan, plan administrators must provide notice of the suspension of benefits to participants who continue employment beyond normal retirement age and to rehired retirees. This notice should be given during the first month during which the benefit is suspended.

Section 403(b) Plans “To Do” List

• Adopt Design Changes by the End of the Plan Year: If an employer made any design changes to the plan during the year, it generally must amend its plan to reflect those design changes by the last day of the 2018 plan year (i.e., December 31, 2018 for calendar year plans).
• Consider Changes to Hardship Distributions: The Budget Act makes changes to hardship distributions beginning on the first day of the plan year that begins in 2019 (January 1, 2019 for calendar year plans). For Section 403(b) Plans, the Budget Act (1) permits a participant to obtain a hardship distribution without obtaining all available plan loans, (2) removes the requirement to suspend elective deferrals for six months following a hardship distribution and (3) expands the available sources from which a participant may elect to receive a hardship distribution to include qualified nonelective contributions and qualified matching contributions provided they are not in a custodial account.
• Consider Providing Disaster Relief and Amending Plan as Necessary: Please see our description of this issue under “Section 401(k) Plans ‘To Do’ List” above.
• Update Summary Plan Description ("SPD") if Needed: SPDs for a Section 403(b) plan that is subject to ERISA must be updated once every five years if the plan has been amended during the five-year period and once every 10 years for other plans.
• Provide Safe Harbor Notice by December 2, 2018 for Calendar Year Plans: If a Section 403(b) plan uses an ACP contribution safe harbor, an employer must provide the safe harbor notice at least 30 days, but not more than 90 days, before the beginning of each plan year (i.e., December 2, 2018 for calendar year plans).
• Provide Annual Automatic Enrollment Notice by December 2, 2018 for Calendar Year Plans: If a Section 403(b) plan is subject to ERISA and has automatic deferrals, an employer must give an annual automatic enrollment notice at least 30 days, but not more than 90 days, before the beginning of each plan year (i.e., December 2, 2018 for calendar year plans).
• Provide Annual Qualified Default Investment Alternative (“QDIA”) Notice by December 2, 2018 for Calendar Year Plans: If a Section 403(b) plan is subject to ERISA and an employer is relying on the QDIA safe harbor, it must give an annual notice at least 30 days, but not more than 90 days, before the beginning of each plan year (i.e., December 2, 2018 for calendar year plans).
• Provide Participant Benefit Statements: Section 403(b) plans that are subject to ERISA must provide individual benefit statements at least annually, although plans that permit participants to direct the investment of their accounts must provide the statement at least quarterly. Plans must also provide the statement upon request.
• Distribute Summary Annual Report: Section 403(b) plans that are subject to ERISA must distribute a summary annual report, which is a summary of the information reported on the Form 5500. The summary annual report is generally due nine months after the plan year ends. If the Form 5500 was filed under an extension, the summary annual report must be distributed within two months following the extended date on which the Form 5500 was due.
• Provide Participant Fee Disclosure Information: Plans are required to provide to participants and beneficiaries in individual account plans on an annual basis a comparative chart of detailed investment-related information about the plan’s designated investment alternatives. DOL guidance requires this information to be provided at least annually.
• Remember the Deadline to Restate 403(b) Plans to Align with IRS Pre-Approved Plan Documents: In March 2017, the IRS published pre-approved Section 403(b) plan documents for the first time. If plan sponsors retroactively adopt a pre-approved plan by March 31, 2020, any form defects in the previously adopted plan document will automatically be deemed corrected and the previously adopted plan document will be deemed compliant with plan document requirements back to 2010. Plan sponsors using individually designed plans should consider amending their plans to correct any form defects by March 31, 2020, but adoption of a pre-approved plan is the only way to ensure compliance at this time.
• Ensure Compliance with the Universal Applicability (“UA”) Rules: Noncompliance with the UA rules is a common defect in Section 403(b) plans. The UA rules ensure that if an employer allows one employee to make salary deferrals, the employer offers the same opportunity to all employees, with certain exceptions. The IRS requires that the plan provide each employee with an “effective opportunity” to participate, which is determined by all of the facts and circumstances, including notice of eligibility, the period of time during which an election may be made, and any other conditions on elections.
• If Adding an ACP Contribution Safe Harbor for 2019, Adopt Amendment Before the 2019 Plan Year: ACP contribution safe harbors may not be adopted mid-year. Accordingly, if an employer wishes to add an ACP contribution safe harbor to its Section 403(b) plan for the 2019 plan year, it must adopt an amendment by December 31, 2019 for calendar year plans.
• Comply with Form 5500 Reporting Requirements: Section 403(b) plans that are subject to ERISA must comply with standard Form 5500 filing requirements, including an annual plan audit for large plans (i.e., plans with 100 or more participants) and detailed financial information for small Section 403(b) plans (i.e., plans with fewer than 100 participants).

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