As 2020 comes to an end, we are pleased to present our traditional End of Year Plan Sponsor “To Do” Lists. This year, we present our “To Do” Lists in four separate SW Benefits Updates. Part 1 covered health and welfare plan issues, Part 2 covered the annual cost of living adjustments, Part 3 covered executive compensation issues and this Part 4 covers qualified plan issues. Each SW Benefits Update provides you with a “To Do” List of items on which you may want to take action before the end of 2020 or in early 2021. 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 four categories, which are accessible via the menu on the left.

All Qualified Plans “To Do” List

• Review 2021 Plan Limits: Become familiar with the 2021 plan limits. See Part 2 – Annual Cost of Living Adjustments for more information.
• 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 2020 plan year (i.e., December 31, 2020 for calendar year plans).
• Consider the Required Amendments Lists: Each year, the Internal Revenue Service (“IRS”) publishes a 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. Employers 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 2017 and 2019 RA Lists, which still are applicable, contain changes to qualification requirements that affect certain plans. The 2018 RA List does not include any items. For more information about these RA Lists, please see our December 18, 2017 SW Benefits Blog, “IRS Publishes 2017 Required Amendments List” and our December 16, 2019 SW Benefits Blog, “IRS Publishes 2019 Required Amendments List.”
  • 2020 RA List: The 2020 RA List includes no items in Part A, which addresses changes in qualification requirements that require amendments to most plans. Part B of the 2020 RA List addresses other changes in qualification requirements that may require an amendment to certain plans. The 2020 RA List includes two changes in Part B: those regarding difficulty of care payments treated as compensation for retirement contribution limitations under the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”) and those that involve the application of cooperative and small employer charity pension plan rules to certain charitable employers under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).
• Consider the Operational Compliance List: The IRS provides an Operational Compliance List to help employers identify changes in qualification requirements that may require mandatory or discretionary amendments to plans or that may contain other significant guidance that affects plan operation. The Operational Compliance List is available only on the IRS website at https://www.irs.gov/retirement-plans/operational-compliance-list. Employers should review the Operational Compliance List and consider whether any plan amendments are required.
• Consider Changes Made by the SECURE Act: The SECURE Act was enacted on December 20, 2019 and has numerous provisions affecting qualified retirement plans. This newsletter covers a number of these changes, but employers should review this legislation to determine the provisions that are applicable to their plans. Plan amendments to implement SECURE Act changes generally must be adopted by the last day of the first plan year beginning on or after January 1, 2022 (i.e., December 31, 2022 for calendar year plans). Later deadlines apply for qualified governmental plans and collectively bargained plans. The change described below applies to all qualified plans. Other SECURE Act changes are included under the applicable plan "To Do" Lists below.
  • Implement Change to Required Minimum Distributions: The required beginning date by which an individual must begin taking required minimum distributions from qualified plans and IRAs has been changed to April 1 of the calendar year following the calendar year in which an individual attains age 72 (rather than age 70½). This change applies to individuals who attain age 70½ after December 31, 2019. This change to the required minimum distribution rules is mandatory.
• Update Section 402(f) Notice: The IRS 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 changes made by the SECURE Act, including the exception to the 10% additional tax under Section 72(t) of the Internal Revenue Code (“Code”) for qualified birth or adoption distributions and the increase to age 72 for required minimum distributions described above. The updated notices also make clear that coronavirus-related distributions made pursuant to the CARES Act are not subject to the 10% additional tax under Section 72(t) of the Code. They further clarify that, although these coronavirus-related distributions may be recontributed to a retirement plan, they are not considered eligible rollover distributions that require a Section 402(f) notice.
• Consider Using Electronic Distribution Safe Harbor for Certain Plan Communications: The Department of Labor (“DOL”) issued a final rule that allows certain retirement plan disclosures to be posted online or delivered electronically, rather than printing and mailing such disclosures. In order to take advantage of the new rule, plan administrators must comply with certain requirements, including providing an initial paper notice informing participants that future communications will be provided electronically. Once the initial paper notice is provided, the new rule will make the electronic media easier to use. For more information, see our July 15, 2020 SW Benefits Blog, "Department of Labor Issues Final Electronic Disclosure Rule."
• Consider the Impact of the DOL’s Fiduciary Rule: The DOL proposed a new fiduciary rule that, in part, clarified that the DOL has reinstated the “five-part test.” This test is used to determine whether a person providing investment advice for a fee is a fiduciary. For more information about the fiduciary rule, see our November 20, 2020 SW Benefits Blog, “With a New Administration, Will the Department of Labor’s Fiduciary Rule Once Again be Revised?”
• Consider the Impact of the DOL’s Final Rule on Financial Factors in Selecting Plan Investments: Plan fiduciaries should examine their current approach to plan investments in light of the DOL’s new rule regarding the use of non-pecuniary factors in making investment decisions. The DOL issued a final rule that amends the “investment duties” regulation and clarifies the DOL’s stance on the use of non-pecuniary considerations in selecting plan investments and the DOL’s “tie-breaker standard.” These considerations typically come into play with respect to environmental, social or corporate governance goals, although the DOL declined to use these terms in the final rule. Perhaps most significantly, the final rule: (1) restates the duty of loyalty under ERISA Section 404(a)(1)(A), (2) adds a specific provision to confirm that ERISA fiduciaries must select plan investments solely based on pecuniary factors and requires that fiduciaries consider the best interests of plan participants over and above any other unrelated objective or non-pecuniary goal that may impact investment risk or performance, (3) imposes documentation requirements for the limited instances in which fiduciaries utilize non-pecuniary factors to make their final investment choice, (4) clarifies that the ERISA duties of prudence and loyalty apply to a fiduciary’s selection of a designated investment alternative to be offered as part of a plan’s investment lineup, and (5) prohibits plan fiduciaries from adding or retaining any investment fund, product or portfolio as a qualified default investment alternative (“QDIA”) or as a component of such QDIA, if its objectives, goals or principal strategies include, consider or indicate the use of one or more non-pecuniary factors. For more information, please see our November 6, 2020 SW Benefits Blog, “Final DOL Rule Imposes Fiduciary Limitations on Social Investing.”
• Consider the Availability of COVID-19 Relief for Retirement Plans: The IRS and the Employee Benefits Security Administration of the DOL issued guidance that grants deadline extensions and other relief to qualified plans related to: (1) due dates for providing notices, disclosures and documents required by Title I of ERISA (collectively “Disclosures”), (2) failure to follow the plan’s verification procedures for plan loans and distributions, (3) loans provided pursuant to the CARES Act, (4) forwarding of participant contributions and repayment of plan loans to the plan, and (5) filing of Forms 5500 and M-1.
  
  For purposes of this “To Do” List, perhaps the most significant relief the guidance provides is the extension of the distribution deadline for Disclosures that otherwise would be due during the Outbreak Period. The DOL states that it will not consider it a violation of ERISA if an employer or fiduciary fails to provide a Disclosure during the “Outbreak Period.” The “Outbreak Period” began on March 1, 2020 and ends 60 days after the announcement of the end of the COVID-19 National Emergency. The relief applies if the plan and fiduciary act in good faith and furnish the Disclosure as soon as administratively practicable under the circumstances. Acting in “good faith” includes the use of electronic alternative means of communicating with plan participants and beneficiaries who the plan fiduciary reasonably believes have effective access to electronic means of communication such as email, text messages and continuous access websites.
  
  Employers or fiduciaries should consider whether to take advantage of the extension provided by this guidance during the Outbreak Period. Some of the Disclosures covered by this extension include, but are not limited to, the following: plan documents, summary plan descriptions, summary of material modifications, Section 404(c) disclosures, plan and investment fee disclosures, annual funding notices, qualified default investment alternative notices, and blackout notices.
• Consider Whether a Partial Plan Termination Has Occurred: This year has brought a number of changes to the workforce, including reductions due to layoffs and furloughs. Employers should consider whether these workforce changes triggered a partial plan termination under their qualified plans. Whether a partial plan termination has occurred is a facts and circumstances determination, but generally a reduction of 20% or more of the workforce in a given year is presumed to be a partial plan termination. If a partial plan termination occurs, all affected participants must be 100% vested. The IRS provided some limited guidance in the form of a Q&A to address partial plan termination issues. The question involved a situation in which a plan participant was laid off during 2020 due to COVID and then rehired before the end of 2020. Under those facts, the IRS indicated that the participant is generally not treated as having an employer-initiated severance from employment for purposes of determining whether a partial plan termination has occurred because the participant was rehired prior to the end of 2020.
• Update Summary Plan Description if Needed: Summary plan descriptions 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.
• Take Action to Locate Missing Participants: Missing participants continue to pose challenges to plan administrators and continue to be an area of focus for the DOL and the IRS. Plan administrators should consider taking steps to locate missing participants and should also consider adopting missing participant procedures to address steps that the plan administrator will take to locate missing participants.

Defined Contribution Plans (Including 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, including Section 401(k) plans.
• Consider Changes Made by the SECURE Act: As described in the All Qualified Plans “To Do” List, the SECURE Act made a number of changes that are applicable to all qualified plans. The changes described below are applicable to defined contribution and/or Section 401(k) plans.
  • Distribution on Birth of Child or Adoption: Plans may, but are not required to, permit a participant to receive a distribution of up to $5,000 from an eligible retirement plan if the distribution is a qualified birth or adoption distribution (a “QBAD”). A QBAD must be taken during the one-year period beginning on the date that the child was born or legally adopted by the participant. A QBAD is includible in gross income, but it is not subject to the additional 10% tax under Section 72(t) of the Code. A QBAD may be recontributed to an applicable eligible retirement plan to which a participant is permitted to make an eligible rollover contribution. An eligible retirement plan must permit the recontribution of QBADs if: (1) the plan permits QBADs, (2) the participant received a QBAD from the plan, and (3) the participant is eligible to make rollover contributions to the plan at the time he/she wishes to recontribute the QBAD to the plan.
  • Prepare to Provide Lifetime Income Disclosures: The SECURE Act requires individual account plans, such as Section 401(k) plans, to add lifetime income disclosures to at least one benefit statement furnished to participants during a 12-month period. This lifetime income disclosure must state a participant’s benefit as a lifetime income stream both as a 100% joint and survivor annuity and as a single life annuity. The DOL issued an interim final rule setting forth the rules that must be followed in implementing the lifetime income disclosure requirement. The interim final rule is effective on September 18, 2021 and applies to benefit statements furnished after that date.
  • Determine how to Track Hours of Service for Long-Term Part-Time Employees: Prior to the SECURE Act, Section 401(k) plans could limit plan participation to participants who attained age 21 and completed at least 1,000 hours of service during a 12-month period. The SECURE Act limits an employer’s ability to exclude long-term part-time employees from Section 401(k) plans. Under the SECURE Act, long-term part-time employees must be eligible to make salary deferrals to a Section 401(k) plan once the employee has: (1) reached age 21, and (2) worked at least 500 hours in three consecutive 12-month periods. For this purpose, 12-month periods prior to January 1, 2021 are not taken into account in determining a part-time employee’s eligibility to participate in the plan. An employer is not required to make employer contributions for these long-term part-time employees, but if the employer chooses to do so, separate vesting rules apply. Such participants must be credited with one year of vesting service for each 12-month period during which they complete at least 500 hours of service and all years of service, including those before 2021, must be considered unless those years may otherwise be disregarded (e.g., years prior to the attainment of age 18). While this rule does not take effect until 2024, employers should consider acting now to begin tracking hours to determine when long-term part-time employees will be eligible to participate in a plan. If a plan already permits all employees to participate or uses a short eligibility period that is not based on hours worked, these rules do not apply.
  • Increase in Maximum Default Deferral Rate for Qualified Automatic Contribution Arrangements: The SECURE Act raises the maximum permissible deferral rate for a qualified automatic contribution arrangement (“QACA”) from 10% of compensation to 15% of compensation for the second plan year and all subsequent plan years (the maximum rate through the end of the first year remains at 10%). This change is effective for plan years beginning after December 31, 2019. Since it is not clear whether employers may make this change mid-year, employers contemplating this change should consider adopting an amendment by December 31, 2020.
  • Elimination of Annual Notice Requirement for Section 401(k) Safe Harbor Plans that Make Nonelective Contributions: The SECURE Act eliminated the annual notice requirements for safe harbor Section 401(k) plans that make nonelective contributions effective for plan years beginning after December 31, 2019. Employers that offer such plans do not need to provide the annual notice for the 2020 plan year. The SECURE Act also extended the deadline for Section 401(k) plan sponsors to adopt a nonelective safe harbor design. Employers who wish to adopt a Section 401(k) safe harbor plan using nonelective contributions no longer are required to do so at least 30 days before the end of the plan year, provided they make a 4% nonelective contribution rather than a 3% contribution. These employers are permitted to adopt a Section 401(k) safe harbor plan with nonelective contributions at any time before the close of the following plan year. For more information, please see our November 16, 2020 SW Benefits Blog, “Is Your Safe Harbor Section 401(k) Plan Required to Provide an Annual Notice?”
  • Timing Changes for Payment of Required Minimum Distributions Following Death: The SECURE Act changes the length of time over which a deceased participant’s benefits may be distributed following his/her death if such death occurs after December 31, 2019. Defined contribution plans must distribute the entire account balance within 10 years following the participant’s death, subject to exceptions for a surviving spouse, a minor child, a disabled or chronically ill person or a person not more than 10 years younger than the participant.
• Implement CARES Act Suspension of Required Minimum Distributions for 2020: In addition to the changes made to required minimum distributions by the SECURE Act, the CARES Act also waived required minimum distributions for defined contribution plans including Section 401(k) plans. The waiver of required minimum distributions applies to any distribution that is required to be made in calendar year 2020. The IRS has issued a sample amendment to assist employers in implementing this change. For more information, see our March 27, 2020 SW Benefits Update, “The CARES Act and Defined Contribution Plans: A Brief Summary for Plan Sponsors.”
• Consider Changes Made by the CARES Act to Plan Distributions: The CARES Act provided increased retirement plan loan limits and provided relief for plan loan repayment in some instances. The CARES Act also provided hardship distributions in certain coronavirus-related circumstances. Plans need to be amended to incorporate CARES Act changes by the last day of the first plan year beginning on or after January 1, 2022 (i.e., December 31, 2022 for calendar year plans). Employers should consider making note of the provisions of the CARES Act relief that they implemented so they are prepared to amend their plans in the future. For more information, see our March 27, 2020 SW Benefits Update, “The CARES Act and Defined Contribution Plans: A Brief Summary for Plan Sponsors.”
• Restate Pre-approved Defined Contribution Plans and Consider Submitting Restated Plan for Favorable Determination Letter: Every six years, the IRS requires pre-approved qualified plans to be amended and restated to comply with changes in the law. The IRS recently confirmed that “Cycle 3” is open and will remain open until July 31, 2022. Adopting employers of pre-approved defined contribution plans need to amend and restate plan documents during this period. Once the plan has been restated, an adopting employer may apply for an individual determination letter for the restated pre-approved plan.
• Provide Section 401(k)/401(m) Safe Harbor Notice for Plans that Use Matching Contributions by December 2, 2020 for Calendar Year Plans: If a plan has a Section 401(k)/401(m) matching contribution safe harbor, the plan administrator 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, 2020 for calendar year plans). As noted above under “Elimination of Annual Notice Requirement for Section 401(k) Safe Harbor Plans that Make Nonelective Contributions,” this notice is not required for the 2020 plan year for plans making nonelective contributions.
• Provide Annual Automatic Enrollment Notice by December 2, 2020 for Calendar Year Section 401(k) Plans: If a plan has an automatic contribution arrangement, an eligible automatic contribution arrangement (“EACA”), a QACA, or any combination thereof, the plan administrator 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, 2020 for calendar year plans).
• Provide Annual Qualified Default Investment Alternative Notice by December 2, 2020 for Calendar Year Plans: If a plan is relying on the QDIA safe harbor, the plan administrator 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, 2020 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. Model charts are available on the DOL website at www.dol.gov.
• 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: Plan administrators 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 2020, Adopt Amendment Before the 2020 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 2020 plan year, it must adopt an amendment by December 31, 2020 for calendar year plans.
• Consider Amendments to Safe Harbor Plans: Employers may make some 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 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.
• Make Required Minimum Distributions: As described above, the SECURE Act delayed the required beginning date for individuals who attain age 70½ after December 31, 2019. Plan administrators should make 2020 required minimum distributions by December 31st for all participants who have attained their required beginning date, taking into account the delayed required beginning date provided by the SECURE Act.
• Consider CARES Act Extended Due Date for Contributions to Defined Benefit Plans: Employers have a bit of extra time to make their required minimum contributions to defined benefit plans for 2020. The CARES Act delayed until January 1, 2021 the due date for all required minimum contributions to single-employer defined benefit plans that otherwise would have been due in 2020. The CARES Act requires that any delayed contributions (or installments) must be increased with interest that accrues for the period that begins on the original due date and ends on the date of the payment. The CARES Act also permits employers to use the adjusted funding target attainment percentage (“AFTAP”) from the last plan year that ends before January 1, 2020 for any plan year that includes the 2020 calendar year. In Notice 2020-61, the IRS provided detailed guidance on the CARES Act’s extended deadline, the related interest adjustments, the consequences of failure to meet the extended deadline and the use of an AFTAP from a prior year. In Notice 2020-82, the IRS extended the January 1, 2021 deadline to January 4, 2021.
• Consider Amending Plans to Lower Minimum Age for In-Service Distributions: Section 104 of the Bipartisan American Miners Act of 2019 reduced the minimum age for in-service distributions under pension plans to age 59½. For plan years beginning after December 31, 2019, employers may amend their defined benefit plans to reduce the minimum age for in-service distributions from age 62 to age 59½. This change is not mandatory and therefore employers should consider whether it makes sense to modify their defined benefit plans to provide for earlier in-service distributions.
• Consider Closed/Frozen Plan Relief for Closed Defined Benefit Plans: The SECURE Act provides expanded relief from nondiscrimination, minimum coverage and minimum participation testing in certain circumstances and subject to meeting certain requirements. Employers that sponsor closed or frozen defined benefit plans should consider whether this new relief applies.
• 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%: 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 AFTAP is less than 80%. Plan administrators are not required to provide this notice to participants and beneficiaries who are in pay status.
• Provide Participant Benefit Statements: Plan administrators of defined benefit plans should provide individual benefit statements every three years or upon request. Alternatively, plan administrators of 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

• Review 2020 Plan Limits: Please see our description of this issue under “All Qualified Plans ‘To Do’ List” above.
• Consider Changes Made by the SECURE Act: As described in the All Qualified Plans “To Do” List, the SECURE Act made a number of changes that are applicable to all qualified plans. The changes described below are applicable to Section 403(b) Plans.
  • Distribution on Birth of Child or Adoption: Plans may, but are not required to, permit a participant to receive a distribution of up to $5,000 from an eligible retirement plan if the distribution is a QBAD. A QBAD must be taken during the one-year period beginning on the date that the child was born or legally adopted by the participant. A QBAD is includible in gross income, but it is not subject to the additional 10% tax under Section 72(t) of the Code. A QBAD may be recontributed to an applicable eligible retirement plan to which a participant is permitted to make an eligible rollover contribution. An eligible retirement plan must permit the recontribution of QBADs if: (1) the plan permits QBADs, (2) the participant received a QBAD from the plan, and (3) the participant is eligible to make rollover contributions to the plan at the time he/she wishes to recontribute the QBAD to the plan.
  • Prepare to Provide Lifetime Income Disclosures: The SECURE Act requires individual account plans, including Section 403(b) plans, to add lifetime income disclosures to at least one benefit statement furnished to participants during a twelve-month period. This lifetime income disclosure must state a participant’s benefit as a lifetime income stream expressed both as a 100% joint and survivor annuity and a single life annuity. The DOL issued an interim final rule setting forth the rules that must be followed in implementing the lifetime income disclosure requirement. The interim final rule is effective on September 18, 2021 and applies to benefit statements furnished after that date.
  • Timing Changes for Payment of Required Minimum Distributions following Death: The SECURE Act changes the length of time over which a deceased participant’s benefits may be distributed following his/her death if such death occurs after December 31, 2019. Defined contribution plans must distribute the entire account balance within 10 years following the participant’s death, subject to exceptions for a surviving spouse, a minor child, a disabled or chronically ill person or a person not more than 10 years younger than the participant.
• Implement CARES Act Suspension of Required Minimum Distributions for 2020: In addition to the changes made to required minimum distributions by the SECURE Act, the CARES Act also waived required minimum distributions for defined contribution plans including Section 403(b) plans. The waiver of required minimum distributions applies to any distribution that is required to be made in calendar year 2020. The IRS has issued a sample amendment to assist plan sponsors in implementing this change. For more information, see our March 27, 2020 SW Benefits Update, “The CARES Act and Defined Contribution Plans: A Brief Summary for Plan Sponsors.”
• Consider Changes Made by the CARES Act to Plan Distributions: The CARES Act provided increased retirement plan loan limits and provided relief for plan loan repayment in some instances. The CARES Act also provided additional hardship distributions for coronavirus-related distributions. Plans need to be amended to incorporate CARES Act changes by the last day of the first plan year beginning on or after January 1, 2022 (i.e., December 31, 2022 for calendar year plans). Plan sponsors should consider making note of the provisions of the CARES Act relief that they implemented so they are prepared to amend their plans in the future. For more information, see our March 27, 2020 SW Benefits Update, “The CARES Act and Defined Contribution Plans: A Brief Summary for Plan Sponsors.”
• Provide Safe Harbor Notice by December 2, 2020 for Calendar Year Plans: If a Section 403(b) plan uses an ACP contribution safe harbor, the plan administrator 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, 2020 for calendar year plans).
• Provide Annual Automatic Enrollment Notice by December 2, 2020 for Calendar Year Plans: If a Section 403(b) plan is subject to ERISA and has automatic deferrals, the plan administrator 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, 2020 for calendar year plans).
• Provide Annual Qualified Default Investment Alternative Notice by December 2, 2020 for Calendar Year Plans: If a Section 403(b) plan is subject to ERISA and the plan is relying on the QDIA safe harbor, the plan administrator 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, 2020 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 annually provide to participants and beneficiaries in individual account plans a comparative chart of detailed investment-related information about the plan’s designated investment alternatives. DOL guidance requires that this information be provided at least annually. Model charts are available on the DOL website at www.dol.gov.
• Ensure Compliance with the Universal Availability Rules: Noncompliance with the universal availability (“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 Actual Contribution Percentage Contribution Safe Harbor for 2020, Adopt Amendment Before the 2020 Plan Year: Actual contribution percentage ("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 2020 plan year, it must adopt an amendment by December 31, 2020 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).