2014 End of Year Plan Sponsor “To Do” List Part 2 – Qualified Retirement Plans

As 2014 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 presenting our “To Do” Lists in three separate SW Benefits Updates. Part 1 of the series covered health and welfare plan issues; Part 2 covers qualified retirement plan issues and Part 3 will cover executive compensation issues. Each SW Benefits Update will provide you with a “To Do” List of items on which you may want to take action before the end of 2014 or in early 2015. As always, we appreciate your relationship with Snell & Wilmer and hope that these “To Do” Lists focus your efforts over the next few months.

For your convenience, we have broken the “To Do” lists into five categories (accessible via the menu on the left).

All Qualified Plans “To Do” List

  • Amend Plans to Comply with United States v. Windsor if Needed: If the plan’s terms define “spouse” as consistent with Section 3 of the Defense of Marriage Act (“DOMA”) (e.g., it limits spouse to a person of the opposite sex or it references DOMA) or the plan terms are otherwise inconsistent with the Windsor decision, a plan amendment is required. Plans generally must be amended by the later of (1) December 31, 2014 or (2) the due date of the employer’s tax return for the tax year that includes the date the amendment is first effective. For additional information on same sex marriage issues impacting employee benefits, please see our September 9, 2013 Legal Alert and our SW Benefits Blog posts on February 5, 2014; April 4, 2014; May 6, 2014; May 22, 2014 and June 30, 2014.       
  • 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 2014 plan year (i.e., December 31, 2014 for calendar year plans).
  • Adopt Plan Restatement if in Cycle D: If a qualified plan is individually designed and falls in Cycle D (i.e., certain multiemployer plans or the employer identification number associated with the plan ends in 4 or 9) the plan must be restated and submitted for a determination letter on or before January 31, 2015.
  • 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 2015 Plan Limits: Become familiar with the 2015 plan limits. See our October 31, 2014 SW Benefits Blog post for more information.

Section 401(k) Plans “To Do” List

  • Comply with Items on All Qualified Plans List: The items on the All Qualified Plans list also apply to Section 401(k) plans.
  • Provide Section 401(k)/401(m) Safe Harbor Notice by December 2, 2014 for Calendar Year Plans: As a reminder, 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, 2014 for calendar year plans).
  • Provide Annual Automatic Enrollment Notice by December 2, 2014 for Calendar Year Plans: As a reminder, if a plan has an automatic contribution arrangement, an eligible automatic contribution arrangement (“EACA”), or 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, 2014 for calendar year plans).
  • Provide Annual Qualified Default Investment Alternative Notice by December 2, 2014 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, 2014 for calendar year plans).
  • Provide Participant Fee Disclosure Information: Plans are required to provide a comparative chart of detailed investment-related information to plan participants and beneficiaries about the plan’s designated investment alternatives on an annual basis. For calendar year plans, the initial fee disclosure was due on August 30, 2012. Department of Labor guidance requires this information to be provided at least annually. In an effort to allow plan sponsors to align this disclosure with other disclosure requirements, the Department of Labor issued Field Assistance Bulletin 2013-02, which provides plan administrators with a one-time opportunity to reset the deadline for the annual fee disclosure. Under this guidance, a plan administrator is treated as satisfying the annual notice requirement if the 2013 fee disclosure is provided no later than 18 months after the initial disclosure was provided (i.e., February 25, 2014). In addition, for plan administrators that have already taken action to furnish the 2013 fee disclosure, the one-time reset opportunity may be applied to the 2014 fee disclosure.
  • 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 must also 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 date on which the Form 5500 was due.
  • If Adding Qualified Automatic Contribution Arrangement or Eligible Automatic Contribution Arrangement for 2015, Adopt Amendment Before the 2015 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 2015 plan year, it must adopt an amendment by December 31, 2014 for calendar year plans.
  • Consider Amendments to Safe Harbor Plans:  The ability to amend a safe harbor plan mid-year is limited. For example, a safe harbor plan cannot be amended mid-year to add automatic enrollment or automatic escalation. To the extent an employer wants to make changes to a safe harbor plan, it needs to do so before year end and, depending on the change, may need to do so before providing the safe harbor notice described above.    

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

  • Comply with Items on All Qualified Plans List: The items on the All Qualified Plans list also apply to defined contribution plans.
  • Provide Annual Qualified Default Investment Alternative Notice by December 2, 2014 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, 2014 for calendar year plans).
  • Provide Participant Fee Disclosure Information: Plans are required to provide a comparative chart of detailed investment-related information to plan participants and beneficiaries about the plan’s designated investment alternatives on an annual basis. For calendar year plans, the initial fee disclosure was due on August 30, 2012. Department of Labor guidance requires this information to be provided at least annually. In an effort to allow plan sponsors to align this disclosure with other disclosure requirements, the Department of Labor issued Field Assistance Bulletin 2013-02, which provides plan administrators with a one-time opportunity to reset the deadline for the annual fee disclosure. Under this guidance, a plan administrator is treated as satisfying the annual notice requirement if the 2013 fee disclosure is provided no later than 18 months after the initial disclosure was provided (i.e., February 25, 2014). In addition, for plan administrators that have already taken action to furnish the 2013 fee disclosure, the one-time reset opportunity may be applied to the 2014 fee disclosure.
  • 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 must also 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 date on which the Form 5500 was due.

Defined Benefit Plans “To Do” List

  • Comply with Items on All Qualified Plans List: The items on the All Qualified Plans list also apply to defined benefit plans.
  • Consider Impact of Hybrid Plan Regulations: In September, the IRS issued long awaited regulations on hybrid plans. The regulations provide guidance on what is considered a “market rate of return” under the Pension Protection Act. The IRS also issued proposed regulations that provide guidance on transitioning to a market rate of return. The IRS has indicated it expects to finalize the proposed regulations early in 2015. The final regulations are effective for plan years that begin on or after January 1, 2016.
  • Post Portions of Form 5500 on Company’s Intranet: A plan sponsor of a defined benefit pension 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 a restriction on payment of benefits. These restrictions become applicable if the plan’s adjusted funding target attainment percentage is less than 80%. Plan administrators are not required to provide this notice to participants and beneficiaries 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 a participant 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 2014 plan year (i.e., December 31, 2014 for calendar year plans).
  • Update Summary Plan Description if Needed: 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. If a Section 403(b) plan is subject to ERISA, the SPD may need to be updated.
  • Provide Safe Harbor Notice by December 2, 2014 for Calendar Year Plans: As a reminder, 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, 2014 for calendar year plans).
  • Provide Annual Automatic Enrollment Notice by December 2, 2014 for Calendar Year Plans: As a reminder, 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, 2014 for calendar year plans).
  • Provide Annual Qualified Default Investment Alternative Notice by December 2, 2014 for Calendar Year Plans: As a reminder, 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, 2014 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 date on which the Form 5500 was due.
  • If Adding an ACP Contribution Safe Harbor for 2015, Adopt Amendment Before the 2015 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 2015 plan year, it must adopt an amendment by December 31, 2014 for calendar year plans.
  • Comply with Form 5500 Reporting Requirements: As a reminder, effective for plan years beginning on or after January 1, 2009, Section 403(b) plans 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).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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