As 2021 winds down, retirement plan sponsors should confirm that their plan documents are amended by December 31, 2021, to comply with certain plan changes:
- Hardship Distributions. 401(k) plans and 403(b) plans must be amended, as applicable, to comply with the final regulations updating the hardship distribution rules. For hardship distributions made on or after January 1, 2020, plans must be amended by December 31, 2021, to: (i) eliminate the suspension of elective deferrals following a hardship distribution; and (ii) require employees requesting hardship distributions to represent that they have insufficient cash or other liquid assets reasonably available to satisfy the need.Additionally, plans that made changes to their hardship distribution provisions that were (i) permitted under the regulations, and/or (ii) took effect on or before January 1, 2020 (such as eliminating the requirement to exhaust all available loans before taking a hardship distribution, or permitting amounts contributed as qualified nonelective contributions (QNECs) or qualified matching contributions (QMACs) and earnings to be made available for hardship distributions), must adopt such changes by December 31, 2021.
- PBGC Rates. Defined benefit plans that refer to the Pension Benefit Guaranty Corporation (PBGC) immediate rate may need to be amended to reflect that the PBGC stopped publishing monthly rates at the end of 2020. Such amendment would need to be effective January 1, 2021 (which, for calendar year plans, would require adoption of an amendment by December 31, 2021).
- Collectively Bargained Cash Balance/Hybrid Defined Benefit Plans. Cash balance/hybrid defined benefit plans maintained pursuant to a collective bargaining agreement ratified on or before November 13, 2015 must be amended by December 31, 2021, to comply with requirements regarding market rate of return and other cash balance/hybrid plan requirements that first applied to such plans generally on or after January 1, 2017.
- Discretionary Amendments. If a retirement plan implements discretionary changes during the 2021 plan year, retirement plan sponsors must adopt an amendment to that effect by the last day of the 2021 plan year (December 31, 2021, for a calendar year plan).
If any of the above items apply to your retirement plan, the plan must be amended by the deadline stated above (generally, December 31, 2021). Sponsors of defined contribution and defined benefit plans may also consider the following changes to their retirement plans:
- Mandatory Class Action Waivers and Arbitration Provisions. Sponsors of defined contribution and defined benefit plans may consider adding mandatory class action waivers and arbitration provisions to their plan documents.
- SECURE Act and CARES Act Amendments. Defined contribution and defined benefit plans may be amended in 2021 for SECURE Act and CARES Act changes, but the deadline for adopting SECURE Act and CARES Act amendments is plan year-end 2022 (December 31, 2022 for calendar year plans).
- American Rescue Plan Act of 2021. The Internal Revenue Service (IRS) recently issued the 2021 Required Amendments List in IRS Notice 2021-64 (the “2021 List”). The only required amendment on the 2021 List involves multiemployer plans receiving special financial assistance under the American Rescue Plan Act of 2021 (ARPA). These plans may be amended in 2021 to incorporate this change, but the deadline for adopting the amendment is December 31, 2023.
Please contact your employee benefits counsel to ensure that your retirement plan document has been (or will be) timely amended to incorporate any necessary amendments.