Employee Benefit Plan Amendments/Disclosures Required This Year
Sponsors of employee benefit plans should be aware of several rapidly approaching deadlines that require immediate action. As noted below, we request that you reach out to us if you would like us to prepare or review any plan amendments to account for these items.
Retirement Plan Amendments
As we previously have advised, plan sponsors must amend their retirement plan documents before the end of the 2022 plan year. Specifically, the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”) and the Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) require plan amendments to reflect (a) certain mandatory changes and/or (b) optional changes employers chose to implement. While plan sponsors already implemented many of these changes operationally, plan sponsors must amend their retirement plan documents to include these changes no later than December 31, 2022 (for certain calendar year plans).
Note that governmental plans have an extended deadline period to the last day of the 2024 plan year, but as a matter of good governance, governmental plan sponsors should consider updating these plans now to ensure the plan terms match what likely already has been updated in plan operations.
Action Required: If your retirement plan documents have not been updated yet for these legislative and discretionary changes, you should contact us immediately so we can prepare an updated document before the deadline. In addition, we also should review and update the administrative forms and summary plan descriptions to ensure these employee communications are legally sufficient and match the terms of the plan.
Lifetime Income Disclosure
The SECURE Act established a requirement for a new “lifetime income” disclosure to be sent this year (no later than the second quarterly statement sent to participants in 2022). In short, this disclosure will provide an example of the annuity product a participant can buy on the open market using the current lump sum value of the participant’s plan benefit. The DOL has issued regulations providing guidance for this new disclosure. Although there is some flexibility in these regulations, unfortunately, the DOL guidance requires the use of several unfavorable assumptions – for example, the required disclosure cannot take future earnings/contributions into account. Plan sponsors should be prepared for potential questions these notices may raise as participants inevitably realize their lifetime income projection in the new disclosure is lower than expected. Plan sponsors should take full advantage of the limited flexibility in the DOL regulations when preparing the new lifetime income disclosure to address these questions.
Action Required: If you have not already sent out the required lifetime income disclosures, you should reach out to your third-party administrator immediately to be sure that the lifetime income disclosures required by the SECURE Act will be provided by the applicable deadline (and as required periodically thereafter), and that they are maximizing the available regulatory flexibility in order to minimize employee discontent. Please contact us if we can be of assistance in ensuring that such disclosures are compliant with the latest guidance.
Pre-Approved Retirement Plan Restatements
For employers using pre-approved plan documents (e.g., prototype, volume submitter documents) for their retirement plans, the IRS requires such plans to be restated periodically (depending on the type of plan involved) and to be amended for amendments reflecting changes in the law in the interim. So-called “Cycle 3” restatements for certain defined contribution retirement plans (e.g., 401(k) plans, profit sharing plans, etc.) are required to be adopted by July 31, 2022. (This is in addition to the changes required by the SECURE Act, the CARES Act, etc.)
Action Required: If you are using a prototype/volume submitter document, you should be sure that your “Cycle 3” restatement (if applicable) is adopted by July 31, 2022. Of course, because the prototype document provider does not provide legal advice, you should have the document reviewed by legal counsel before adopting the restated document. Please contact us if we can be of assistance in ensuring that your pre-approved plan document is compliant and up-to-date.
Health and Welfare Plans
Finally, plan sponsors of health and welfare plans should make sure that their plan documents are fully up-to-date with all the various changes required by (and/or due to) the myriad laws enacted and guidance issued throughout the COVID pandemic. This includes several changes in the CARES Act and informal guidance from the IRS, including, among other things, the temporary rules requiring plans to disregard certain days in calculating various COBRA, special enrollment and ERISA claims/appeals deadlines, etc. Plan Sponsors also need to be focused on compliance with and implementation of the game-changing types of mandates that were set forth in the Consolidated Appropriations Act (passed in late 2020), which in addition to numerous operational action items requiring health plan transparency (as it relates to “no surprises” required billing disclosures and price comparisons, provider directories, new ID card requirements, etc.), requires specific updates to health plan claims processing procedures.
Action Required: If your health and welfare plan documents (including services agreements) have not been amended for compliance with the flurry of guidance related to the pandemic and/or for the many design changes plan sponsors made in response to the realities of the pandemic, you should contact us immediately so we can prepare an updated document.
Please contact us if you want to discuss any of the above provisions. We would be happy to set up a call to discuss, and advise you on, the provisions that are applicable to your plan(s) and help you make and implement an action plan to address these issues.