As year-end approaches, employers should review their employee benefits plans to make sure they have been updated for any changes in the law or for any changes that have been implemented this year. In addition, you may need to send out participant notices, or to restate your plan by January 31, 2012. Below is a summary of end-of-year action items.
Employers that sponsor qualified retirement plans should note the following year-end action items:
Notice Requirements:
Depending on employer plan design, there may be one or more notices that must be provided before the end of the year. A sample of such notices includes:
- Traditional Safe Harbor 401(k) Notice. Annual notification to be sent at least 30 days before the last day of the plan year (for a calendar year plan, the deadline was December 2, 2011), that identifies the applicable safe harbor matching contribution formula or safe harbor nonelective contribution formula, other available employer, contributions, type and amount of compensation that can be deferred, how and when to make a cash or deferred election, and a description of other key elements of the plan.
- Qualified Automatic Contribution Arrangements (QACA) – Safe Harbor 401(k). If applicable, requires notification of the same items (and by the same deadlines) described in the traditional safe harbor 401(k) notice above, along with an explanation of the level of automatic deferral contributions that will be made if the employee does not make an affirmative election to participate in the plan, and a statement of the employee's right to not have elective contributions made or to change the amounts and a description of investment choices.
- Eligible Automatic Contribution Ajurrangement (EACA). As an alternative to the QACA notice, annual notification of the same items described in the traditional safe harbor 401(k) notice above (to the extent applicable), along with a description of the applicable automatic enrollment terms and conditions, including a statement regarding the employee's right to make a permissive withdrawal, and the procedures for electing such a withdrawal.
- Participant directed DC Plan Notice. Unless information has been included in the Summary Plan Description (SPD), if you sponsor a defined contribution plan that allows participant-directed investments, prior to the beginning of the next plan year, a statement must be provided that the plan sponsor is not liable for certain losses resulting from participant's exercise of their rights to direct investments and advising participants as to the availability of any investment advice services.
Amendments
Below is a summary of amendments that you may be required to adopt by the end of the plan year (for example December 31, 2011 for a calendar year plan) due to certain changes in tax law.
Defined Contribution Plans
For defined contribution plans, employers should keep in mind the following matters.
- Suspension of 2009 required minimum distributions. Required minimum distributions (RMDs) generally are amounts that must be distributed from a participant's plan account beginning in the later of the year that the participant reaches age 70½ or retires. The Worker, Retiree, and Employer Recovery Act of 2008 permitted plans to suspend RMDs for 2009 and allowed 2009 RMDs to be treated as eligible rollover distributions. Plans must be amended by the last day of the 2011 plan year if RMD's were suspended.
- In-plan Roth conversions. The Small Business Jobs Act of 2010 permitted plans to allow participants to permit qualified in-plan Roth conversions and Roth deferrals in certain plans that were previously prohibited from allowing. If your plan allowed such conversion or added a Roth feature this year, you must adopt an amendment by the end of the plan year.
- Investment Diversification. A Provision of the Pension Protection Act (PPA) required amendments to defined contribution plans to provide for investment diversification requirements of employer securities. If your plan invests in employer securities, you must adopt an amendment by the end of the plan year.
- Discretionary amendments. Discretionary amendments to implement plan design changes made during the 2011 plan year generally must be adopted by the last day of the 2011 plan year.
Defined Benefit Plans
An employer should keep in mind the following matters involving defined benefit plans.
- Benefit restrictions based on plan funding. Amendments to implement the final regulations under Code Section 436 are required by the last day of the 2011 plan year. This deadline may be extended as the IRS has indicated its intent to issue a model plan amendment, which has not yet been published as of early November 2011.
- Discretionary amendments. As with defined contribution plans, discretionary amendments to implement plan design changes made during the 2011 plan year and to implement certain changes for the 2012 plan year must be adopted by the last day of the 2011 plan year.
Nonqualified Deferred Compensation Plans
Employers who sponsor Nonqualified Deferred Compensation Plans (NQDCPs) that are linked to other NQDCPs must amend to provide for identical time and form of payment provisions by December 31, 2011.
Individually Designed Retirement Plans
If you sponsor an individually designed plan with an EIN ending in "1" or "6" you must restate your plan to incorporate PPA provisions and other legal changes and submit for IRS approval by January 31, 2012.
Deadline Extension
Employers that sponsor health and welfare plans should note the following deadline extension:
Under the Affordable Care Act, plans and insurers are required to furnish participants with an abbreviated summary of benefits and coverage. The deadline for distributing this summary was originally set at March 23, 2012. When the government issued proposed regulations on this requirement, and furnished templates for use in preparing the summaries, it generated considerable confusion and comment. As a result, the deadline has been extended until the final regulations are issued. Thus far, there is no indication as to when final regulations will be issued.
For More Information
If you believe any of these requirements apply to your plan, please contact Polsinelli Shughart's Employee Benefits attorneys to assist you in preparing documents for your plan. |
