Hey Retirement Plan Sponsors: Desire a Joyful New 12 months? Use your 2020 downtime to take a retirement examination Foley & Lardner LLP


Every year at this time, when the holiday season is just beginning and the New Year is just around the corner, all of the well-qualified pension plan sponsors (and plan administrators) ask, “Have we already made any IRS-required plan changes for this year? ? “With all that has happened so far in 2020, I apologize for worrying a little about what the past few weeks may bring.

Fortunately, you can relax (just a little – it’s still 2020 after all). Although you may have implemented some of the defined contribution plan changes under the SECURE Act and the CARES Act in 2020, employers are not required to adopt the required plan changes this year. Instead, they have until December 31, 2022 to do so (for calendar year plans).

Since you have some air to breathe, you should consider doing a “checkup” plan during your “downtime”.

Review: Deadlines of the SECURE Act and the CARES Act

As a quick reminder, the following changes to the SECURE Act needed to be implemented in 2020 (with plan changes adopted by the end of 2022:

  • Minimum Required Distributions (RMDs) must begin April 1st following the year an individual is 72 years old (70 ½ years and older). and
  • New rules for distributing payments for non-spouses.

If you have made any of the optional changes to the retirement plan in the SECURE Act (such as qualified distributions for birth and adoption) or the COVID-19-related relief provided by the CARES Act distribution and loan provisions or its 2020 RMD waiver The changes required for these changes are also due by December 31, 2022

Since you have until the end of 2022 to adopt these changes, you should at least wait a while before making any plan changes. The IRS continues to issue guidance on the SECURE Act and the CARES Act, and may issue model changes to the provisions of the Acts’ retirement plan. Taking the time now to prepare for plan changes could pay off later (potentially saving you from the need to revise your plans).

Reservation: While plan changes for changes to the SECURE Act and the CARES Act are not due until late 2022, plan changes documenting those changes must be adopted by December 31, 2020 (for calendar) if you make changes to yours in 2020 at our sole discretion have made a qualified pension plan. Annual plans).

Do a review of the terms and management of your plan

Retirement plan sponsors have a fiduciary duty to ensure that the terms of their plans comply with the requirements of the Internal Revenue Code (Code) and that those plans are administered in accordance with their terms and all applicable laws, including ERISA. Regular reviews of basic plan compliance requirements can help plan sponsors identify incidents before they become serious issues that need to be addressed.

To that end, the IRS has prepared checklists for several types of retirement plans, including those under sections 401 (k) and 403 (b). The checklists contain a handful of yes / no questions that will encourage plan sponsors to consider the language in their plan documents and the manner in which the plan will be administered. If a plan sponsor answers “no” to any of the questions, the checklists point to an IRS Fix-It guide designed to help the sponsor correct the problem.

The IRS checklists are short – one page each – and are designed to help plan sponsors spot the most common plan documentation and administrative errors. If plan sponsors want to dig deeper into the management of their retirement plans, they can, with the help of legal counsel, create their own administrative checklists, starting with the questions raised in the IRS checklists, and then expand them.

By completing a pension plan administration checklist annually (whether using the IRS checklist or a custom checklist), a plan sponsor can ensure that their pension plans are being administered in accordance with the Code and ERISA. The sponsor should keep the completed checklist in the records of the plan to demonstrate that it is fulfilling its fiduciary duty to monitor compliance with and administer the plan.

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Towards the end of 2020 (finally!) You may have a little extra time as it doesn’t require any changes to prepare and adopt at the end of the year. If so, you should consider a review of your qualified defined contribution pension plans to make sure they are operating in accordance with the terms and conditions and required laws. When you pass your exam, sit back and enjoy the glass of wine / beer / drink of your choice – you deserve it!

1 See e.g. B. the COVID-19 pandemic; Forest fires on the west coast; the stock market crash; deadly earthquakes; Volcanic eruptions; a record breaking hurricane season; Murder hornets (!) Etc. etc. etc. etc.

2 Certain changes to hardship requirements – the elimination of the six-month suspension of election moratoriums and the requirement for participants to certify that they lacked the cash and cash equivalents to alleviate financial hardship – also had to be implemented in 2020. Changes to these changes must be accepted by December 31, 2021 (for calendar year plans).

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