While Santa Claus may get away with waiting until December to make his list and check it twice, plan sponsors usually need a bit more lead time to make sure they’ve complied with all the deadlines for qualified plans.
To that end, here’s a checklist of items, thanks to the lawyers at Bryan Cave, that need attention well before you start decking the halls and planning that New Year’s Eve party.
1. Determination letters. Sponsors of individually designed plans, which are on a five-year cycle, may be required to renew their determination letters with the IRS. Employers with employer identification numbers ending in 4 or 9 are assigned to Cycle D, which ends on Jan. 31, 2015. Multiemployer plans are usually assigned to Cycle D.
2. Recognition of same-sex marriages. Qualified retirement plans must recognize the decision in United States v. Windsor effective June 26, 2013. Any plans that refer to the Defense of Marriage Act in defining marital relationships or fails in any other way to comply with the Windsor judgment must be amended to reflect that judgment.
While plans that define marital relationships exclusively in general terms, such as “spouse,” and do not distinguish between same-sex and opposite-sex spouses, usually don’t require such an amendment, such clarification can still be beneficial. Although there are exceptions under certain criteria, plan sponsors in general have only until Dec. 31 to adopt such an amendment.
3. Change in PBGC premium due date. Both flat-rate and variable-rate premiums for small defined benefit plans, according to a change in rule from the Pension Benefit Guaranty Corporation, are now due 9½ months after the beginning of the plan year for which they are payable. That means that small plans now find their premiums due 6½ months earlier than under the old rule.
The final rule is applicable for 2014 and subsequent years, although there is a transition rule for small plans that allows a four-month delay of the new due date for the first plan year beginning after 2013. The transition rule is intended to ease potential cash-flow problems.
4. New final regulations for cash-balance and hybrid plans. New final regulations governing vesting and interest credits for cash-balance and hybrid plans were issued by the IRS in September after a long wait. While compliance with these new regulations is not required until 2016, plan sponsors should familiarize themselves with their requirements.
5. Annual notice requirements. Plan sponsors need to be sure that all required annual notices are sent to participants and beneficiaries in a timely manner. Required notices include the Section 401(k) Safe Harbor Notice, which describes the safe harbor contribution and certain other plan features and is due by Dec. 1 for calendar-year plans. For non-calendar year plans, the notice is due not fewer than 30, and not more than 90, days before the first day of the plan year.
Another required notice is the Section 401(k) Automatic Enrollment Notice that informs employees how they are automatically enrolled and how automatic contributions work. This is due by Dec. 1 for calendar-year plans, and for non-calendar year plans not fewer than 30 days before the first day of the plan year.
Then there’s the Qualified Default Investment Notice, which is required by Dec. 1 for calendar-year plans, and for non-calendar year plans at least 30 days prior to the beginning of the plan year. It notifies participants who have the option of directing investment of their account balances how their balances will be invested if participants do not give an affirmative investment direction.
Last but not least is the Defined Benefit Plan Funding Notice, which describes the plan’s funded status for the past two years, provides a statement of its assets and liabilities and includes other information about its funded status. This notice must be provided to participants within 120 days after the end of the plan year. Calendar-year plans have an April 30 deadline; small plans covering fewer than 100 participants have the same due date as for their Forms 5500.
A safe harbor 401(k) plan can include two or all three of the Section 401(k) Safe Harbor, Section 401(k) Automatic Enrollment and Qualified Default Investment notices, if applicable, in the same notice.