The end of 2020 is almost here! While most of us are ready to bid good riddance to 2020, retirement plan sponsors should be sure their plans have satisfied all year-end compliance deadlines before the celebrations begin. Otherwise, costly penalties could result.
Retirement Plan Disclosures
As a quick reference, the following is a list of common year-end disclosure requirements for retirement plans:
- 401(k) safe harbor notice – must be distributed to participants 30-90 days prior to the beginning of each plan year for plans relying on safe harbor rules; by December 1, 2020, for calendar-year plans. The same deadline applies to traditional safe harbor plans and qualified automatic contribution arrangement (QACA) safe harbor plans. Although the SECURE Act eliminated the notice requirement for plans that use nonelective contributions to satisfy the safe harbor, sponsors of such plans may wish to continue providing safe harbor notices in order to have the flexibility to reduce or suspend safe harbor contributions during the plan year, if needed.
- Automatic contribution arrangement (ACA) notice – must be distributed to participants 30-90 days prior to the beginning of each plan year; by December 1, 2020, for calendar year plans. The same deadline applies to plans with plain ACAs and eligible automatic contribution arrangements (EACAs).
- Qualified default investment arrangement (QDIA) notice – must be distributed to participants 30-90 days prior to the beginning of each plan year; by December 1, 2020, for calendar year plans.
- Annual participant fee disclosure documents – ERISA plans must provide an annual fee disclosure at least once in each 14-month period. If you distributed the fee notice with your other notices toward the end of last year, plan to do so again this year.
- Summary annual report (SAR) – ERISA-covered defined contribution plans must provide the SAR to participants within nine months of the end of the plan year or two months after the Form 5500 filing deadline. For calendar year plans, this generally means the SAR is due September 30 if the Form 5500 was not extended or December 15 if the Form 5500 was extended.
Keep in mind that vendor-prepared and distributed notices are often computer-generated and may not accurately reflect special features of your plan (particularly if you use an individually designed plan or have any special addenda for your preapproved plan). Ineffective or incorrect notices may result in confusion among your participants as well as errors and penalties. Be sure to review all notices carefully and address any concerns or questions with your benefits counsel.
Additional Year-End Reminders
- Discretionary plan amendments – retirement plan design changes generally must be incorporated into the plan document by the end of the plan year; by December 31, 2020, for calendar year plans.
- Forfeiture balances – must be used or allocated each plan year, and generally may not be carried forward into future years.
- Required minimum distributions (RMDs) – except for a participant’s first required distribution, RMDs generally must be paid by December 31 each year. However, under the CARES Act, defined contribution plans (including 401(k) plans) may choose to forego RMDs for 2020.
- Nonqualified retirement plan elections – participants in nonqualified defined contribution retirement plans (e.g., executive deferral plans) must elect their 2021 deferral amounts (and time and form of payment, if applicable) no later than December 31, 2020.
If you have questions about year-end compliance or any other benefits matter, contact a member of the employee benefits team.