By the end of 2023, sponsors of calendar-year single-employer retirement plans must adopt necessary and discretionary plan amendments to ensure compliance with statutory and regulatory requirements of the tax code and the Employee Retirement Income Security Act of 1974 (ERISA). This Client Action Bulletin looks at key areas—including administrative compliance issues—that defined benefit (DB) and defined contribution (DC) plan sponsors should address by December 31, 2023.
Qualified plan amendments
Employers that sponsor retirement plans should review their plan documents before the end of 2023 to ensure that discretionary or operational features comply with ERISA and the Internal Revenue Code (IRC). Sponsors that made discretionary plan changes during 2023 must formally adopt plan amendments by December 31, 2023. In addition, required or discretionary amendments relating to plan years prior to 2023 should be considered as part of any year-end plan review, taking into account whether they have been properly adopted and executed.
Although there are several changes related to the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act that are required to be in place operationally, the deadline for amendments reflecting these changes was extended by Division T of the Consolidated Appropriations Act of 2023, known as the SECURE 2.0 Act of 2022 (SECURE 2.0). Plan amendments made pursuant to SECURE 2.0 as well as the SECURE Act and CARES Act generally must be adopted no later than the last day of the first plan year beginning on or after January 1, 2025. However, this delay does not apply if a plan is terminating.
Plan sponsors of certain individually designed plans should check their plans to see if any amendments are required in order to comply with the Internal Revenue Service (IRS) Required Amendments List (RAL). The RAL is the annual list of all the amendments necessary for individually designed plans to retain their tax-qualified status. Generally, plan sponsors must adopt any item placed on the RAL by the end of the second calendar year following the year the RAL is published. For amendments in the 2021 RAL (Notice 2021-64), the deadline is December 31, 2023.
The RAL is divided into two parts.
- Part A covers changes in requirements that generally would require an amendment to most plans or to most plans of the type affected by the change.
- Part B includes changes in requirements that the U.S. Treasury Department and the IRS anticipate will not require amendments to most plans but might require an amendment because of an unusual plan provision in a particular plan. For example, if a change affects a particular requirement that most plans incorporate by reference, then Part B would include the change because a particular plan might not incorporate the requirement by reference and, thus, might include language inconsistent with the change.
The 2021 RAL did not include any changes that require amendments to an individually designed single-employer retirement plan by December 31, 2023.
Correcting failures to amend a retirement plan on time
If a plan sponsor discovers a failure to adopt either a required or discretionary plan amendment, it should consider correcting the mistake through the IRS’s Employee Plans Compliance Resolution System (EPCRS). See IRS Revenue Procedure 2021-30. Earlier this year, the IRS issued Notice 2023-43, providing interim guidance on the expansion of EPCRS, which allows plans to self-correct certain Eligible Inadvertent Failures (EIFs) under Section 305 of SECURE 2.0. Plan sponsors may be able to self-correct EIFs without contacting the IRS or paying a fee, provided the corrective action is taken in a timely manner.
If an EPCRS filing is required, the standard filing fees for correcting a plan amendment failure fall between $1,500 to $3,500, based on the amount of plan assets, and can be substantially less than the monetary sanctions that may be assessed if the IRS audits the plan and discovers a late amendment of a failure to adopt an amendment.
Annual notices and benefit statements
Plan sponsors should ensure they make available or distribute certain information to participants by the following dates.
| Due date | Action |
|---|---|
| 10/30/2023 | For DB plans, provide a notice of IRC Section 436 benefit restrictions to plan participants if the September 30, 2023, certified or deemed adjusted funding target attained percentage (AFTAP) is less than 80% and the notice was not previously provided. |
| 11/14/2023 | Distribute third-quarter 2023 benefit statements to participants if the individual account plan gives participants the right to direct their investments. |
| 11/15/2023 | For partnerships, distribute the 2022 summary annual report (SAR) to participants if no IRS Form 5558 was filed but an extension request (IRS Form 7004) was filed on time for the employer’s income tax return (IRS Form 1120). |
| 12/1/2023 | A 401(k) safe harbor notice; an automatic enrollment notice; and/or a qualified default investment alternative (QDIA) notice are required, if applicable. |
| 12/2/2023 | Employee Stock Ownership Plans (ESOPs) must provide a diversification notice to participants first eligible to divest employer securities on January 1, 2024. |
| 12/15/2023 | DC plans and DB plans not covered by the Pension Benefit Guaranty Corporation (PBGC) with calendar plan years (e.g., “professional service employers” with fewer than 26 employees, electing church groups, etc.) must distribute to participants the 2022 SAR if the 2022 Form 5500 due date was extended by an IRS Form 5558 filed on time. Corporate employers must distribute the 2022 SAR if no IRS Form 5558 was filed but an extension request (IRS Form 7004) was filed on time for the employer’s income tax return (IRS Form 1120). Tax-exempt employers must distribute the 2022 SAR if no IRS Form 5558 was filed but an extension request (IRS Form 8868) was filed on time for the employer’s information return (IRS Form 990). |
| 12/31/2023 | DC plans that allow participants to direct their investments must provide a statement—if not included in a summary plan description (SPD)—that the plan fiduciaries are relieved of liability for certain losses resulting from participants’ exercise of their rights to direct their investments; the document must include information about the availability of any investment advice services the plan sponsor offers. |
| 12/31/2023 | DB plans must provide benefit statements every three years or an annual notice explaining how participants may obtain statements. |
| 1/13/2024 | DB plans subject to ERISA and the tax code must post on the sponsor’s existing intranet site Parts I and II of the 2022 Form 5500 and the Schedule SB within 90 days after the date the Form 5500 is filed (by January 14, 2024, if Form 5500 was filed on October 16, 2023). However, the IRS has extended the deadline for Form 5500 filing (including Form 8955-SSA) for businesses located in areas designated by the Federal Emergency Management Agency (FEMA) as qualifying for assistance due to recent natural disasters. |
Other operational action items
By December 31, 2023, retirement plan sponsors should also do the following:
For DC plans
- To maintain a 401(k) plan’s qualified status due to a failed 2022 actual deferral percentage (ADP) test or actual contribution percentage (ACP) test, (1) pay to all affected participants any ADP/ACP distributions needed to correct the failure; or (2) make a qualified nonelective contribution (QNEC) to all non-highly compensated employees (NHCEs).
- For DC plans under which the plan document provides for use of a forfeiture account, use the forfeitures.
For DB and DC plans
- Make recurring required minimum distributions (RMDs) for both DC and DB plans.
- For top-heavy DB and DC plans, make the required top-heavy contributions.
For DB plans
- If desired, make a voluntary funding election to avoid an ERISA 4010 filing or at-risk status (i.e., DB plan elections to reduce a credit balance or revoke a credit balance election) and/or request a change in the funding method for 2023.
- Certify the DB plan’s 2023 plan-year adjusted funding target attained percentage (AFTAP), if the plan used a “range” certification. (Note: A failure to meet this deadline will result in the AFTAP for the plan year being deemed less than 60% retroactively to October 1, 2023.)
- Make an election to reduce the DB plan’s carryover and/or prefunding balance as of January 1, 2023 (e.g., to avoid or terminate a benefit restriction) by providing an irrevocable written notification to the plan’s enrolled actuary and plan administrator.
- If necessary, revoke a prior election to use a carryover or prefunding balance to meet minimum funding requirements for 2023 by providing an irrevocable written notification to the DB plan’s enrolled actuary and plan administrator. (Note: This election is only allowed to the extent that the amount of the prior election exceeded the minimum required contribution.)
A full list of 2023 key administrative dates and deadlines for DB and DC plans is found here. The 2024 calendars will be published soon.
For assistance with year-end compliance reviews, plan amendments, or pre-approved plan availability, please contact your Milliman consultant.