401(k) Plan Sponsors Get More Time to Adopt Amendments by Melissa Fleitas, CPA
Posted on September 20, 2022
by
Melissa Fleitas
Under recent guidance issued by the IRS, retirement plans, including 401(k)s, certain 403(b) plans and individual retirement accounts (IRAs), have additional time to adopt required amendments incorporating new legislation introduced in 2019 and 2020. The new deadline for non-governmental calendar-year plans to adopt these amendments has been postponed from December 31, 2022, to December 31, 2025.
Sponsors and administrators of retirement plans have fiduciary duties to keep their plan documents up to date with applicable laws or risk penalties and disqualification of tax-advantaged status. To meet these requirements, preapproved plans must “restate” their documents every six years to ensure the language reflects recent legislation, mandated regulatory changes and voluntary discretionary amendments. These Cycle 3 restatements, which are comparable to thorough reviews and rewrites of plan documents, are in addition to required adoptions of interim amendments resulting from changes in the Internal Revenue Code and its effect on 401(k). The deadline for interim plan amendments is generally the latter of 1) the due date (including extensions) for the employer’s income tax return filing that includes the date on which the amendment is effective, or 2) the last day of the plan year that includes the date on which the amendment is effective.
The new December 31, 2025, deadline for adopting interim amendments applies to retirement savings plan provisions included in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Following are some of the specific amendments required by the new legislation:
- Increase the age of required minimum distributions (RMDs) from tax-deferred retirement accounts to 72
- Reduce the minimum age for in-service distributions from qualified pension plans to 59½
- Waive 2020 RMDs from tax-deferred plans
- Allow penalty-free withdrawals from qualifying plans for the birth or adoption of a child
- Extend participation in retirement savings plans to include certain part-time workers
- Establish a 10-year distribution requirement for inherited IRAs
Employers must stay current with evolving laws affecting the management and administration of their retirement. While many businesses rely on third-party administrators to stay current with the laws and prepare required amendments to plan documents, sponsoring employers ultimately bear the burden of maintaining accurate documents, communicating changes to plan participants, and ensuring adoption and compliance with all applicable laws.
About the Author: Melissa Fleitas, CPA, is an associate director of Assurance and Advisory Services with Berkowitz Pollack Brant, where she provides accounting, audit and consulting services to a wide range of companies in the healthcare, manufacturing and distribution sectors. She can be reached at the firm’s Miami office at (305) 379-7000 or info@bpbcpa.com.
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