As 2022 begins, retirement plan sponsors and service providers should keep in mind deadlines for required plan changes in 2022. In particular, retirement plan changes under the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) and Coronavirus Aid Relief and Economic Security Act (CARES Act) must be adopted by amendment by December 31, 2022, for calendar year plans. In addition, retirement plans must comply with new SECURE Act disclosure requirements beginning later this year.
- Plan Amendments for SECURE Act and CARES Act Changes. The deadline to adopt retirement plan amendments for SECURE Act and CARES Act changes is December 31, 2022 for calendar year plans. Retirement plan sponsors should contact their benefits counsel to confirm that their plans meet the following requirements:
- Part-time eligibility rules. The SECURE Act generally expanded 401(k) plan eligibility to include long-term part-time employees who work at least 500 hours in three consecutive years and are at least age 21 by the last day of the three-year period. Plan sponsors needed to start tracking hours beginning in 2021, but plans are not required to permit these newly eligible employees to make 401(k) plan deferrals before 2024. The part-time eligibility rules are discussed in further detail in this alert.
- Required beginning date. The SECURE Act changed the required minimum distribution (RMD) rules to increase the required beginning date for RMDs from age 70-1/2 to 72, applicable to participants who reach age 70-1/2 on or after January 1, 2020. Additionally, for defined contribution plan participants who die on or after January 1, 2020, the entire balance of the participant’s account generally must be distributed within 10 years, with exceptions for certain beneficiaries. Plans that allowed RMD waivers under the CARES Act must be amended to reflect that administrative practice.
- Coronavirus-related distributions and loans. Retirement plans that implemented distribution and loan changes permitted under the CARES Act (i.e., coronavirus-related distributions, increase in plan loan limit, delay in loan repayment, etc.) must adopt amendments to conform to their administration. CARES Act changes are discussed in detail in this alert.
Any other changes permitted by the SECURE Act and CARES Act must also be adopted by amendment by December 31, 2022 for calendar year plans.
- New Disclosure Requirements for Lifetime Income Illustrations. The SECURE Act requires benefit statements for defined contribution plans to include lifetime income illustrations (LIIs) on an annual basis.
- Participant directed plans (requiring quarterly statements) must incorporate the first LII disclosure in a benefit statement for a quarter that ends prior to September 18, 2022. For calendar year plans, this means the LII disclosure must be included in a quarterly statement no later than the second quarterly statement for 2022 (for the quarter ending June 30, 2022).
- Non-participant directed plans (requiring annual statements) must incorporate the lifetime income illustration in the annual benefit statement for the first plan year ending on or after September 19, 2021. For calendar year plans, this will be the annual statement for 2021, which must be furnished no later than October 15, 2022.
Plan sponsors should contact the service provider who prepares their pension benefit statements to confirm that the LIIs will be disclosed timely.
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