2011 Year-End Retirement Plan Checklist
Employers who sponsor tax-qualified retirement plans need to take a number of actions in connection with the 2011 plan year-end. The following is a checklist of the most significant year-end actions:
Amended and Restated Plan Documents
The Internal Revenue Service (IRS) previously established a program in which individually-designed qualified retirement plans must be amended and restated once every five years. A plan is “individually designed” if it is not based on a volume submitter or prototype document provided by a law firm or other service provider. The year (or “cycle”) in which a plan must be amended is generally based upon the plan sponsor's EIN. We are currently in Cycle A, the first year of the second five-year cycle. An individually-designed plan is generally in Cycle A if the plan sponsor's EIN ends in 1 or 6.
An employer which maintains an individually-designed qualified retirement plan that is in Cycle A must amend and restate its plan document no later than January 31, 2012. The updated plan document must include the requirements in the 2010 IRS list of cumulative changes. Further, if the employer wants to file for a new determination letter, the deadline for the filing is also January 31, 2012.
2011 Year-End Amendments
The following is a brief overview of the timing deadlines for certain plan amendments.
Pension Protection Act of 2006
In Notice 2010-77, the IRS extended the deadline for adopting the following defined benefit plan amendment to the last day of the first plan year beginning on or after January 1, 2011 (i.e., December 31, 2011, for a calendar plan year): Section 436 funding-based limits on accelerated benefit payments and benefit accruals (applicable to all single-employer defined benefit pension plans).
Worker, Retiree, and Employer Recovery Act of 2008
WRERA provides a suspension of the required minimum distribution rules for 2009 by defined contribution plans. The amendment deadline is the last day of the 2011 plan year.
Small Business Jobs Act of 2010
The SBJA of 2010 added Section 402A(c)(4), which permits rollovers from a plan account (other than a designated Roth account) to the plan's designated Roth account. In Notice 2010-84, the IRS indicated that a non-safe harbor 401(k) plan must adopt a Roth amendment by the later of the last day of the plan year in which the amendment is effective or December 31, 2011, provided that the amendment is effective as of the date the plan first operates in accordance with the amendment.
Other Discretionary Changes
In addition, plan amendments that reflect discretionary changes (i.e., changes not required by statute or regulation) must be adopted no later than the end of the plan year in which they become effective. It is important to remember, however, that certain types of discretionary amendments must be adopted in advance pursuant to specific statutory and regulatory requirements, such as adding a qualified cash or deferred arrangement to a profit sharing plan.
There are a series of notices that potentially must be provided to participants each year. These notices include the following:
- If a plan sponsor makes "safe harbor" 401(k) contributions, a participant must receive a safe harbor notice before the participant is enrolled in the plan, and again on an annual basis. The annual notice must be provided at least 30 days before the beginning of each plan year.
- If a plan includes "automatic enrollment," a participant must receive a notice of the automatic enrollment before the participant is initially enrolled in the plan and again on an annual basis. The annual notice must be provided at least 30 days before the beginning of each plan year.
- If a plan includes participant-directed investments, the plan sponsor may have selected a "qualified default investment alternative" (QDIA) in which a participant's accounts will be invested if the participant fails to make an investment election. A participant must receive a QDIA notice before the participant is enrolled in the plan, and a participant whose accounts have been defaulted into the QDIA must receive an annual notice. The QDIA notice identifies the QDIA, and explains the opportunity to make other investment elections. The annual notice must be provided at least 30 days before the beginning of each plan year.
- A plan sponsor of a defined benefit plan must provide an annual funding notice to the participants in the pension plan. The notice generally must be provided within 120 days after the end of the plan year, but a later due date applies to small plans (less than 100 participants).
Michael E. Pietzsch
Pietzsch, Bonnett& Womack, PA
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