Year End Reminders for Retirement Plans 2021 Edition

By Jon Schultze

As the end of 2021 approaches, employers and plan sponsors of retirement plans need to be aware of their year-end responsibilities and some of the issues they will need to consider going into 2022.

  • Year-end amendments – Plans may need to adopt amendments by December 31, 2021, even if the plan’s plan year is not the calendar year:
    • Final hardship distributions regulations – The Internal Revenue Service (IRS) issued final regulations updating the requirements for 401(k) plans and 403(b) plans that permit hardship distributions. Some changes are required while others are optional. The deadline to adopt such an amendment is December 31, 2021, regardless of the plan year.
    • Discretionary changes – If a plan implements discretionary changes during a plan year, an amendment must be adopted by the last day of that plan year.
    • Defined benefit pension plans that specify the mortality table to use for determining lump sum values, as opposed to incorporating the tables by reference, must be amended by the end of the 2021 plan year.

The Wagner Law Group can draft or review amendments to ensure they are legally compliant and complete.

  • Annual notices – Each year an annual notice must be distributed to plan participants at least 30 days and not more than 90 days before the start of a plan year for defined contribution and 403(b) plans that:
    • rely on a safe harbor design (safe harbor matching contributions or qualified nonelective contributions) to satisfy nondiscrimination requirements,
    • provide for automatic enrollment with or without a safe harbor design, and/or
    • use a qualified default investment alternative (QDIA) for participants who do not make investment elections.

Safe harbor notices must describe the general terms of the plan and the requirements, if any, to receive safe harbor contributions. Automatic enrollment notices must remind employees they were or will be automatically enrolled in the plan, the deferral percentage and, if automatic enrollment is coupled with an automatic escalation feature, the manner in which deferrals will increase. Plans with a QDIA must inform participants as to which investment option the contributions will be invested in the absence of an investment election.

We’ve reviewed many annual notices that are poorly written and confusing, or incomplete and noncompliant. The Wagner Law Group can review your notices to verify they meet applicable requirements and redraft them if necessary.

  • Required Minimum Distributions - The Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed plan sponsors to suspend required minimum distributions payable in 2020. There is no similar relief for 2021. Required minimum distributions for 2021 must be paid no later than December 31, 2021, or by April 1, 2022, for initial required minimum distributions. Also, the Setting Every Community Up for Retirement Enhancement (SECURE) Act changed the required beginning date to age 72 for participants who had not attained age 70-1/2 by December 31, 2019.

We recommend confirming with your service providers that required minimum distributions will be timely processed for 2021.

The Wagner Law Group would be happy to assist with your retirement plan needs. Please contact a member of our retirement practice group if you have any questions.