At the start of 2022, pension plan sponsors and service providers should keep in mind the timelines for plan changes required in 2022. In particular, pension plan changes under the Each Community’s Retirement Enhancement (SECURE Act) and Coronavirus Economic Security and Relief Act (CARES Act) must be passed by amendment by December 31, 2022, for calendar year plans. In addition, pension plans must comply with the new SECURE Act disclosure requirements from the end of this year.
- Plan changes for SECURE Act and CARES Act changes. The deadline to pass the pension plan amendments for the SECURE Act and CARES Act amendments is December 31, 2022 for calendar year plans. Pension plan sponsors should contact their benefits advisor to confirm that their plans meet the following requirements:
- Part-Time Eligibility Rules. The SECURE Act has 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 21 years old on the last day of the period. of three years. Plan sponsors were to start tracking hours starting in 2021, but plans are not required to allow these newly eligible employees to defer the 401(k) plan until 2024. Part-time eligibility rules are outlined in more detail in this alert.
- Start date required. The SECURE Act amended the Required Minimum Distribution (RMD) rules to increase the required start date for RMDs from 70-1/2 to 72, applicable to participants who turn 70-1/2 on January 1, 2020 or after. , for participants in a defined contribution plan who died on or after January 1, 2020, the entire balance of the participant’s account must generally be distributed within 10 years, with exceptions for certain beneficiaries. Plans that allowed for RMD waivers under the CARES Act must be amended to reflect this administrative practice.
- Distributions and loans related to the coronavirus. Pension plans that have implemented the distribution and lending changes allowed under the CARES Act (i.e., coronavirus-related distributions, increasing the plan’s loan limit, delaying in the repayment of the loan, etc.) must adopt amendments to comply with their administration. The CARES Act changes are discussed in detail in this alert.
Any other changes authorized by the SECURE Act and the 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 illustrations of Lifetime Income (LII) on an annual basis.
- Participant-led plans (requiring quarterly statements) must incorporate the first LII disclosure in a benefit statement for a quarter that ends before September 18, 2022. For calendar year plans, this means that the LII disclosure must be included in a quarterly statement no later than the second quarter. statement for 2022 (for the quarter ending June 30, 2022).
- Plans run by non-participants (requiring annual statements) must incorporate the illustration of the lifetime income in the annual statement of benefits for the first year of the plan ending on or after September 19, 2021. For calendar year plans, this will be the annual statement for 2021, which must be provided no later than October 15, 2022.
LIIs are discussed in more detail in this alert, with a more in-depth discussion of the applicable timelines for lifetime income illustrations in this alert.
Plan sponsors should contact the service provider who prepares their pension benefit statements to confirm that LIIs will be disclosed in a timely manner.