Reality Check: Are Your Plan Documents Up-To-Date?

by Jennifer Bassett, QKA, CISP, CIP

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There were a lot of document changes to keep track of in 2018. And more are coming in 2019. If you sponsor 401(k) and profit sharing plan documents, take a few minutes now to double-check your plan documents and make sure they’re up-to-date.

2018 Changes You May Have Missed

Cycle Three Restatement

Pre-approved document users are now in “Cycle Three”—the third restatement cycle. Cycle Three brings significant changes to pre-approved qualified retirement plan (QRP) documents, including a new combined prototype and volume submitter program. Document providers had to submit opinion letter requests to the IRS on behalf of document sponsors by December 31, 2018.   

Disability Amendment

In December 2016, the Department of Labor (DOL) issued final regulations that changed the procedures plan fiduciaries must follow when denying claims for disability benefits. These regulations became effective April 1, 2018. Although the DOL's change may have minor implications for retirement plans, you should review your clients’ documents to see if an amendment is necessary to comply with the new regulations.

2019 Changes You Should Not Miss

Proposed Hardship Distribution Regulations

The Bipartisan Budget Act of 2018 (BBA) and subsequent proposed regulations, which are expected to be finalized in 2019, make significant statutory changes to hardship distributions. Both broaden the employee account types available and eliminate the requirements that participants take plan loans and suspend deferrals before receiving a hardship distribution.

All plans offering hardship distributions will have to be amended. The deadline for a pre-approved document is the end of the plan year in which the changes are first employed in the operation of the plan.

Other Changes That May Come in 2019

Several legislative proposals are in the works and may be introduced as early as this month. Some topics that appear to be gaining momentum include the following and could mean potential document changes.

Required Minimum Distributions (RMDs)

RMDs are a hot issue and are covered in more than one piece of proposed legislation. For example, one provision would waive the annual RMD requirement for any year that a taxpayer’s combined IRA, QRP, 403(b) plan, and governmental 457(b) plan balances are at or below $50,000 (indexed). Another provision would allow IRA and employer plan assets to be exempt from RMDs until the taxpayer’s aggregate balance exceeds $250,000.

Extended Plan Establishment Deadline

Two different pieces of proposed legislation would allow an employer to establish a plan (e.g., a pension plan or profit sharing plan) by its business tax filing deadline, including extensions. Current rules require employers to establish a plan by the last day of their business year.

Relaxed 401(k) Safe Harbor Rules

Under two proposed bills, employers could have up until the deadline for removing excess contributions to elect a safe harbor 401(k) plan provision without providing a prior-year notice. Both bills would require employers to make a nonelective safe harbor contribution.

Association Retirement Plan Regulations

While this one isn’t legislative, once the recently proposed Association Retirement Plan Regulations are finalized by the DOL, this is yet another action that could eventually require changes for QRP documents.

Ascensus Is Here to Help

Washington is constantly shaking things up. Keeping track of rule changes and amendments is complicated. If you don’t pay attention, your clients’ plans could run into document compliance and plan operation issues. Fortunately, Ascensus offers a wide variety of document services and software that make things easier for you, including our Employer Direct Document Service.

Contact Ascensus to learn how we can help.