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A Few Year End Retirement Plan Action Items and Issues for Consideration

Added by John C. Hughes in Articles & Publications, Tax Law on December 21, 2018

The end of the calendar year and the beginning of a new year is an important time for many retirement plans. The following is a list of a few issues that employer plan sponsors should consider. Several of these points assume a plan year that coincides with the calendar year.

  • The deadline for plan design changes is often before the beginning of a new plan year, although changes may be made by the last day of a plan year. Accordingly, plans sponsors should consider whether any amendments need to be put in place on or before December 31.
  • Several different notices to participants often must be furnished before the beginning of a new year (for example, safe harbor, QDIA, automatic enrollment, automatic escalation notices, and potentially others). Plan sponsors should consider whether applicable notices were properly provided (and if not, take immediate action — it may not be too late). I am aware of several situations where matters fell between the cracks because the plan sponsor assumed, erroneously, that the recordkeeper and/or third party administrator was ensuring those notices were appropriately prepared and delivered.
  • Make sure systems are in place so that any automatic enrollments or automatic escalations occur in accordance with the plan terms. Qualification failures resulting from confusion and miscommunication in this context happen with great frequency. Also, often the plan terms in these regards are misunderstood.
  • Are any required minimum distributions due to any participants?
  • Be sure that any plan forfeitures are timely and appropriately applied.
  • A new sample “402(f)” distribution notice was issued by the IRS in the fall. It should be in use now. I have come across several situations where it is not yet being used by plan sponsors.
  • Several of the various IRS-plan limits, such as contribution limits, were adjusted for 2019. Those new limits should be observed.
  • Plan sponsors should gear up to perform 2018 nondiscrimination testing; particularly, “ADP/ACP” testing, which generally must be completed by (and corrections made by) mid-March 2019.
  • The correction of some plan qualification failures must be completed by the end of the second year following the year during which the failure occurred in order to retain eligibility to “self-correct” and avoid a costly application to the IRS.

The foregoing is obviously far from an exhaustive listing of employers’ many and ongoing responsibilities and obligations relative to their benefit plans; but rather, just few items for last minute consideration that, hopefully, have not been overlooked (and which still may be addressed). Happy Holidays!

John C. Hughes counsels clients nationwide relative to a wide variety of issues involving all kinds of employee benefit plans including 401(k), nonqualified deferred compensation/409A, profit sharing, pension/defined benefit, 457, 403(b), employee stock ownership (“ESOP”), governmental, 125/cafeteria, and health and welfare plans.

If you would like further information concerning the matters discussed herein, please contact a member of our Tax & Employee Benefits Group