SECURE 2.0 is a GO!

Is it already time to complete another year-end data request?

When Plan Sponsors are asked to provide company and employee census information for a recent plan year, the details being collected affect the contributions that must be calculated and funded as well as which compliance tests the plan must satisfy. The same questions are asked year after year because changes in the company affect the plan a great deal. Information collected may include:

Employee census: Details about all employees on payroll must be provided, whether they are full time, part time or only worked a few weeks.

• Employee information allows your retirement plan professional to determine who met the plan eligibility requirements, who is required to be included in compliance testing and who is eligible to receive employer contributions being funded for the plan year.
• If your payroll information is collected per payroll, you may be asked to confirm its accuracy at year end to be sure that no payrolls were missed and that, for calendar year compensation years, the amounts tie to the Form W-3.
• With the new rules for Long Term Part Time (LTPT) employees, it is very important to track hours worked for part time employees to determine who falls into this category.
• If you are an owner only plan (sole proprietor and spouse, or partnership and spouses of partners), be sure to reach out to your retirement plan professional if you are considering hiring employees. Depending on the plan provisions, even seasonal or short-term hires could have an unexpected impact.

Ownership % and other businesses owned by those owners: Not only does it matter who owns a part of your business, how much they own makes a difference as well.

• Ownership of more than 5% means they are a Highly Compensated Employee (HCE) for compliance testing purposes, and this may affect the contribution amount they are able to receive. If the spouse of the owner is also employed, the ownership attribution applies to them as well. This applies to parents, children, and grandparents of 5% owners.
• If the owners of your company have ownership in another company, it could be a controlled group or affiliated service group situation and the employees of that other company may need to be included in the compliance testing for your qualified plan.
• Changes in ownership should be communicated as they are being planned, rather than after the change takes effect. For example, if the owners plan to retire at year end with their children taking over, the compliance testing for the plan could be affected by the change in ages of the HCEs. There are ways to make this a smooth transition with plan provision changes if discussed in advance.

ERISA fidelity bond: The amount in place for your plan at year end is requested to determine if it is sufficient or needs to be increased.

• The amount of the bond is reported on the Form 5500 filed for the plan year and the required amount is 10% of plan assets. Certain exceptions apply.
• For the 1st year of the plan, the amount of coverage is to be based on 10% of the expected contribution amount for the year.

Stay tuned! Secure 2.0 Act of 2022 includes some action items that may produce beneficial changes in the future.

Within 18 months:

• Effectiveness of notice provided for eligible rollover distributions: A 402(f) notice, often referred to as a Special Tax Notice, must be provided to the recipient of a distribution that is eligible for rollover. The notice must contain required language regarding rollover options and the tax implications that may apply. The Government Accountability Office must issue a report to Congress on the effectiveness of these notices.

No later than two (2) years after the date of enactment:

• Retirement Savings Lost and Found: A national online database will be created to help connect former participants who are trying to reach a prior employer with Plan Sponsors who are trying to reach them regarding a remaining account balance.
• Consolidation of defined contribution plan notices: Regulations are to be amended so that the individual notices currently provided to participants by the plan can be consolidated.

Within five (5) years:

• Report on pooled employer plans: The Department of Labor (DOL) Secretary must conduct a study on the new and growing pooled employer plan industry and issue a report within five years. Subsequent reports will be completed every five years after.

Upcoming Compliance Deadlines for Calendar-Year Plans

February 28th
IRS Form 1099-R Copy A - Deadline to submit 1099-R Copy A to the IRS for participants and beneficiaries who received a distribution or a deemed distribution during the prior plan year. This deadline applies to scannable paper filings. For electronic filings, the due date is March 31, 2023.
March 15th
ADP/ACP Corrections - Deadline for processing corrective distributions for failed ADP/ACP tests without a 10% excise tax for plans without an Eligible Automatic Contribution Arrangement (EACA).
Employer Contributions - Deadline for contributing employer contributions for amounts to be deducted on 2022 S-corporation and partnership returns for filers with a calendar fiscal year (unless extended).
March 31st (April 1st falls on a weekend)
Required Minimum Distributions - Normal deadline to distribute a Required Minimum Distribution (RMD) for participants who attained age 72 during 2022.
April 14th (April 15th falls on a weekend)
Excess Deferral Correction - Deadline to distribute salary deferral contributions plus related earnings to any participants who exceeded the IRS 402(g) limit on salary deferrals. The limits for 2022 were $20,500 or $27,000 for those aged 50 and over if the plan allowed for catch-up contributions.
April 18th (April 15th falls on a weekend)
Employer Contributions - Deadline for contributing employer contributions for amounts to be deducted on 2022 C-corporation and sole proprietor returns for filers with a calendar fiscal year (unless extended).