• Year-End Checklist for Retirement Plans
  • November 2, 2011 | Author: James C. Bruinsma
  • Law Firm: Miller Johnson - Grand Rapids Office
  • As the end of 2011 approaches, there are a number of year-end action items that need to be completed by plan sponsors with regard to their retirement plans. Here is a checklist:

    Updated Plan Document
    The IRS previously established a program in which individually-designed qualified retirement plans must be amended and restated once every five years. The year (or "cycle") in which a plan must be amended is generally based upon the plan sponsor's EIN. We are currently in Cycle A, the first year of the second five-year cycle.

    An employer which maintains an individually-designed qualified retirement plan that is in Cycle A must amend and restate its plan document no later than January 31, 2012. The updated plan document must include the requirements in the 2010 IRS list of cumulative changes. Further, if the employer wants to file for a new determination letter, the deadline for the filing is also January 31, 2012.

    The plan is generally in Cycle A if the plan sponsor's EIN ends in 1 or 6. A plan is "individually designed" if it is not based on a prototype or volume submitter document provided by a law firm or other service provider.

    Required Amendment - RMDs
    The Worker, Retiree, and Employer Recovery Act of 2008 waived required minimum distributions (RMDs) from defined contribution plans for the 2009 calendar year. A plan sponsor is required to amend its plan to conform with how it implemented the waiver of the RMD requirement for 2009. There were two primary options:

    • Distribute the RMD unless the participant requested a waiver of the distribution.
    • Waive the RMD unless the participant requested a distribution.

    This amendment is required by the last day of the plan year beginning during 2011. However, many plan sponsors included the applicable provisions regarding 2009 RMDs in the HEART Act amendment signed during the plan year beginning in 2010. For these employers, no additional compliance amendment is necessary at this time.

    There are a series of notices that potentially must be provided to participants each year. These notices include:

    • If a plan sponsor makes "safe harbor" 401(k) contributions, the plan sponsor must provide the participants with a safe harbor notice at least 30 days before the beginning of the plan year.
    • If a plan includes "automatic enrollment," a participant must receive a notice of the automatic enrollment before the participant is initially enrolled in the plan and again on an annual basis. The annual notice must be provided at least 30 days before the beginning of the plan year.
    • If a plan includes participant-directed investments, the plan sponsor may have selected a "qualified default investment alternative" (QDIA) in which a participant's accounts will be invested if the participant fails to make an investment election. A participant whose accounts have been defaulted into the QDIA must receive an annual notice regarding the QDIA and the opportunity to make other investment elections at least 30 days before the beginning of the plan year.
    • A plan sponsor of a defined benefit plan must provide an annual funding notice to the participants in the pension plan. The notice generally must be provided within 120 days after the end of the plan year, but a later due date applies to small plans (less than 100 participants).