COLLECTED WISDOM™ on Compliance and Regulatory Related Issues

This page gathers relevant information for 401k plan managers, sponsors, administrators, recordkeepers and others with plan fiduciary and administrative responsibilities. It covers many aspects of compliance and regulatory related issues.

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.

IRS Notice 2024-35: (Another) Temporary Waiver for Certain RMDs

On April 16, 2024, the IRS released Notice 2024-35 extending temporary relief for certain required minimum distributions related to the SECURE Act's 10-year distribution rule through 2024. This notice follows similar relief provided by the IRS in Notice 2022-53 and Notice 2023-54 for earlier periods.

Source: Erisapracticecenter.com, April 2024

DOL Issues Proposal for SECURE 2.0 Lost and Found Database

In the proposed procedure, the DOL places the burden of data collection and reporting on plan administrators. Administrators would be required to provide necessary data to the DOL via Form 5500s each year, perhaps starting with the 2023 5500s that are due in 2024. Because, for most plans, the collection of 5500 data is almost always outsourced to a third-party administrator or bundled recordkeeper, these will be the entities that would presumably provide required data to the DOL via the 5500s of the individual plan sponsors.

Source: Captrust.com, April 2024

Too Little, Too Late? Plan Contribution Timing Requirements and How to Correct Delays

One of the most basic duties of a defined contribution plan sponsor is to ensure that that there is no delay and participants' salary deferral elections are correctly and timely deposited into the retirement plan. Not only is this duty necessary for proper administration of the plan, but it is also part of a plan sponsor's fiduciary duties under ERISA. This is a review of the plan contribution timing requirements and how to correct delays.

Source: Brickergraydon.com, April 2024

Retirement Lost and Found: DOL Proposes Voluntary Reporting

The SECURE 2.0 Act of 2022 directed the DOL to establish a database that individuals can search to help locate their retirement benefits. The database was originally intended to leverage existing filing requirements, but the IRS determined it could not legally share Form 8955-SSA data with DOL. Consequently, DOL has issued a proposed procedure to collect data directly from plan administrators voluntarily via a new filing made along with, but not as part of, Form 5500.

Source: Groom.com, April 2024

Revisiting Plan Service Provider Agreements: To Provide or Not to Provide to Plan Participants

In Zavislak v. Netflix, the court held that the plan administrator of a health plan was not required to provide a participant with copies of various service provider agreements. While the Zavislak decision provides a detailed analysis of the topic, the issue of whether service provider agreements must be disclosed remains unsettled across other jurisdictions. Accordingly, plan administrators who receive such requests should consider the extent to which such agreements must be provided based on case law in the applicable jurisdiction.

Source: Erisalitigation.com, April 2024

How IRS Notice 2024-35 Affects Beneficiaries

Under the proposed RMD regulations, if an account owner dies on or after their required beginning date, beneficiaries who are subject to the 10-year rule must take annual life expectancy payments during the first nine years. This applies to beneficiaries of account owners and to successor beneficiaries of eligible designated beneficiaries who died in 2020 or later.

Source: Ascensus.com, April 2024

IRS Provides Guidance Regarding 2024 RMDs

The IRS has issued Notice 2024-35, which guides certain required minimum distributions for 2024. Notice 2024-35 also states that final regulations regarding RMDs will not apply before the 2025 distribution calendar year. Here is a review of the guidance.

Source: Westlaw.com, April 2024

DOL Issues Final Rule Amending QPAM Exemption

On April 3, 2024, the DOL released its final rule amending Prohibited Transaction Exemption 84-14. The inclusion of foreign crimes modernizes PTE 84-14 in light of the increasing globalization of the financial services sector, and the increase in asset management and equity thresholds ensures that the exemption remains limited to large managers.

Source: Shearman.com, April 2024

IRS Issues Guidance on Certain RMDs for 2024

On April 16, the IRS issued guidance on certain specified required minimum distributions for 2024. It adds that the final regulations it plans to issue related to RMDs will apply for purposes of determining RMDs for calendar years beginning on or after Jan. 1, 2025. The guidance is contained in Notice 2024-35 and is outlined here.

Source: Napa-net.org, April 2024

Department of Labor Finalizes QPAM Exemption Amendment

The DOL final amendment to Prohibited Transaction Class Exemption 84-14, the QPAM Exemption is commonly relied upon by investment managers for ERISA-governed employee benefit plans and individual retirement accounts to avoid potential prohibited transaction issues, was published in the Federal Register on April 3, with the changes becoming effective on June 17, 2024. This article reviews the key changes to the exemption.

Source: Morganlewis.com, April 2024

ERISA Reporting Requirements

ERISA reporting requirements, as well as other retirement plan reporting requirements, can be daunting for plan sponsors and administrators new to the process. This article is an introduction to those requirements and responsibilities.

Source: Employeebenefitslawgroup.com, April 2024

DOL Turns to Recordkeepers for Help With Lost and Found Database

The DOL on April 15 released a proposed information collection request to help implement a forthcoming lost-and-found database to assist individuals with locating missing retirement accounts, but the operation appears to have hit a slight bump in the road. As for that bump in the road, the DOL notes that it initially had planned to use data that plan administrators submitted to the IRS on Form 8955-SSA. However, citing concerns under Section 6103 of the Internal Revenue Code, the IRS has now indicated that it will not authorize the release of this data to the DOL.

Source: Asppa.org, April 2024

Participants Prefer SECURE 2.0 PLESA Benefit Over Withdrawal Feature

A new survey by Commonwealth analyzes the impacts of SECURE 2.0 legislation on low to moderate-income employees. Commonwealth worked with five focus groups, for a total of 20 participants, to assess interest and requests for emergency expense provisions under SECURE 2.0. Under SECURE 2.0, employers can implement a PLESA feature that would allow employees to make post-tax contributions towards a rainy-day fund, which can be used during financial hardships.

Source: 401kspecialistmag.com, April 2024

"Lost & Found" Database: DOL Seeks Recordkeeper Help

The Department of Labor is asking for help from retirement industry recordkeepers to establish a SECURE 2.0-mandated online search tool to help America’s workers locate lost retirement accounts. The DOL’s Employee Benefits Security Administration announced it is proposing to collect information from plan administrators voluntarily to build the new tool.

Source: 401kspecialistmag.com, April 2024

DOL Finalizes Tighter Standards for QPAMs

On April 2, 2024, the DOL finalized an amendment to prohibited transaction class exemption 84-14, expanding the categories of disqualifying criminal conduct for qualified professional asset managers, commonly referred to as QPAMs. The final amendment also added new compliance requirements to the Exemption.

Source: Debevoise.com, April 2024

DOL Finalizes Amendment to QPAM Exemption

The DOL has completed a final amendment that would allow parties related to employee benefit plans and individual retirement accounts to engage in transactions involving plan and IRA assets. The final amendment on the Class Prohibited Transaction Exemption 84-14, otherwise known as the Qualified Professional Asset Manager Exemption (QPAM), responds to changes in the financial services industry since the exemption's 1984 establishment.

Source: 401kspecialistmag.com, April 2024

Several New Reasons Employers Should Self-Audit Retirement Plans

Employee benefit plans must be reviewed regularly to determine whether there are compliance errors that need to be corrected before there are major correction costs and penalties. There are many reasons why doing self-audits of both tax and fiduciary compliance makes sense and provides retirement plan fiduciaries with protection. Here are four of them.

Source: Cohenbuckmann.com, March 2024

Counting Participants in a First Year Plan

The 2023 Form 5500 Annual Return/Report of Employee Benefit Plan includes some changes to previous filing requirements. One change is to the participant-counting methodology, specifically for defined contribution plans, to determine the plan filing type. But there is an important caveat for first-plan year filers.

Source: Belfint.com, March 2024

2024 Plan Limits for Puerto Rico

On January 31, 2024, the Puerto Rico Department of the Treasury issued Internal Revenue Circular Letter No. 24-01 (CL IR 24-01) announcing the 2024 limits for Puerto Rico-qualified retirement plans according to Section 1081.01(h) of the Puerto Rico Internal Revenue Code of 2011. Here is a chart of the applicable 2024 limits for qualified defined contribution retirement plans in Puerto Rico.

Source: Belfint.com, March 2024

IRS Issues Favorable Initial PLESA Guidance on Match Restrictions

Notice 2024-22 brings important initial guidance on appropriate matching restrictions for Pension-Linked Emergency Savings Accounts, which was added to the Internal Revenue Code by Section 127 of SECURE 2.0, and is effective this year. In this article, Groom principals Elizabeth Dold and David Levine offer a simplification of the requirements for employers and recordkeepers to offer PLESAs.

Source: Groom.com, March 2024

SECURE 2.0 Act: Catch-up Contributions

Section 603 of the SECURE 2.0 Act of 2022 placed restrictions on catch-up contributions such that individuals having earnings of more than $145,000 in the previous calendar year would be required to make all catch-up contributions as Roth after-tax contributions. In this article, the Public Retirement Research Lab Database is analyzed to assess the impact of this provision on public-sector retirement plans and participants.

Source: Ebri.org, March 2024

SECURE 2.0 DC Retirement Plan Provisions Summary

SECURE 2.0 is a law designed to substantially improve retirement savings options, including 401k and 403b plans. The number of retirement plan provisions in SECURE 2.0 is expansive and can feel overwhelming for a plan sponsor. If you are looking for a summary organized by effective date to help you understand how this relates to your DC plan, this resource can be a useful tool for you.

Source: Multnomahgroup.com, March 2024

Do You Know Where Your "Missing" Retirement Plan Participants Are?

In the laundry list of retirement plan administrative and operational requirements, plan sponsors may sometimes overlook their obligations concerning terminated vested employees. Even though these individuals have left the company, the plan sponsor still retains fiduciary obligations to them. To provide them with their benefits under the plan, you will need to maintain contact information for them. Here are some suggestions for minimizing missing participants in your plan.

Source: Brickergraydon.com, March 2024

The DOL Issues New Guidance on PLESA

PLESAs allow eligible participants to contribute up to $2,500 (as Roth contributions) to an emergency savings account linked to a defined contribution plan. In consultation with the Treasury Department and the IRS, the DOL recently issued guidance regarding PLESAs in the form of FAQs. There are no earth-shattering revelations in the FAQs, but there are a few nuggets to glean from them.

Source: Benefitslawadvisor.com, March 2024

2024 Puerto Rico Retirement Plan Limits

As announced through Circular Letter No. 24-01 (CL IR 24-01), issued by the Puerto Rico Treasury Department, the following chart outlines the 2024 limits for retirement plans qualified under the Puerto Rico Revenue Code of 2011, as amended.

Source: Voya.com, March 2024

New Voluntary Correction Rules Could Be Finalized Soon

The Department of Labor should be finalizing its proposed update to the Voluntary Fiduciary Correction Program in "the next few months," according to a representative of the Employee Benefit Security Administration speaking at a conference on Tuesday.

Source: Planadviser.com, March 2024

Prevent Problems by Using Auto Rollover IRAs for Force-Outs Below $1,000

Have you done something for a long time without really thinking about it, and when you finally do you realize you could be doing it better? Most service providers and plan sponsors continue to pay force-out distributions of less than $1,000 in cash via checks without recognizing there is a more efficient solution.

Source: Penchecks.com, March 2024

IRS Provides Guidance on Hodgepodge of SECURE 2.0 Provisions

The IRS released a notice providing guidance on various provisions of the SECURE 2.0 Act of 2022. This article focuses on the changes most relevant to large plan sponsors with more than 100 participants, i.e., automatic enrollment changes, de minimis financial incentives, an exception to the 10% tax for terminally ill participant withdrawals, an automatic enrollment error correction, the Rothification of employer contributions, and amendment deadlines extensions.

Source: Morganlewis.com, March 2024

What the SECURE Act Requires 401k Sponsors to Do Right Now

The SECURE Act not only imposes significant changes on retirement plans but also offers optional provisions that employers may want to incorporate into their 401k and 403b retirement plans. There has been a lot of media attention on the whole array of SECURE Act changes which are phased in over the next few years. But, what do employers need to do about their retirement plans right now? Here are a few items.

Source: Gct.law, March 2024

Merger and Acquisition Considerations for Employee Benefit Plans

In the context of mergers and acquisitions, an acquisition target's qualified retirement plans, health plans, executive compensation arrangements, and benefit programs can all be a source of significant liabilities. These benefit programs are promises that the target has made to its employees, and the buyer must ascertain whether it is liable to fulfill them and, if so, the dollar value of those promises. To avoid complications and liabilities, the parties need to understand the best deal structure based on the benefit program requirements and perform due diligence to carefully address any issues under both ERISA and the IRS early in the transaction.

Source: Wagnerlawgroup.com, February 2024

Long-Awaited IRS Proposed Regulations for Long-Term Part-Time Employees

On November 24, 2023, the IRS.) released proposed regulations concerning the long-term part-time employee rules beginning in the 2024 plan year. The LTPT employee rules were originally established under the SECURE Act of 2019 and then modified under the recent SECURE 2.0 Act of 2022. SECURE 2.0 made changes to shorten the initial LTPT eligibility requirements and expanded them to include 403b plans. The new guidelines help define LTPT employees and certain eligibility conditions. Here is a review.

Source: Tri-ad.com, February 2024

Prevent Problems by Using Auto Rollover IRAs for Force-Outs Below $1,000

Have you done something for a long time without really thinking about it, and when you finally do you realize you could be doing it better? Most service providers and plan sponsors continue to pay force-out distributions of less than $1,000 in cash via checks without recognizing there is a more efficient solution. Discussed here is why you should be using an automatic rollover IRA for all account balances: from $1 to $7,000.

Source: Penchecks.com, February 2024

DOL Gets Temporary Restraining Order Against TPA

The DOL has gone to court to protect retirement plan assets in a case of alleged embezzlement by a TPA. According to the DOL, RiversEdge is a third-party administrator of at least 240 retirement plans that hold millions of dollars in plan assets and acts as an agent to manage and administer plan assets, at least 229 of these retirement plans are covered by ERISA.

Source: Napa-net.org, February 2024

New Rules Make Tracking Long-Term, Part-Time Employee Service a Full-Time Job

Most employers with impacted plans reviewed their eligibility-tracking processes some time ago in anticipation of the initial effective date of the new LTPT rule. However, with that new rule now effective -- and last-minute guidance available -- employers need to review those processes to determine if further changes are needed or desired. Eventually, it may become easier to think of service tracking under the new rule as a largely set-it-and-forget-it process. However, for now, employers will likely want to continue revisiting, reviewing, and refining their eligibility-tracking processes around the new rule.

Source: Mwe.com, February 2024

PR Treasury Announces Plan Contribution Limits for 2024

On January 30, 2024, the Puerto Rico Treasury Department issued Internal Revenue Circular Letter No. 24-01 notifying the retirement plan limits that will apply to retirement plans qualified for the year 2024, including the cost-of-living adjustments published by the IRS. Here are the retirement plan limits applicable for taxable years beginning on or after January 1, 2024.

Source: Mcvpr.com, February 2024

The IRS's Pre-Examination Pilot Program Enters Phase Two

The IRS announced earlier this month that it is extending its pilot program under which retirement plan sponsors are given 90 days' notice that their plan has been selected for examination, with the opportunity to avoid a full audit by correcting certain errors and demonstrating compliance with the applicable Internal Revenue Code rules by the end of the 90-day pre-examination period. The key features of the pre-examination pilot program remain the same.

Source: Groom.com, February 2024

2024 Highly Compensated Employees: What You Need to Know to Pass Your Non-Discrimination Tests

If you have been offering a company 401k for more than a year, then you know your plan requires a lot of testing to stay compliant. That's because one of the primary duties of employers offering a 401k is to ensure that it's designed to benefit all employees, not just owners and highly paid employees. A series of annual tests is used to decide whether or not a plan discriminates. If the plan fails a test, the company must take corrective action until the plan is no longer discriminatory.

Source: Forusall.com, February 2024

Calculating Earnings for 401k and 403b Plan Corrections: Do Your Best to Do Better

Practitioners tend to use the DOL's online calculator for late deferral deposits since EPCRS permits estimates, but to the extent one is being practical and making participants whole, the cheaper result of the online calculator should not prevail over the participant's, the plan's, or the default investment alternative's actual rate of return. Some other alternatives are presented here.

Source: Belfint.com, February 2024

A More Enlightened Approach to Uncashed Distribution Checks

No retirement plan sponsor likes the idea of dealing with uncashed distribution checks, nor do they wish to draw unwanted regulatory attention or to become embroiled in costly litigation because of their uncashed check policies. Unfortunately, many plan sponsors place themselves in precisely that spot, becoming unnecessarily over-burdened with unresolved uncashed checks, while inviting unwanted regulatory scrutiny and/or legal challenges by embracing flawed uncashed check policies.

Source: 401kspecialistmag.com, February 2024

SPARK Institute Comment Letter on Long-Term, Part-Time Employee Proposal

Their letter includes comments seeking clarification and relief for various issues covered by the proposed regulations including a request to delay the proposal's applicability date and provide good faith relief; a request for changes and/or clarifications concerning the proposal's rules governing eligibility computation periods for LTPT employees; concerns and requests regarding the proposed regulations' impact on the elapsed time method for crediting service; and concerns and requests regarding the proposed definition of "long-term, part-time employee."

Source: Sparkinstitute.org, February 2024

DOL Guidance on Pension-Linked Emergency Savings Accounts

The DOL has provided guidance on pension-linked emergency savings accounts, a special type of short-term savings account within a 401k or 403b account. The SECURE 2.0 Act authorized PLESAs to encourage elective contributions to 401k or 403b accounts because the limited ability to access money from those accounts in the event of an emergency has tended to discourage those who are lower paid from making elective contributions and thereby receiving an employer match.

Source: Segalco.com, February 2024

Input Requested on Retirement Plan Disclosure and Reporting

The SECURE 2.0 Act requires the agencies responsible for administering ERISA to review existing reporting and disclosure requirements under both ERISA and the Internal Revenue Code and subsequently report to Congress on the effectiveness of those requirements. To help them fulfill those mandates, the agencies have published a broad, sweeping appeal for information on the adequacy and problems with current disclosure and reporting requirements for retirement plans, including comprehension, cost, and usefulness.

Source: Segalco.com, February 2024

DOL Proposes Rule on Automatic Portability

SECURE 2.0 Act added a prohibited transaction exemption under which an intermediary -- referred to as an automatic portability provider -- may receive a fee without violating prohibited transaction rules. As required by SECURE 2.0, the DOL has issued guidance on the prohibited transaction exemption in the form of a proposed rule. The DOL welcomes comments on the proposed rule, which are due by March 29, 2024.

Source: Segalco.com, February 2024

EBSA Recovered $1.4B in Retirement, Health Benefits in '23

In an annual fact sheet summarizing recoveries from enforcement actions and complaint resolutions, EBSA, a division of the DOL, reported that $854.7 million in recovery came from 731 civil investigations, with 505 (or 69%) resulting in monetary resolutions or other corrective actions. Another $444.1 million came from resolving complaints, $61.2 million from recovering abandoned plan assets, and $84.5 million from its voluntary fiduciary correction program.

Source: Planadviser.com, February 2024

When It Comes to Vesting, the IRS Says Once a Long-Term, Part-Time Employee, Always a LTPT Employee

Under the SECURE Act and the SECURE 2.0 Act, employers must provide long-term, part-time employees the opportunity to make elective deferrals under their 401k plans and, beginning in 2025, their 403b plans. However, long-term, part-time employees are not required to be eligible for employer matching or profit-sharing contributions until they satisfy the regular plan rules. Despite this fact, one of the most salient issues surrounding the implementation of the new rule is how it impacts -- and complicates -- tracking when employees become vested in such contributions.

Source: Mwe.com, February 2024

IRS Confirms Long-Term, Part-Time Employees Excludible From Certain Nondiscrimination Testing

Under the SECURE Act and the SECURE 2.0 Act, employers must provide long-term, part-time employees the opportunity to make elective deferrals under their 401k plans and, beginning in 2025, their 403b plans. When this occurs, certain special rules apply to such employees that impact whether they must be included in annual nondiscrimination testing or receive required top-heavy vesting and benefits. As a result, employers need to understand these requirements, as they may impact how annual testing is performed and the results.

Source: Mwe.com, February 2024

SECURE 2.0 Grab Bag: 401k's and De Minimis Financial Incentives

On December 20, 2024, the IRS released Notice 2024-2 (the "Grab Bag" guidance), which provided a Q&A format of guidance on certain provisions of the SECURE 2.0 Act of 2022. This article discusses the "de minimis" incentives for employees to defer, as outlined in SECURE 2.0 and for which the IRS just provided guidance in the Grab Bag. Here's how it may apply to your qualified plan.

Source: Ferenczylaw.com, February 2024

IRS Pre-Examination Retirement Compliance Pilot Program Is Extended

On February 7, 2024, the IRS announced the second phase of its Pre-Examination Retirement Compliance Program. Under this program, sponsors will be notified that their plan is selected for examination and will have 90 days to review and correct any plan document or operational errors, similar to the process for phase one. If a plan sponsor receives a letter notifying them of an upcoming examination, it is important to act quickly and loop in benefits counsel as soon as possible.

Source: Erisapracticecenter.com, February 2024

2024 Deadlines and Important Dates for Plan Sponsors

Sponsors of defined benefit and defined contribution retirement plans should keep these deadlines and other important dates in mind as they work toward ensuring compliance with their plans in 2024. Dates assume a calendar year plan. Some deadlines may not apply, or dates may shift based on the plan sponsor's fiscal year.

Source: Berrydunn.com, February 2024

New Guidance on Pension-Linked Emergency Savings Accounts

Over the past several years, there has been a growing interest in enhancing employee benefit programs to help employees save for emergencies. To facilitate this, Congress included a provision in the SECURE 2.0 Act of 2022 intended to provide a framework for integrating emergency savings accounts into defined contribution plans. The IRS and DOL recently released guidance intended to clarify several open legal questions related to pension-linked emergency savings accounts. The guidance is summarized here.

Source: Groom.com, February 2024

Form 5500 Updates: Participant Count Win and Large Plan Filer Warning

The Form 5500 series was recently updated with a key change to the participant counting methodology for determining if the plan is a small plan filer or a large plan filer. Not as widely publicized but affecting all filers, the Department of Labor released adjusted penalty rates effective January 15, 2024, which include an increase of $84 per day for failure to timely file a complete Form 5500. Are you prepared for the changes to the filing requirements?

Source: Newfront.com, February 2024

IRS Confirms Same Hours-Counting Rules Still Add Up for Long-Term, Part-Time Employees

The new long-term, part-time employee rule has generated questions about whether all employers will now be required to track the actual hours all employees work to ensure compliance with this rule. The recently proposed regulations released by the IRS confirm that the answer is no. Employers do not need to change how they count periods of service toward plan eligibility. However, employers should revisit how such service is currently counted under their plans and consider the impact that may have on if and how the long-term, part-time employee rules apply.

Source: Mwe.com, February 2024

IRS Proposes Long-Term, Part-Time Employee Regulations

On November 24, 2023, the IRS proposed long-awaited guidance on the required coverage of long-term, part-time employees under the SECURE 1.0 and the SECURE 2.0. This first piece of guidance to squarely address the LTPTE provisions arrived just weeks before the January 1, 2024, required LTPTE entry date under SECURE 1.0. Here is the background and a review of the guidance.

Source: Morganlewis.com, February 2024

Puerto Rico Announces 2024 Limits on Qualified Retirement Plans

On January 31, 2024, the Puerto Rico Department of the Treasury issued Internal Revenue Circular Letter No. 24-01 announcing the applicable 2024 limits for Puerto Rico qualified retirement plans. Here are the applicable 2024 limits for qualified retirement plans in Puerto Rico.

Source: Littler.com, February 2024

IRS Issues Guidance on Required Inclusion of Long-Term, Part-Time Employees in 401k Plans

SECURE 2.0, among other things, reduced the three-year requirement to two years, effective January 1, 2023, for such eligible long-term, part-time employees. This means, that for plan years beginning on or after January 1, 2025, an LTPT employee's eligibility will only require two consecutive 12-month periods of service of at least 500 hours, but less than 1000 hours and plans must begin counting hours to support this process as of January 1, 2023.

Source: Hansonbridgett.com, February 2024

DOL Guidance: Pension-Linked Emergency Savings Accounts (PLESAs)

On January 17, 2024, the DOL issued guidance in the form of Q&As on PLESAs. Under the SECURE 2.0 Act, employers are permitted (but not required) to offer PLESAs in conjunction with their 401k plans, effective for plan years beginning after December 31, 2023. The DOL separately issued a news release generally describing the Q&As. Among other things, the release discloses that the DOL and the IRS consulted with each other in developing their respective guidance.

Source: Compliancedashboard.net, February 2024

You Don't Have To Go Home, But You Can't Stay Here

It's 2024, which means a new batch of provisions from SECURE Act 2.0 have gone into effect. One of the more significant ones is an increase in the "cashout" limit that a qualified plan can impose to kick former employees with small balances out of their plans. For a while, this limit was $3,500 and was increased to $5,000 by the Taxpayer Relief Act of 1997. SECURE Act 2.0 bumps it up to $7,000 as of January 1, 2024. Plans aren't required to have a force-out provision, but nearly all do, and for good reason.

Source: Benefitslawadvisor.com, February 2024

The Maximum Contribution May Be Lower Than You Thought: ADP and ACP Test Basics for 401k and 403b Plans

Business owners and Highly Compensated Employees are often shocked to hear that they cannot contribute the maximum 401k or 403b deferral because their plan did not pass the discrimination tests. Much to their surprise, through the Actual Deferral Percentage and the Aggregate Contribution Percentage tests, the Internal Revenue Code prevents HCEs from benefiting from tax deferrals significantly more than NHCEs, unless the plan is a safe-harbor plan. Maria T. Hurd, CPA, provides a full review of the issue.

Source: Belfint.com, February 2024

A Long-Term, Part-Time Employee or Not a Long-Term, Part-Time Employee, That Is the Question

Under the SECURE Act and the SECURE 2.0 Act, employers must provide long-term, part-time employees the opportunity to make elective deferrals under their 401k plans and, beginning in 2025, their 403b plans. Because certain special rules apply to employees who enter an employer's plan as long-term, part-time employees, all employers need to understand when an employee is long-term, part-time.

Source: Mwe.com, January 2024

IRS Guidance: Pension-Linked Emergency Savings Accounts

On January 12, 2024, the IRS issued Notice 2024-22, initial guidance on emergency savings accounts linked to 401k plans under the SECURE 2.0 Act. The new provisions, effective for plan years beginning after December 31, 2023, generally permit (but do not require) employers to offer pension-linked emergency savings accounts to non-highly compensated employees as part of their defined contribution plans, subject to several rules and restrictions.

Source: Compliancedashboard.net, January 2024

New DOL Guidance on Pension-Linked Emergency Savings Accounts

On January 17, 2024, the DOL published a list of questions and answers to help plan sponsors administer pension-linked emergency savings accounts. The guidance provides important clarification on the administration of these emergency savings accounts.

Source: Captrust.com, January 2024

"Guiding" Student Loan Matches

One of the optional provisions in the SECURE 2.0 Act that some employers were very excited about is the provision to allow a 401k match based on a participant's student loan payment rather than deferrals. When asked about what guidance from the Treasury Department they would like to see before deciding on this provision or before implementing it, the responses varied from technical questions such as how to track employees' student loan payments, to regulatory questions such as how this would work with safe harbor plans, to not waiting on guidance but just waiting to work out the technical complexities with their providers.

Source: Asppa.org, January 2024

Student Loan 401k Matching: A Case Study

SECURE 2.0 was instrumental in focusing employers' attention on the issue and provided a guidepost as to how they might provide more financial support to address those payments. As a case in point, engineering consultancy Kimley-Horn and Associates Inc., which employs about 8,000 people, is now offering a 401k match based on student loan payments through a program run by SoFi at Work.

Source: Planadviser.com, January 2024

Impractical SECURE 2.0 "Sidecar" Emergency Savings Accounts Should Be Avoided

The DOL has issued guidance clarifying several components of the emergency savings provision of SECURE 2.0. The guidance highlights the complexity of creating and maintaining these accounts and should be enough to make most plan sponsors look for a better option. Here are some of the rules a plan sponsor must follow if considering this option.

Source: Multnomahgroup.com, January 2024

SECURE 2.0 Guidance - Auto Enrollment, SIMPLE, and Roth Provisions

On December 20, 2023, the IRS gave us a nice holiday present with the release of guidance on several provisions of the SECURE 2.0 Act. This article deals with the provisions that the author believe are of the highest interest to plan sponsors, advisors, and CPAs. The article provides a summary of the guidance for auto-enrollment, SIMPLE, and Roth provisions.

Source: Consultrms.com, January 2024

IRS Highlights Changes to Pre-Approved DC Plan Program

There have been significant changes to the IRS Pre-Approved Defined Contribution Plan Program, and two of the IRS officials involved in the thick of it recently provided a refresher on the program rules and recent developments. Central to recent developments is Revenue Procedure 2023-37, which the IRS issued in November 2023. It provided fresh guidance on qualified pre-approved plans and 403b pre-approved plans, and combined, conformed, clarified, and updated rules for those plans outlined in prior revenue procedures.

Source: Asppa.org, January 2024

Pension-Linked Emergency Savings Accounts: Qualified Plans Provide More Than Just Retirement Benefits

Although there are several options available for emergency savings accounts, this is the first one that provides both a way to encourage retirement savings and at the same time a tax-advantaged way to meet immediate financial needs that arise in one's day-to-day activities. This article examines the features of the Pension-Linked Emergency Savings Accounts under Section 127 of SECURE 2.0.

Source: Groom.com, January 2024

Safe-Harbor Leveraging for Small Business, Top-Heavy Retirement Plans - 2024

Many employers are debating how to most efficiently take advantage of the defined contribution limit increase to $69,000. However, few owners of small businesses are aware of the extent to which certain types of "leveraging" are now permitted in qualified retirement plans. The purpose of this article is to illustrate the provisions that allow owners of small businesses to get the most in return for what they are willing to contribute on behalf of their non-owner employees.

Source: Consultrms.com, January 2024

Long Term/Part Time Employees - Revised

SECURE 2.0 made technical corrections to the long-term/part-time rules, including clarifying that (1) long-term/part-time employees may be excluded from a plan's safe harbor provisions and (2) all periods of service before 2021 are excluded for both eligibility and vesting. SECURE 2.0 also clarified that the vesting rules that apply to a long-term/part-time employee continue to apply even if the employee later satisfies the regular service requirements. The provision concerning long-term/part-time employees applies to all 401k plans.

Source: Consultrms.com, January 2024

SECURE 2.0 Guidance Addresses Designated Roth Contributions

Under SECURE 2.0, 401k plans may choose to permit participants to elect to receive employer matching and/or discretionary (non-elective) contributions in the form of Roth (i.e., after-tax) contributions, effective for plan years beginning after December 29, 2022. Here are some details and clarifications.

Source: Compliancedashboard.net, January 2024

2024 Adjusted Penalties for ERISA Violations

On January 11, 2024, the DOL released a final rule that provides new figures reflecting the adjusted civil penalty amounts for 2024, under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The chart here shows the increased penalties for ERISA violations; however, please note that penalties under other federal laws are affected as well. The adjustments are effective January 15, 2024.

Source: Groom.com, January 2024

DOL Releases Proposed Auto-Portability Reg

The DOL announced on Jan. 18 that its Employee Benefits Security Administration released a proposed regulation on automatic portability transactions under SECURE 2.0. The DOL said automatic portability transactions aim to help workers keep track of their retirement savings accounts and improve retirement security by reducing cash-outs when they change jobs.

Source: Asppa.org, January 2024

DOL Proposes SECURE 2.0 Auto-Portability Regulation

The Employee Benefit Security Administration has released a proposed regulation on automatic portability transactions under the SECURE 2.0 Act of 2022, the DOL announced. According to an announcement from the federal agency, the regulation seeks to help workers keep track of their retirement savings accounts by reducing cash-outs when employees switch jobs.

Source: 401kspecialistmag.com, January 2024

"Cross-Testing" in Qualified Profit Sharing Plans - 2024

Cross-testing is a method of demonstrating that a defined contribution plan is not discriminatory in favor of Highly Compensated Employees by analyzing the retirement benefit generated by the annual contributions for the HCEs to the retirement benefit generated by the contributions to the non-HCEs (rather than looking at the contribution itself). Here is a brief overview of the 2024 Cross-testing rules.

Source: Consultrms.com, January 2024

New Requirement to Cover Long-Term Part-Time Employees in 401k Plans Enters Into Effect

Some executives may view this change as an issue that does not require their attention and that will be handled by their human resources staff and the 401k plan service providers. However not complying with the rules might be costly for the employer if corrective contributions for long-term, part-time employees who were not allowed to participate are required, along with ancillary costs.

Source: Bdo.com, January 2024

Mandatory Auto-Enrollment is Coming for Some Plans: What to Know

Studies show that auto-enrollment increases plan participation, and soon it will not be optional for some plans. Among the many changes enacted in SECURE 2.0 is a requirement that new 401k and 403b plans have auto-enrollment and auto-escalation beginning in 2025. As with most of the SECURE 2.0 changes, there were many questions about how the rules would work in practice. Part of the "grab bag" guidance issued in recent Notice 2024-02 fills in some of the blanks but also leaves important questions unanswered.

Source: Cohenbuckmann.com, January 2024

2024 Benefits Limits

Employee benefits limits for 2024 have been promulgated by the government. Here is a one-page 2023-2024 comparison chart of important employee benefits limits.

Source: Clarkhill.com, January 2024

New Form 5500 Released

The Department of Labor released on Monday changes to Form 5500 for plan year 2023 reporting. Form 5500 is updated annually to account for statutory and regulatory changes affecting pension and retirement plan disclosure. The new form contains modifications for both SECURE Acts.

Source: Planadviser.com, January 2024

IRS Notice 2024-2 Provides Guidance for Multiple SECURE 2.0 Provisions

On December 20, 2023, the IRS released guidance concerning certain provisions of the SECURE 2.0 Act of 2022. Notice 2024-2, which is in a Q&A format, is not intended to be comprehensive guidance but rather to offer assistance in commencing implementation of these provisions. The Treasury Department and IRS invite comments on the matters discussed in the Notice. Additional guidance is anticipated.

Source: Voya.com, January 2024

2024 Retirement Saver's Credit

The Saver's Credit, also known as the Credit for Qualified Retirement Savings Contributions, was designed to help low- to moderate-income individuals save for retirement by providing an additional credit toward tax liability on top of existing retirement savings incentives. Learn who is eligible and how it works.

Source: Usicg.com, January 2024

IRS Says Keep Those Class Exclusions Classy Under Long-Term, Part-Time Employee Rules

The new rules require that employers who maintain such plans provide employees who work at least 500 hours for three consecutive years (reduced to two in 2025) and are at least age 21, the opportunity to make elective deferrals under their 401k plans beginning in 2024 and their 403b plans beginning in 2025. This change has generated numerous questions about what employers need to do to comply.

Source: Mwe.com, January 2024

SECURE 2.0 Grab Bag: Naughty or Nice? Mandatory Automatic Enrollment

On December 20, 2023, the IRS reached into its bag of toys and bestowed upon the pension community a gift for the holidays: assorted guidance for certain provisions of the SECURE 2.0 Act of 2022. Included in this Guidance is information about several key provisions already in effect and several that are effective as of the New Year. The subject of this article is the required Automatic Enrollment provisions that become effective in 2025.

Source: Ferenczylaw.com, January 2024

EBSA Releases Form 5500 Series for 2023 Reporting

New year, new forms. The Department of Labor's Employee Benefits Security Administration on Jan. 1 released Form 5500, Form 5500-SF, and Form 5500-EZ for reporting concerning the 2023 plan year.

Source: Asppa.org, January 2024

Defined Contribution Retirement Plan: 2024 Compliance Calendar

Retirement plan sponsors are responsible for compliance with any ongoing reporting, disclosure, and notice requirements. This Retirement Plan Compliance Calendar summarizes the major requirements that apply to defined contribution plans for 2023. Due dates are based on a calendar plan year and apply to plans subject to ERISA.

Source: Usicg.com, December 2023

De Minimis Financial Incentives to Participate in a 401k or 403b Plan

On December 20, 2023, the IRS issued Notice 2024-2, which provides question-and-answer guidance on various aspects of the SECURE 2.0 Act. This article focuses on "de minimis financial incentives" under SECURE 2.0 Act Section 113.

Source: Spotlightonbenefits.com, December 2023

IRS 2023 Changes List for Pre-Approved Plans Is Out

The Internal Revenue Service issued the 2023 Cumulative List of Changes in Plan Qualification Requirements for Defined Contribution Qualified Pre-approved Plans; a list of plan amendments required for plans relying on a safe harbor plan. Many of the newest changes in the 18-page document relate to provisions of the SECURE 2.0 Act of 2022.

Source: Planadviser.com, December 2023

Using Force Out Distributions to Avoid a 401k Audit

If you seek avenues to avoid a costly 401k audit, your focus should be headcount. Why headcount? Because it is what the government uses as a measuring stick to determine which plans must be audited. Between recent Acts of Congress and rule changes implemented by the IRS, there are currently two unrelated changes to be aware of. Both can potentially reduce the number of plans subject to audit significantly.

Source: 5500audit.com, December 2023

Why SECURE 2.0 Act Auto Enrollment and Escalation Will Boost Financial Wellbeing

The SECURE Act 2.0 contains dozens of changes to retirement plans, but perhaps none bigger than these two: New 401k and 403b plans will be required to automatically enroll participants in the respective plans, and employee salary deferral rates will automatically escalate each year. Here's what you need to know.

Source: Hubinternational.com, December 2023

New Guidance Fills in the Blanks for Roth Employer Contributions

As a result of these new rules, allowing employees to elect to treat matching or nonelective contributions as Roth contributions has become more attractive, especially for plans that already permit Roth deferrals and in-plan Roth conversions. The elimination of lifetime RMD requirements means that participants will no longer have to roll their distributions into Roth IRAs to avoid the lifetime RMD rules, which has been a common practice.

Source: Cohenbuckmann.com, December 2023

The IRS's Grab Bag of SECURE 2.0 Guidance is Here

Adding to the holiday joy of employee benefits practitioners nationwide, the IRS issued guidance on several outstanding questions related to SECURE 2.0. At this time of year, we are especially thankful that the guidance was issued on a day other than the day before or following a national holiday.

Source: Beneficiallyyours.com, December 2023

SECURE 2.0 Grab-Bag Brings Holiday Treats

This holiday week, the IRS issued its long-anticipated guidance on miscellaneous changes under the SECURE 2.0 Act of 2022 that are effective now (or in short order). Specifically, Notice 2024-2, covers, in question and answer format, twelve provisions of SECURE 2.0. The guidance brings increased and much-needed clarity to several important provisions. This is a brief review of the guidance.

Source: Groom.com, December 2023

IRS Releases Q&A Guidance on Key SECURE 2.0 Provisions

The IRS has just released new guidance in the form of questions and answers addressing several key provisions contained in the SECURE 2.0 Act of 2022. The IRS advises that the notice (Notice 2024-02) is not intended to provide comprehensive guidance as to the specific provisions of the SECURE 2.0 Act, but rather is intended to guide on discreet issues to assist in commencing implementation of these provisions.

Source: Asppa.org, December 2023

IRS Issues 2023 Cumulative List of Changes in Pre-Approved DC Plan Requirements

The IRS, on Dec. 20th, issued their 2023 cumulative list of changes in plan qualification requirements for pre-approved defined contribution plans. The changes are contained in Notice 2024-03. The 2023 Cumulative List is intended to assist providers applying to the IRS for opinion letters for the fourth remedial amendment cycle for DC-qualified pre-approved plans (Cycle 4) under the IRS' pre-approved plan program.

Source: Napa-net.org, December 2023

Last-Minute Guidance Leaves Little Time for Long-Term, Part-Time Employee Changes

Though well-intentioned, implementing the new LTPTE rule has been fraught with complexity, driven in part by long-unanswered questions about how the requirement should be applied. Recently issued guidance provides insight into the rule and answers to many of those unanswered questions. However, with that new rule effective for 401k plans beginning January 1, 2024, the guidance leaves employers very little time to make changes.

Source: Mwe.com, December 2023

403b vs. 401k - 2024

403b plans are generally subject to fewer technical requirements and less administrative burdens than 401k plans. But there are other differences as well. Here is a 4-page chart comparing the two types of plans.

Source: Consultrms.com, December 2023

Year-End Plan Sponsor Roundup

The end of the year is fast approaching. Many plan sponsors are tying up loose ends and hopefully preparing for some downtime with family and friends. With competition for your time and attention in mind, this article provides a rapid-fire roundup of the retirement plan issues that have emerged over the last few weeks.

Source: Qualifiedplanadvisors.com, December 2023

A Benefits Wish List for 2024

The 50th anniversary of the passage of ERISA will occur in 2024, but there is still no definitive guidance on some of the provisions that were part of the original legislation. Guidance is needed on more recent legislation as well. Here is a list of steps that courts and Congress could take in the coming year to help stem meritless fiduciary breach litigation, better enable recordkeepers and plan sponsors to implement provisions of SECURE 2.0, and encourage the adoption of new plans.

Source: Cohenbuckmann.com, December 2023

Longstanding Internal Revenue Service Position Called Into Question

The Internal Revenue Service's longstanding position has been that forfeitures in a tax-qualified defined contribution plan can be used in only three ways: payment of reasonable plan expenses; reduction of employer contributions; or allocation to plan participants. Recently, several class action lawsuits have been filed challenging the permissibility of plan language providing discretion as to how forfeitures should be used.

Source: Wagnerlawgroup.com, December 2023

Long-Term, Part-Time Employee (LTPTE) Regulations Proposed by IRS

On November 27, 2023, the IRS released proposed regulations addressing the new rules for long-term, part-time employees under tax-qualified retirement plans, including 401k plans. Generally, effective for taxable years beginning after December 31, 2020, the SECURE Act requires plans to permit eligible employees who complete at least three consecutive 12-month periods of service, in which they complete more than 500 hours of service in each of the 12-month periods, to contribute to the plan.

Source: Compliancedashboard.net, December 2023

New LTPTE Proposed Regs Drop as Effective Date Looms

These rules on LTPTE become effective for most 401k plans on January 1, 2024, a mere 25 working days after the proposed regulations were issued. They may have a significant impact on design decisions and plan administration for many plan sponsors, so immediate action may be needed. This article highlights some of the key issues raised by the proposed regulations.

Source: Psca.org, December 2023

DOL Drops Off Proposed Auto-Portability Exemption at OMB

Proposed guidance implementing the SECURE 2.0 Act's provision providing an exemption for certain automatic portability transactions has moved one step closer to being publicly released. The DOL on Dec. 5 submitted to the White House Office of Management and Budget for review a Notice of Proposed Rulemaking to implement a statutory exemption under Section 4975 of the Internal Revenue Code allowing for the receipt of fees and compensation by an automatic portability provider for services provided in connection with automatic portability transactions.

Source: Napa-net.org, December 2023

IRS Proposes 401k Plan Regulations Implementing Long-Term Part-Time Employee Eligibility Requirements

The proposed rules include a significant level of detail and illustrate many of the operational challenges associated with administering the long-term part-time employee rules. Here is a review of the rules. Some plan sponsors may want to explore plan design changes that would permit them to comply with the long-term part-time employee requirements, but avoid some of the tricky service crediting and vesting requirements in the proposed rules. Given that the long-term part-time requirements take effect in 2024, plan sponsors should act quickly to evaluate next steps.

Source: Erisapracticecenter.com, December 2023

Proposed Regulation for Long-Term Part-Time Employees: Plan Sponsors Act Now

Effective Jan. 1, 2024, employers who sponsor 401k plans must allow employees who work at least 500 hours a year over consecutive years to be eligible to make deferrals into the plan. This change requires immediate action by plan sponsors to change the way they administer their plans, specifically, counting service hours and increasing eligibility for LTPT employees.

Source: Employeebenefitslawreport.com, December 2023

2023 End of Year Plan Sponsor To-Do List for Qualified Retirement Plans

As 2023 comes to an end, the law firm Snell & Wilmer presents their "End of Year Plan Sponsor To-Do Lists." It provides plan sponsors with a to-do list of items on which they may want to take action before the end of 2023 or in early 2024.

Source: Swlaw.com, December 2023

Long-Term, Part-Time Employees IRS Proposed Regulations

While the IRS uses the name "long-term, part-time employees" in the proposed regulations, these rules apply to part-time, seasonal, and other types of reduced-hours workers, and could potentially apply to even some full-time employees if a plan uses hours to determine eligibility to participate. More detailed information about the proposed regulations is included in this chart.

Source: Sgrlaw.com, December 2023

Plan Sponsors Need More Clarity on Optional SECURE 2.0 Provisions

A key theme that has emerged from Alight's annual "hot topics" survey is that employers need more guidance on key provisions in the SECURE 2.0 Act before fully embracing them. Alight notes that this is particularly true for some of the novel provisions. In fact, all employers in the survey say they would need more legal guidance before considering the Saver's match contribution. Notably, the least popular are the provisions with the most questions, like the $2,500 emergency fund and matches on a Roth basis.

Source: Napa-net.org, December 2023

2024 Key Administrative Dates and Deadlines for Calendar-Year DC Retirement Plans

This five-page compliance calendar for 2024 lists key administrative dates and deadlines for defined contribution plans, from January to December, with more than four dozen relevant entries for plan sponsors working in the DC space.

Source: Milliman.com, December 2023

IRS Issues Long-Term, Part-Time Employee Proposed Regulations

The proposed regulations provide several helpful answers that may reduce the implementation burdens for some employers. But there are also some nuances that are likely to be challenging to implement by the January 1, 2024, statutory effective date of SECURE 1.0, and the January 1, 2025 effective date of SECURE 2.0.

Source: Groom.com, December 2023

For Many, DOL's Fiduciary Proposal May Be "Less Daunting" Than at First Blush

Outside of the banking and insurance contexts, an overview of the proposed changes to PTE 2020-02 shows that the changes are somewhat less daunting than they may seem at first blush and are not drastic for many parts of the industry as some headlines have suggested.

Source: Asppa.org, December 2023

401khelpcenter.com, LLC is not the author of the material referenced in this digest unless specifically noted. The material referenced was created, published, maintained, or otherwise posted by institutions or organizations independent of 401khelpcenter.com, LLC. 401khelpcenter.com, LLC does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC.

About | Glossary | Privacy Policy | Terms of Use | Contact Us

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.