2022 Required Changes for Employee Benefit Plans

Plan sponsors and service providers should keep in mind several fast-approaching deadlines for required plan changes in 2022:

• Changes made as a result of the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) and Coronavirus Aid, Relief, and Economic Security Act (CARES Act) must be formally adopted via amendment by December 31, 2022 (for calendar year plans). Note that governmental plans have an extended deadline period to the last day of the 2024 plan year. Examples of requirements brought about by the Acts are as follows:
• • Part-time eligibility rules – The SECURE Act generally expanded 401(k) plan eligibility to include long-term part-time employees who work at least 500 hours in three consecutive years and are at least age 21 by the last day of the three-year period. Plan sponsors needed to start tracking hours beginning in 2021, but plans are not required to permit these newly eligible employees to make 401(k) plan deferrals before 2024.
  • Required Minimum Distributions (RMDs) – The SECURE Act changed the RMD rules to increase the required beginning date from age 70-1/2 to 72, applicable to participants who reach age 70-1/2 on or after January 1, 2020. Additionally, for defined contribution plan participants who die on or after January 1, 2020, the entire balance of the participant’s account generally must be distributed within 10 years, with exceptions for certain beneficiaries. Plans that allowed RMD waivers under the CARES Act must be amended to reflect that administrative practice.
  • Coronavirus-related distributions and loans – Retirement plans that implemented distribution and loan changes permitted under the CARES Act (e.g., coronavirus-related distributions, increases in plan loan limits, and/or delays in loan repayments) must adopt amendments to conform to their administration.

• The SECURE Act established a requirement for a new “lifetime income” disclosure to be sent this year. The lifetime income disclosure will provide an example of the annuity product a participant can buy on the open market using the current lump sum value of the participant’s plan benefit. For participant-directed calendar year plans requiring quarterly statements, the disclosure must be included in a quarterly statement no later than the second quarterly statement for 2022 (i.e., June 30, 2022). Non-participant directed plans requiring annual statements must incorporate the disclosure in the annual benefit statement for the first plan year ending on or after September 19, 2021. For calendar year plans, this will be the annual statement for 2021, which must be furnished no later than October 15, 2022.
• The IRS requires plans that are using pre-approved documents (e.g., prototype or volume submitter documents) to be periodically restated to an updated document. These updated documents must incorporate legislation, regulations, and other items specified by the IRS since the last restatement. Note that this is in addition to the changes required by the SECURE Act, the CARES Act, etc. “Cycle 3” restatements for certain defined contribution retirement plans (e.g., 401(k) plans, profit sharing plans, etc.) are required to be adopted by July 31, 2022. Failure to comply could cause a qualification failure, which may result in adverse tax consequences.
• Finally, sponsors of health and welfare plans should make sure that their plan documents are fully up-to-date with all the various changes required by and/or due to the many laws enacted and guidance issued throughout the COVID-19 pandemic (e.g., the temporary rules requiring plans to disregard certain days in calculating various COBRA, special enrollment, and ERISA claims/appeals deadlines). Plan sponsors should also ensure compliance with and implementation of the mandates that were set forth in the Consolidated Appropriations Act, which was passed in late 2020. This legislation requires health plan transparency and specific updates to health plan claims processing procedures.

Please contact us if you have questions about the information outlined above, our seasoned and experienced employee benefit plan professionals are here to help. You can also learn more about our Employee Benefit Plan Audit  services by visiting our website.

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