PLANSPONSOR - September - October 2023 - 38

FIDUCIARY FORUM
When to Amend?
Plan sponsors face multiple deadlines, but some are unclear
P
lan sponsors are exhausted by
the passage of legislation in the
past few years aimed specifically
at retirement plans. Since 2019, they've
been trying to grasp the changes brought
by the Setting Every Community Up
for Retirement Enhancement Act, the
Coronavirus Aid, Relief and Economic
Security Act and the SECURE Act 2.0 of
2022. Sponsors have been navigating the
new laws, revising their operational procedures
and trying to find the best avenues
to educate their plan participants
about the changes. But they want more
information: By when do plans need to be
amended for all these new requirements?
Originally, there was a deadline of
December 31, 2022, for the SECURE Act
1.0 and CARES Act, with caveats for noncalendar
plans and collectively bargained
plans. The IRS issued Notice 2022-33,
which effectively extends the deadline
to amend plans for the SECURE Act and
Cares Act to December 31, 2025 (government
plans excepted). However, there are
quite a few exceptions that plan sponsors
need to be aware of and that may require
amendments as early as the end of
this year.
The confusion as to when plan
amendments must be adopted is exacerbated
by the fact
that participants have
already been notified of these changes
and that some of the operational ones
are already moot and inapplicable. Many
relate back to 2020 such as for COVIDrelated
loans and distributions.
The July 2022 deadline to restate
defined contribution preapproved plans
adds to this confusion. Plan sponsors that
restated their defined contribution volume
submitter or prototype plan documents
may have thought that was enough
and they were done but, in fact, had not
amended for the original SECURE Act
and the CARES Act changes. Some document
providers issued separate SECURE
Act 1.0 and CARES Act amendments, but
not all did. Plan sponsors need to figure
out whether additional amendments are
necessary, even if they just restated their
plan document.
Another challenge for plan sponsors
is needing to remember what
changed as far back as 2019 and whether
a plan amendment is even necessary. For
example, when SECURE 1.0 was passed in
2019, it increased the required minimum
distribution age from 70.5 to 72 and made
other changes to death benefits. Most
plan sponsors did not amend their plan
documents for these changes.
Then, on March 27, 2020, CARES
was enacted. The CARES Act allowed
participants to take distributions from
their retirement accounts without being
subject to the 10% excise tax. This
included penalty-free distributions and
participant loans of up to $100,000 of the
person's account, with a three-year repayment
period. Some plan sponsors opted to
proactively amend their plan document to
reflect the CARES Act while others just
provided notices to participants regarding
the changes.
Plan sponsors that adopted preapproved
plan documents relied on their
document provider to supply guidance;
they submitted directives to the provider
as to what options they would offer to
Plan sponsors
that restated
their defined
contribution
volume submitter
or prototype plan
documents may
have thought that
was enough ...
their participants but, for the most part,
and based on our experience, plan amendments
were not drafted.
Lastly, SECURE 2.0 was enacted on
December 29, 2022. This legislation has
many optional and mandatory provisions.
However, these provisions have different
amendment deadlines. For example, one
of the mandatory requirements, calling
for participants earning over $145,000
annually, as indexed, to make catch-up
contributions on a Roth after-tax basis,
was originally due to be effective January
1, 2024. But this has been delayed to 2026
(IRS notice 2023-62). That now places
another deadline for plan sponsors to be
aware of and, if necessary, include in the
plan amendment timeline.
Plan sponsors should work with their
service providers in determining when/ if
their plans must be amended, and this
discussion should start to happen well
before 2025.
Summer Conley is a partner in the Los Angeles office of Faegre Drinker Biddle
& Reath LLP. Michael Rosenbaum is a partner in the firm's Chicago office.
Heather Bader, also a partner in Los Angeles, contributed to this column.
38 PLANSPONSOR.COM September - October 2023 Art by Joseph Ciardiello
http://www.PLANSPONSOR.COM
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