REMINDER - SECURE/CARES Act Amendments
Plan sponsors must amend their retirement plan documents before the end of the 2022 plan year for certain mandatory changes and/or optional changes from recent legislation. In particular, both the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE) and the Coronavirus Aid Relief and Economic Security Act of 2020 (CARES) either added required changes to be made to your plan documents or gave you the discretion to make temporary optional changes.
For example, the SECURE Act changed the date in which participants must start taking required minimum distributions (RMDs) to April 1st after the year the participant turned Age 72 or retired, which was a change from the previous age requirement of 70 ½. From an operational perspective, when we calculate RMDs for your plan we use the new Age 72 requirement, but your plan document still needs to be updated by the end of the 2022 plan year for this law change.
If your plan document has not been updated for the SECURE or CARES Act, please contact your legal advisor to ensure any required plan updates are completed by the required deadline.
IRS Correction Programs
It happens to the best of us. No one is immune to making mistakes. Mistakes can also occur in relation to the operation of your retirement plans. The IRS recognizes that mistakes do happen and therefore has a program called their Employee Plans Compliance Resolution System (EPCRS) that permits plan sponsors to identify and correct plan failures. Certain plan failures can be self corrected without the need to contact the IRS or pay any sort of user fee. Other more material failures that cannot be self corrected can be resolved through a Voluntary Correction Program (VCP) where a plan sponsor contacts the IRS to acknowledge the error, gets a written agreement for outlining the correction of the failure with the IRS and pays a user fee for the submission.
Prior to 2022, plan sponsors had the ability to submit an anonymous VCP submission to allow them to report a plan issue. The IRS eliminated this option for any submission made on or after January 1, 2022. In place of this prior program, the IRS now allows plan sponsors to make an anonymous request for a pre-submission conference to discuss a potential VCP submission at no cost. Following the conference if the plan sponsor submits a VCP request it can no longer be anonymous.
On June 3rd of this year, the IRS also announced a new 90 day Pre-Examination Compliance Pilot program. For this program, the IRS will notify a plan sponsor by letter that their plan was selected for an upcoming examination. The letter will give the plan sponsor a 90 day window to review their plan document and operations to determine if they follow all current legal requirements. The IRS will review your documentation and determine if they agree with your conclusions, and then either issue a closing letter or conduct a limited or full scope audit.
If the plan sponsor does not respond within the 90 day period, the IRS will contact them to schedule a formal examination. If your review reveals mistakes in your plan document or operations, you may be able to correct them using the self correction options available and notify the IRS of those corrections as part of your response.
The goal with this pilot program is to reduce plan sponsors burden as well as the time spent in a typical formal examination.