With apologies to Aldous Huxley, it is fair to say that SECURE 2.0 has ushered in a brave new world of self-correction for plan sponsors with plan qualification failures.  This post focuses on self-correction of operational failures; i.e., failures to operate plans in accordance with their written terms. SECURE 2.0 comprises Division T of the Consolidated Appropriations Act, 2023, and Section 305 of that Division expanded the Employee Plans Compliance Resolution System (EPCRS) to permit self-correction of any inadvertent failure to comply with the rules applicable to qualified plans, Sect ..read more

Last week, final changes to Form 5500 reporting requirements were announced that are estimated to result in over 10,000 fewer retirement plans having to file independent qualified public accountant (IQPA) reports with their Form 5500 returns. The changes, which take effect for reporting for the 2023 plan year, were met with dismay by CPA firms that provide the IQPA reports, often referred to as audit reports. However, their concerns may be short-lived, as certain provisions of SECURE 2.0 will likely increase plan participation levels over the next few years and result in more plans that are of ..read more

The SECURE 2.0 Act of 2022, as enacted on December 29, 2022, contains over 90 provisions affecting retirement plans and IRAs, but of the many provisions only a handful are required changes for 401(k) plans.  This post lists those changes and indicates when the provisions go into effect.  Unless otherwise noted, 401(k) plans (and 403(b) plans, to which these changes also apply) will need to be amended to reflect mandatory SECURE 2.0 changes by the end of their 2025 plan year, unless that deadline is later extended.  Note that some of the changes listed below, such as the paper di ..read more

SECURE 2.0 Permits Small Financial Incentives to Encourage Plan Enrollment Effective immediately under a provision of the recently-passed SECURE 2.0 retirement reform legislation, employers may offer their employees gift cards or other “de minimis financial incentives” for enrolling in a 401(k) plan.  This post sets forth some compliance points for this new incentive opportunity. Under prior law, matching contributions were the only means by which employers could encourage employees to make elective deferrals.  Expanding access to retirement plans is one of the overriding goals of ..read more

On December 29, 2022 President Biden signed into law H.R. 2617, the Consolidated Appropriations Act, 2023, a $1.7 trillion omnibus spending bill that will keep the federal government funded for the 2023 fiscal year.  Of the many provisions in the massive bill, Division T, the SECURE Act of 2022, contains close to 400 pages of far-reaching changes affecting retirement plans and IRAs.  Commonly referred to as SECURE 2.0, it builds upon and adds to retirement plan provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE 1.0) which was passed in 2019, b ..read more

Self-correction of operational errors arising in qualified retirement plans is a critical means for plan sponsors to retain their plans’ tax-qualified status. Self-correction has been promoted by the Internal Revenue Service as part of the Employee Plans Compliance Resolution System, or EPCRS, for approximately twenty years, but the rules for self-correction have evolved over that time period, and some essential requirements of self-correction are still little understood. One recommended component of self-correction that can tend to be overlooked is preparation of a self-correction memo. Below ..read more

Despite an extension granted to qualified plans, Section 403(b) plans, and governmental Section 457(b) plans to make necessary amendments under the SECURE Act, no extension past December 31, 2022 currently applies for Section 457(b) plans maintained by private tax-exempt organizations.  That means that, absent future guidance from IRS, these plans must be amended by the end of this year to incorporate the SECURE Act’s changes to required minimum distribution provisions.  Prompt action by those responsible for Section 457(b) benefits is required in order to meet the fast-approaching d ..read more

The Internal Revenue Service announced new dollar limits for retirement plans for 2023, with most limits showing a sizeable increase over 2022 amounts. The new annual 401(k) elective deferral limit is $22,500 with a $7,500 catch up for those age 50 or older, permitting $30,000 to be contributed annually, or $5,000 per month. Plan sponsors should also note that the compensation threshold to determine highly compensated employees increases from $135,000, to $150,000, which is measured based on prior year’s compensation. The rest of the new limits are shown below: The above information is a brie ..read more

The following Q&A is geared for plan sponsors who are curious about the auto-portability process and how it might prove beneficial to their plan participants.  Auto-portability can prove especially useful in industries with lower wages and high employee turnover, which may include retail, transportation, hospitality, and restaurants, because this can often lead to numerous account balances of $5,000 or less being involuntarily rolled to default IRAs.  Note that SECURE 2.0 proposals could increase the involuntary cash-out threshold to $7,000, which could expand the potential marke ..read more

The IRS recently published an Issue Snapshot meant to guide examiners who encounter third party loans among the investments of plans they are auditing.   Third party loans occur when a qualified plan trustee elects to loan plan funds to someone other than a plan participant, at a designated rate of return, in exchange for a promissory note, deed of trust, or other form of security. Below I summarize some of the key points in the IRS Snapshot and add some insights gleaned from third party loan issues I have encountered in my practice.   Note: this post is not intended as a ..read more