2017 Year-End Deadlines and Tips for Retirement Plans

Kyle Woods, senior associate at Alston & Bird in its Atlanta office, says in past years there have been significant year-end deadlines for retirement plans, but this year, due to fewer legislative changes that require plan amendments and the end of cycle filing for determination letters, there aren’t really many must-do items for the end of 2017.

But, there are a few to note.

Last year, the Internal Revenue Service (IRS) issued a final rule modifying minimum present value requirements for partial annuity distribution options under defined benefit (DB) plans. According to Elizabeth Thomas Dold, principal at Groom Law Group, Chartered, in Washington, D.C., if DB plans adopt these bifurcated lump sums by the end of 2017, they will get Employee Retirement Income Security Act (ERISA) anti-cutback relief.

For defined contribution (DC) plans, Dold notes that plan amendments are not due yet for relief given to this year’s hurricane and wildfire victims; however, relief provided in 2016 for Hurricane Matthew victims does have required amendments by the end of this year. “But this is only for plans with no loan or hardship provisions,” she says.

Woods adds that amendments are also required for plans that took advantage of regulatory relief provided for victims of flooding in Louisiana in 2016.

Required minimum distributions (RMDs) for participants who turned 70 1/2 in previous years are due by 12/31.

Of course, discretionary plan changes—such as adding automatic enrollment or changing the plan’s matching formula—that are to go into effect in 2018 need to have plan amendments by the end of the current plan year—December 31, 2017 for most plans, according to Woods. Given how late in the year it is, he notes that at this point, plan sponsors probably couldn’t begin the process of implementing automatic enrollment because of the participant notice requirement, but if they want to switch to a safe harbor plan or increase their employer match, there is still time to do that.

Dold adds that plan sponsors may consider adding into plan amendments some items that do not require amendments just yet. For example, a plan sponsor can elect to apply the January 2017 proposed regulations to permit the use of forfeitures for qualified non-elective contributions (QNECs) and qualified matching contributions (QMACs) in safe harbor plans.

Finally, Dold notes that plans that were previously under cycles B, C, D and E have until 12/31 to get a determination letter because their remedial amendment period was cut short. These plans should look to the cumulative list of changes issued by the IRS for 2015—for which cycle A plans have already had time to make amendments—to see if any changes need to be made to their plans.

“If there’s not a collective bargaining agreement [CBA] and union, amendments can be made within days, but sometimes service providers need a little lead time to implement. The actual amendment isn’t usually a complicated process,” Woods says.

Year-end tips for retirement plans

“We tell our clients the end of the year is an excellent time to review their plans and make sure they are operating properly. Also look at whether participants are utilizing benefits properly and think about additional features,” Woods says. He adds that while the more recent storm and disaster relief provisions do not have to be incorporated in plan amendments this year, if plans are already incorporating some other design changes, now would be a good time to address everything together.

Dold adds that plan sponsors should keep an eye out for updates to the IRS’ new required amendments list. Also, plan sponsors need to keep documentation about what they are doing to provide hurricane and wildfire relief.

Dold says actuaries are excited about an IRS announcement which provides for automatic approval of a change in funding method with respect to a single-employer defined benefit plan under certain circumstances in which the change in method results from a change in the plan’s enrolled actuary. Actuaries and DB plan sponsors should be talking about this as well as the final regulations about mortality tables.

Other tips mentioned in an Insights report by Conduent Incorporated include remembering to process automatic cashouts of small balances, if plans allow it, as well as to identify missing participants as soon as possible. “The sooner the search is started, the more likely you’ll be able to locate terminated participants whose addresses have changed,” the report states.

Conduent also says year-end is a good time to remind participants to name beneficiaries, and to review participant vesting and forfeiture amounts.