Deadlines are quickly approaching for ERISA employee benefit plans. Not only must plan sponsors comply with the provisions set forth in the Securing a Strong Retirement Act of 2022 (SECURE 2.0), but compliance may also trigger mandatory plan amendments that must be adopted according to a timeline set by the IRS. Waiting until deadlines loom to adopt plan amendments can turn a manageable process into a last-minute scramble, especially when procrastination can result in plan disqualification. In this article, we explain the upcoming deadlines and offer advice on taking a proactive approach.
SECURE 2.0 and ERISA Retirement Plans
SECURE 2.0 introduced sweeping reforms for employee retirement plans, intended to increase plan coverage while bringing clarity to complicated rules. Some modifications are mandatory, while others are optional; either may require amendments to plan documents.
The Act contains more than 90 changes related to various plan-related issues, including but not limited to the following:
- Increasing catch-up contributions, including new “super” catch ups for participants who are age 60 to 63
- Rothification of catch-up contributions for participants earning over $145,000 (indexed) starting in 2026
- Participant election of Roth treatment for employer contributions
- 401(k) coverage for eligible long-term part-time employees
- Mandatory automatic enrollment for new 401(k) or 403(b) plans
- Expanding the Employee Plans Compliance Resolution System (EPCRS)
- Increasing the small employer plan start-up credit
- Reform of family attribution rules
It is crucial for employers with qualified retirement plans to understand how SECURE 2.0 affects their plan provisions. For a more comprehensive review, please refer to BDO’s previous article, “Secure 2.0 Act of 2022 Introduces Key Changes for Workplace Retirement Plans.”
A Unified Mandate with Different Deadlines
Under IRS Notice N-2024-02, all plans must amend their plan documents by the following deadlines, regardless of whether the plan operates on a fiscal year or calendar year basis, for all changes in the law in the past few years, including the CARES Act, SECURE 1.0 and SECURE 2.0:
12/31/2026: Qualified plans, excluding governmental plans or union plans
12/31/2028: Union plans under collective bargaining agreements
12/31/2029: Governmental plans under IRC Section 414(d) and 403(b) plans sponsored by public school
Amending an ERISA retirement plan requires robust review and decision making, which may include working with outside entities. It’s never too early to start, as the process of preparing and finalizing plan amendments can be more time-consuming than expected.
Best Practices for Plan Sponsors Facing SECURE 2.0 Deadlines
How can employers and plan sponsors manage their plan amendment process?
- Review the plan now. Conducting a thorough review of current plan documents will help employers and sponsors fully understand the existing provisions and identify potential changes early in the process. If the employer implemented any CARES Act, SECURE 1.0 or SECURE 2.0 changes in the law in operation, those changes must be memorialized in the plan amendment.
- Manage third-party collaboration. When working with third-party vendors or outside service providers, be sure to give them sufficient time to prepare the necessary amendment documents. As work progresses, maintain regular communication with vendors and providers to confirm their work is on track.
- Discuss key decisions. Add SECURE 2.0 reminders to meeting agendas to promote early discussions. Employers and plan sponsors should make key decisions as soon as possible so they are prepared to sign amendment documents when the final documents arrive.
As mentioned earlier, all qualified ERISA retirement plans are subject to the mandatory plan amendment deadlines. Taking a proactive approach to preparing plan amendments can lead to a smoother process and reduce the risk of last-minute complications.
Is Your Company Ready for SECURE 2.0’s Mandatory Deadlines?
Complying with regulations for ERISA retirement plans is never easy, particularly when facing mandatory deadlines. Our Employee Benefit Plan Audit team can help review your plan and assist with plan amendments.