There is still a lot of 2020 left to go. But 2021 is fast approaching, and a July 22 Plan Sponsor Council of America (PSCA) webcast offered ideas on how to prepare for that.
In “Year-End Checklist: COVID-19 issues and Preparing for 2021,” three Winston & Strawn LLP attorneys—Ariane Andrade, an Associate at the firm’s Chicago office; Anne Becker, a Partner at its Chicago office; and Joanna Kerpen, a Partner at its Washington, D.C. office, discussed preparing for the upcoming year from a variety of perspectives.
Becker focused on retirement plans, and told attendees that in 2020 they should take a variety of steps.
Plan design changes. There has been so much change already this year that “It’s hard to think about more change,” said Becker, but suggested that attendees consider whether any additional plan design changes are necessary or desirable before year-end.
Safe harbor 401(k) plan amendments. Regardless of whether employer is operating at an economic loss or provided required notice, said Becker, a safe harbor 401(k) plan may be amended to suspend or reduce matching contributions on or before Aug. 31, 2020.
IRS determination letters. Becker reminded attendees that the deadline for submission of cash balance/hybrid plans for IRS determination letter is Aug. 31, 2020.
Coronavirus-related distributions. Becker suggested considering coronavirus-related distributions (CRDs) for defined benefit plans.
Update SMMs or SPDs. Becker suggested issuing 401(k) SMM or new SPD with CARES Act and SECURE Act updates.
Communications. Double-check the recordkeeper’s communications with participants.
E-disclosure. Consider whether to take advantage of new electronic disclosure rules.
Loan Procedures. Review 401(k) loan procedures—do they reflect recent CARES Act and Tax Cuts and Jobs Act updates?
Required minimum distributions (RMDs). Regarding RMDs, Becker suggested considering:
- How the 401(k) plan will treat 2020 RMDs under the CARES Act.
- Whether the employer will permit participants to roll 2020 RMDs back into the 401(k) plan.
- Review of forms provided by the 401(k) plan recordkeeper to (1) participants becoming eligible for RMDs and (2) beneficiaries of deceased participants, with a view toward whether they are updated for the SECURE Act.
402(f) notices. Review the recordkeeper’s 402(f) rollover notice, Becker suggested. She noted that the IRS has not updated safe harbor versions of the notice since 2009. Becker added that plan sponsors may rely on the IRS version, but that updates in accordance with the Tax Cuts and Jobs Act and SECURE Act could help avoid confusion or allegations of fiduciary breach; further, that according to IRS Notice 2020-50 no changes are required for CARES Act distributions.
Preparing for 2021
Becker suggested the following steps in preparing for 2021.
2021 recommencement of 2020 suspended loan repayments. When will the recordkeeper recommence suspended loans? Coordinate with payroll and communicate with participants.
Rollovers of CRDs back into a 401(k) plan. Discuss the matter with the recordkeeper; decide whether they will be deposited in a pre-tax or rollover account.
SECURE Act guidance. Watch for guidance in keeping with the SECURE Act from the IRS concerning qualified birth or adoption distributions, and from the Department of Labor (DOL) concerning lifetime income disclosures.
Cybersecurity
There is no DOL guidance on whether cybersecurity is a fiduciary responsibility under ERISA or the extent to which, if any, data is a “plan asset,” Becker said. She had suggestions regarding the practical steps a plan fiduciary can take to protect the plan and its participants from a cybersecurity breach:
- Understand what data is stored and how it is used and transmitted.
- Include data privacy requirements in RFP/contract.
- Monitor service provider compliance with contractual requirements.
- Review any protection program a record keeper offers.
- Communicate with 401(k) plan participants, including through SPD language.
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