How To Successfully Navigate A DOL ESOP Investigation

“Dear Sir or Madam…our office has scheduled a review of the above captioned plan to determine compliance with the provisions of ERISA.” A formal notice from the Department of Labor (DOL) can bring a sense of unease to any employee stock ownership plan (ESOP) practitioner. However, by developing an understanding of why DOL ESOP investigations occur and familiarizing oneself with the DOL’s audit practices, navigating one will be less ominous.

What Is A DOL ESOP Investigation?

The DOL enforces the federal laws of retirement plans under the Employment Retirement Income Security Act of 1974 (ERISA). ERISA provisions grant the DOL authority to conduct investigations of ESOPs and, unlike those conducted by the Internal Revenue Service (IRS), it has the discretion to investigate and reinvestigate any plan it so chooses. Because ESOPs fall under the governance of ERISA, fiduciary duty is required to those who administer, manage, or control plan assets and any ESOP fiduciary is required to act solely in the best interests of the plan’s participants.

Beginning in 2005, the DOL’s ESOP review project initially focused on the valuation of privately-held employer securities purchased by the ESOP.  Even more so today, ESOP trustees are under continued scrutiny from the DOL regarding this subject matter. The trustee must continually demonstrate due diligence in analyzing the transaction and determine that the valuation procedures considered when authorizing the share purchase result in the trust’s payment of no more than fair market value (i.e. “adequate consideration”). Ultimately, the DOL monitors whether participants are being overcharged for the stock acquired by the plan. Failure of any ESOP trustee to uphold this duty may result in them being held liable for making the ESOP trust whole, as evidenced by an increase of monetary settlements in recent court rulings.

How To Successfully Navigate A DOL ESOP Investigation

Why Was Our ESOP Selected?

Because the DOL does not detail their selection process, understanding why your ESOP is under investigation remains unclear. They commence for various reasons, including through referrals from other government agencies or media sources, via plan participant complaints, through computer generated targeting (e.g. collecting information on Form 5500), or by random audit. Many of the investigations do not occur until after a fiduciary breach occurs and the severity of any infraction will determine any company/civil penalties or criminal proceedings. Additionally, DOL enforcement agencies typically provide little advance notice, so knowing how to respond before an investigation begins is critical.

What Can We Expect?

The formal investigation process begins after receipt of a notification letter from a DOL regional office. This letter requests an abundance of plan documentation, including:

  • Plan and trust document
  • ESOP board minutes and correspondence
  • ESOP allocation report
  • ESOP trust statements
  • Copies of Form 5500
  • ESOP loan documents
  • Payroll data
  • Service provider agreements

This information must be provided to the investigator within a certain deadline, although extensions may be granted. It is good practice for a company to establish a point of contact (i.e. ERISA legal counsel) to help aid in the information exchange process. This helps to avoid disruptions, maintains organization, and ensures all requested materials are reviewed and properly addressed. Once all requested documentation is received, the DOL conducts on-site visits comprised of in-person interviews, including key personnel, plan fiduciaries, and those involved with the day-to-day operations of the ESOP. During this stage, it is crucial that legal counsel represent those being interviewed since they can detail what to expect and inform those interviewed of their rights during the process.

What Happens Next?

At the end of the audit period, the DOL must decide whether to take any further action. This phase of the DOL ESOP investigation may take several months and, during that time period, the DOL may discontinue communication with the contact person. Ideally, an investigation ends with receipt of a “no action” letter, meaning the DOL has found no improprieties during its audit. To the extent that the DOL ESOP investigation uncovers violations of ERISA, they will issue a Voluntary Compliance Letter. The letter generally details the facts gathered by the DOL during the investigation, outlines the violations that they have uncovered, and invites discussions related to the remedy of such violations. The DOL may also insist on entering into a written settlement agreement, of which, civil penalties may be imposed. Should settlement not be amenable to both parties, the DOL may also provide the IRS with their findings, which may impose further penalties or excise taxes.

In summary, one should not underestimate the seriousness of a DOL ESOP investigation or the resulting outcome. In the interest of transparency, the department does provide online access to its enforcement manual, detailing their internal audit guidelines and checklists. With a thorough review of these documents and an understanding of the general steps of an ESOP DOL investigation, any plan sponsor can successfully navigate one.

Questions regarding the process of ESOP investigations? Contact the Findley consultant you normally work with or Aaron Geibel in the form below.

Published August 28, 2020

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Single Employer Defined Benefit Plan CARES Act Guidance Issued by IRS

IRS Notice 2020-61 was issued on August 6, 2020, and provides clarification on the relief the CARES Act provided to single employer defined benefit plans. The CARES Act extended the due date of all 2020 calendar year required pension plan contributions to January 1, 2021, and allows the use of the prior year AFTAP certification to avoid benefit restrictions.

Extended Contribution Deadline

Many plan sponsors are considering taking advantage of the extended due date for the 2020 calendar year required contributions. As this option is considered, plan sponsors should be aware of the potential impact on the administration of the plan. IRS Notice 2020-61 has provided additional details regarding the impact to the plan’s administration.

Single Employer Defined Benefit Plan CARES Act Guidance Issued by IRS

Contribution amounts will be increased as a result of the later payment date. The due dates are extended but as required by §430, interest is added at the plan’s effective interest rate until the date the contribution is paid. The CARES Act has waived the additional 5 percentage point penalty for late contributions until the new due date of January 1, 2021. Any contribution made after January 1, 2021 will start to accrue the additional 5 percentage point interest penalty on January 2, 2021 in addition to the effective interest rate.

An amended Form 5500 filing will be required. The only contributions that are allowed to be included in the 5500 filing are those that have already been contributed to the plan as of the filing date, which is October 15th for calendar-year plans. Consequently, if a plan sponsor opts to delay any 2019 contributions, the 5500 contribution will need to be filed omitting those contributions. Once the contributions are made, the 5500 filing will need to be amended in order to avoid any additional penalties that would be triggered on unpaid contribution requirements.

The audit report may need to be updated once the contributions are made in order to match the amended 5500 filing. This should be discussed with the auditor prior to delaying contributions. Some auditors may choose to footnote the audit report either this year or next year in order while other auditors may choose to update the audit report.

The contribution deadline applies to excess contributions in addition to required contributions. For calendar year plans, any contribution made before January 1, 2021 can be applied to the 2019 plan year even if it is made after September 15, 2020. Plan sponsors therefore have additional time to improve the 2020 funded level of the plan. Note, however, as detailed in our earlier article, contributions made after the filing of the PBGC premium payment for 2020 cannot be included to reduce PBGC premiums.

AFTAP certification for 2020 may be lower because any calendar year plan will need an AFTAP certification by September 30, 2020 but such certification can only include contributions made as of the date of certification. Once the contributions are made, the plan can update their certification if it materially changes the funded percentage of the plan. Alternatively, the CARES Act also allows plan sponsors to use their 2019 AFTAP certification for 2020 which is discussed later.

Prefunding Balance elections are also delayed to January 1, 2021. Plan sponsors have until January 1, 2021 to elect to use the Prefunding Balance towards any contribution requirements or to increase the Prefunding Balance with any excess contributions.

Use of Prior AFTAP Certification

A Plan Sponsor may use the prior year AFTAP certification for any plan year occurring in 2020. This will help keep plans from falling into benefit restrictions as a result of a lower 2020 AFTAP certification.

The election can be used for a 2019 plan year if it ends in 2020. Any plan that has a plan year that ends in 2020, can opt to use the prior year’s AFTAP as long as that prior year ends on or before December 31, 2019.  For example, a July 1, 2019 plan year that ends June 30, 2020 can use the July 1, 2018 AFTAP for 2019. The same AFTAP can also then be used for the plan year beginning July 1, 2020.

Plan Sponsors must make the election by notifying their plan actuary and plan administrator in writing. The process to make such an election is similar to the elections made regarding the plan’s credit balances. The certification is deemed to be made on the day the Plan Sponsor makes the election. An attachment should then be included with the applicable Schedule SB indicating such an election has been made.

Election by the Plan Sponsor is a recertification if the actuary had already certified the AFTAP. Therefore the election would be applicable from the date of the election forward. The actuary cannot certify the AFTAP after an election unless the Plan Sponsor revokes their election in writing.

Presumptive AFTAP for the following year is based on the actual AFTAP instead of the plan sponsor’s election. Therefore for any calendar year plan, the 2021 presumed AFTAP as of April 1, 2021 would be the actual 2020 AFTAP less 10% ignoring the participant’s election to use the 2019 AFTAP for 2020.

There are many administrative hurdles that should be considered before choosing to elect any of the options provided in the CARES Act.  However, for plan sponsors that need the relief, these are several strategies you can employ. For more information regarding this notice and its effects on single employer defined benefit plans, contact Amy Gentile in the form below.

Published August 12, 2020

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Benefit Plans Get Disclosure and Filing Relief in COVID-19 Emergency

On April 29th, the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) issued EBSA Disaster Relief Notice 2020-01 (Notice) to provide employers with additional relief as they make their way through the national emergency due to the Novel Coronavirus Disease (COVID-19) Outbreak. The guidance applies to employee benefit plans, employers, labor organizations, and other plan sponsors, plan fiduciaries, participants, beneficiaries, and service providers subject to ERISA from March 1, 2020 until 60 days after the announcement that the national emergency is over, or such other date announced by the DOL. Additional guidance can be found in  29 CFR Parts 2560 and 2590 and 26 CFR Part 54.

The Notice was a coordinated effort of the Department of Labor’s EBSA, the Internal Revenue Service (IRS) and the Department of Health and Human Services (HHS). Specifically, HHS intends to exercise enforcement discretion and extend timeframes (similar to those announced by EBSA) applicable to group health plans and health insurance issuers offering coverage as to group health plans, their participants, beneficiaries and enrollees. HHS is also urging states and health insurance issuers offering coverage as to group health plans to operate in a manner consistent with the Notice.

Benefit Plans Get Disclosure and Filing Relief

Extension of Deadlines

Specifically, the Notice extends the time for furnishing benefit statements, annual funding notices, as well as other notices and disclosures (e.g. summary plan descriptions, summaries of material modification) required by Title I of ERISA, provided that the efforts to issue such notices and disclosures are made in good faith. The Notice specifies that an employee benefit plan and the plan fiduciary will not violate ERISA for failing to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020 and 60 days following the announced end of the COVID-19 national emergency.

Expansion of Electronic Delivery of Notices or Disclosures

The DOL specifies that acting in good faith includes use of electronic means of communicating with plan participants and beneficiaries if the plan fiduciary reasonably believes that participants and beneficiaries have effective access to such electronic communication means as email, text message and continuous access websites.

Relief for Deadlines in ERISA’s Claims Procedures

For group health plans subject to ERISA or the Internal Revenue Code, the additional time gives employers, participants and beneficiaries additional time to comply with certain deadlines affecting COBRA continuation coverage, special enrollment periods, benefit claims, appeal claims and the external review of certain claims.

For disability, retirement and others plans subject to ERISA’s claim procedures, participants and beneficiaries are given additional time to comply with deadlines for benefit claims and the appeal of denied claims.

Specific Areas of Relief in the Notice

The Notice provided specific guidance in connection with plan loans and distributions, participant contributions and loan repayments, blackout notices, Form 5500 and Form M-1 filings.

Form 5500 and Form M-1 Filings

Relief for Form 5500 and PBGC deadlines was described in Findley’s article Filing Extension to July 15th for Approaching Form 5500 and PBGC Deadlines. The deadlines for Form M-1 filings required for multiple employer welfare arrangements (MEWAs) and certain entities claiming exception (ECEs) are extended for the same period of time as the Form 5500 filings.

Plan Loans and Distributions

The Notice provides relief to an employee pension benefit plan that fails to follow procedural requirements for plan loans or distributions provided in the plan’s provisions. The relief is conditioned on the following factors:

  • The failure is solely attributable to the COVID-19 emergency;
  • The plan administrator’s efforts to comply with the requirements are made in good faith;
  • The plan administrator makes reasonable efforts to correct any procedural deficits as soon as administratively practicable (e.g. obtaining missing documentation).

The relief for verification requirements is limited to those proscribed by Title I of ERISA. The relief does not extend to statutory or regulatory requirements under the jurisdiction of the IRS, such as spousal consent requirements.

Participant Loan Repayments and Contributions

Currently, amounts withheld from a participant’s wages by the employer for contributions or plan loan repayments are considered plan assets that must be forwarded to the plan on the earliest date on which those amounts can reasonably be segregated from the employer’s general assets. In any event, the amounts cannot be forwarded to the plan later than the 15th business day of the month following the month in which the amounts were paid to or withheld by the employer. In this Notice, DOL announces that it will not take enforcement action with respect to a temporary delay in forwarding those contributions and loan repayments, as long as such delay is attributable to the COVID-19 emergency. Employers and service providers must act as soon as administratively practicable, and in the interest of the employees, to forward the delayed amounts.

Blackout Notices  

Currently, the administrator of an individual account plan is required to provide 30 days’ advance notice to participants and beneficiaries whose rights under the plan will be temporarily suspended, or restricted by a blackout period. The advance notice is triggered by a period of suspension or restriction of more than three consecutive business days on a participant’s ability to direct investments, obtain loans or other distributions from the plan. An exception to the advance notice requirement is provided when the inability to provide the notice is due to events beyond the plan administrator’s reasonable control. In this Notice, DOL announces that it will not take enforcement action with respect to a temporary delay in providing required blackout notices, including those required to be provided after the blackout period begins. The currently required written determination by a fiduciary for blackout notices will not be required during the COVID-19 emergency.

General ERISA Fiduciary Guidance

In this Notice the DOL provides that the guiding principle for plans must be to act reasonably, prudently, and in the interest of the covered workers and their families, including making reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments. Plans should minimize the possibility of individuals losing benefits because of a failure to comply with the deadlines discussed above. The DOL’s approach to enforcement will emphasize compliance assistance and include grace periods and other relief where appropriate.

Questions? Please contact the Findley consultant you regularly work with or Sheila Ninneman at Sheila.Ninneman@findley.com, or 216.875.1927

Published on May 1, 2020

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Filing Extensions to July 15th for Approaching Form 5500 and PBGC Deadlines

A pair of government releases provides Form 5500 filing deadline relief for employee benefit plans, and PBGC filing relief for pension plans.

On April 9th, the IRS released Notice 2020-23, in which the Secretary of the Treasury determined that any person required to perform a time-sensitive action between April 1, 2020 and July 15, 2020 is affected by the Coronavirus/COVID-19 emergency. That includes filing a Form 5500 for an employee benefit plan, among other things. Any filing that is due on or after April 1, 2020, and before July 15, 2020, is automatically postponed to July 15, 2020. This is true for original filing deadlines and those obtained via a previous filing for extension. It is also automatic, so there is no need to contact the IRS or file any extension forms.

Filing Extensions to July 15th for Approaching Form 5500 and PBGC Deadlines

On April 10th, in Press Release Number 20-02, the Pension Benefit Guaranty Corporation (PBGC) announced it is offering flexibility to pension plan sponsors in response to the Coronavirus/COVID-19 outbreak.  Any deadlines for upcoming premium payments, and for other filings that originally fell on or after April 1, and before July 15, 2020, have been extended to July 15, 2020. So this includes regular premium filings as well as 4010 filings, but there are exceptions for filings that the PBGC requires related to tracking possible high risk of harm to participants or the PBGC’s insurance program. Some examples of exceptions are notification of large missed contributions through Form 200 and advanced notice of reportable events through Form 10-Advance. For a list of filings not covered by disaster relief announcements, see the PBGC’s Exceptions List.

These two releases provide welcome news for benefit plan sponsors with original deadlines approaching very quickly. However, it does not address deadlines for sponsors of plans with calendar year measurement periods. As more unfolds about how and when the stay-at-home requirements begin to be lifted, we may see additional deadline relief from the IRS and PBGC. Findley will continue to monitor these events and keep you updated.

Questions? Contact the Findley consultant you normally work with, or contact Colleen Lowmiller at colleen.lowmiller@findley.com, 216.875.1913.

Published April 14, 2020

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Breaking Down the Secure Act – Required Minimum Distributions

Benefits experts are still poring through the SECURE Act’s various mandated provisions, optional provisions, and effective dates, some of which may be retroactive. This series of articles will break down the implications that the Act has for existing tax-qualified retirement plans. This article will focus on the Act’s impact on required minimum distributions (RMDs) for both defined benefit and defined contribution plans. Related articles will address (1) changes that impact 401(k) and other defined contribution plans only, (2) changes for defined benefit plans only; and (3) other changes to the retirement plan landscape.

Remedial Amendment Period

Plan sponsors generally have until the last day of the 2022 plan year to adopt amendments that reflect the Act’s required revisions.  For calendar year plans the last day is December 31, 2022. Governmental plans have until the 2024 plan year to amend. Remember that operational compliance is still required during the period from the effective date for the Act’s required changes and the date the plan is amended.

Delay of Lifetime RMDs – MANDATORY

Prior law: Distributions from an eligible employer retirement plan must be made by April 1 of the calendar year following: (a) the calendar year in which the participant turns age 70-1/2, or (b) for a participant who is not a 5% owner, the calendar year in which he or she terminates employment after age 70-1/2.

Under the Act: The required age for RMDs is raised from 70-1/2 to 72. Participants who are not 5% owners and who work beyond the required age for RMDS, under the Act still don’t trigger RMDs until the calendar year in which they retire. The Act did not change the way in which 5% owners are determined. In addition, post-death distributions to a participant’s surviving spouse are not required to begin before the calendar year in which the participant would have obtained age 72 (formerly 70-1/2). 

Effective date: The new age applies to employees who turn age 70-1/2 after December 31, 2019; that is, for those born after June 30, 1949. For those born on or before June 30, 1949 (already obtained age 70-1/2 prior to January 1, 2020), the prior law applies.

What to do and when: Plan sponsors should work with their service providers to track two populations: those born on and before June 30, 1949 (for whom age 70-1/2 is the RMD trigger date), and those born after that date (for whom age 72 is the RMD trigger date). Distributions of RMDs for the latter population therefore need not begin until April 1 of the calendar year following the year they attain age 72.

This change to tax-qualified retirement plans will necessitate updates to distribution forms, SPDs, 402(f) notices, and participant communications.

Post-Death RMDs are accelerated – MANDATORY

Prior law: In general, distributions are permitted to be paid annually over the beneficiary’s life expectancy. In general, if the participant died before RMDs began, distributions could be made at various times, provided the entire account was distributed by the end of the fifth year following the participant’s year of death.

Under the Act:  Following the death of the participant, distributions must generally be made by the end of the 10th calendar year following the year of death. The determination of the 10-year period is presumably calculated in the same way that the 5-year period was calculated. Payments can be made over the beneficiary’s life expectancy provided the beneficiary is an “eligible designated beneficiary”, which can be the surviving spouse, a disabled/chronically ill individual, a minor child of the participant or a beneficiary no more than 10 years younger. Prior rules still apply to a beneficiary that is not a “designated beneficiary”.

Effective date: The rule regarding the acceleration of post-death RMDs is effective for deaths that occur after December 31, 2019. Special delayed effective dates apply to collectively bargained and governmental retirement plans. 

What to do and when: Sponsors of tax-qualified retirement plans should be working with their service providers to implement these rules now.

This change will impact beneficiary designation forms, distribution forms, SPDs and other participant/beneficiary communications.

Special Note for Defined Benefit Pension Plans

The Act does not change actuarial increases required by Internal Revenue Code 401(a)(9)(C).  For individuals who continue working and choose to retire late, a defined benefit plan must provide actuarial increases beginning at age 70-1/2.  

General Thoughts

Commentators anticipate IRS guidance to provide self-correction relief for plans that fail to implement the new rules correctly during the remedial amendment period and clarify the Act’s impact on current regulations. Tax-qualified plan sponsors considering an amendment prior to the remedial amendment deadline, for the sake of clarity for itself and its service providers, may want to wait to see how further guidance may affect that amendment.

Questions? Please contact the Findley consultant you regularly work with or Sheila Ninneman at Sheila.Ninneman@findley.com, or 216.875.1927.

To learn more about the passage of the Secure Act and changes to retirement plans, click here

Published March 19, 2020

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2020 Health and Group Benefits Plan Compliance Calendar

Calendar Plan Year & Calendar Employer Tax Year*

2020 Health and Group Benefits Plan Compliance Calendar January through June
2020 Health and Group Benefits Plan Compliance Calendar July through December

January 2020

31   Last day to report on Form W-2 to employees the cost of applicable employer-sponsored coverage under a group health plan

February 2020

28   Paper Filing – Last day for applicable large employer member to file one or more Forms 1094-C and to file Form 1095-C for each employee who was a full-time employee for any month of the calendar year 2019

28   Paper Filing – Last day for person that provides minimum essential health coverage to an individual during calendar year 2019 to file an information return with the IRS reporting the coverage. Filers will use Form 1094-B, Transmittal of Health Coverage Information Returns, to submit Forms 1095-B, Health Coverage, to IRS.

28   Notice of Breach of Unsecured Protected Health Information – breaches affecting fewer than 500 individuals. Last day for covered entities to notify HHS of a breach affecting fewer than 500 individuals. (Covered entities must notify affected individuals of such a breach without unreasonable delay and in no case later than 60 days following the discovery of a breach.)

March 2020

02   Last day to file electronically with DOL Form M-1 annual report for MEWAs (and certain entities claiming exception) for 2019 (without extension)

02   Last day for filers of IRS For 1095-B, Health Coverage, to furnish a copy of Form 1095-B to the person identified as the “responsible individual” on the form for coverage in 2018

02   Last day for an applicable large employer member to furnish a Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to each of its full-time employees

31   Electronic Filing – Last day for an applicable large employer member to file one or more Forms 1094-C and to file a Form 1095-C for each employee who was a full-time employee for any month of the calendar year 2019 bb

31  Electronic Filing – Last day for person that provides minimum essential coverage to an individual during calendar-year 2018 to file an information return with the IRS reporting the coverage. Filers will use Form 1094-B, Transmittal of Health Insurance Offer and Coverage Information Returns, to submit Forms 1095-B, Health Coverage, to IRS

May 2020

15   Last day (unextended deadline) to file Form 990 series for a 2019 VEBA. An automatic filing extension of 6 months may be requested by filing Form 8868 by the due date of the Form 990

July 2020

28   Last day to furnish Summary of Material Modifications (SMM) to participants and beneficiaries receiving benefits

31   Last day to file Form 5500 for 2019 without extension

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on disqualified benefits underfunded welfare plans

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on certain excess fringe benefits

September 2020

30   Last day to furnish Summary Annual Report (SAR) for 2019 plan year to participants and beneficiaries if an extension to file Form 5500 was not obtained

October 2020

Prior to Oct. 15, 2020 – Medicare Part D Creditable Coverage Notice – Employers offering prescription drug coverage to Medicare Part D eligible individuals must notify those individuals whether the offered prescription drug coverage is creditable coverage. Notice must be provided prior to Oct. 15, 2020.

15   Last day to file Form 5500 with extension

December 2020

15   Last day (with extension) to furnish Summary Annual Report (SAR) for 2019 plan year to participants and beneficiaries

*This calendar is designed to provide a general overview of certain key compliance dates and is not meant to indicate all possible compliance dates that may affect your plan.

Copyright © 2020 by Findley, Inc. All rights reserved.

To access other selected requirements with no specific deadline plus a detailed description of each compliance item, click below.

View 2020 Detailed Health and Welfare Plan Compliance Calendar/Checklist and other selected requirements with no specific deadline

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Defined Contribution

2020 Defined Contribution Plan Compliance Calendar

Calendar Plan Year & Calendar Employer Tax Year*

defined contribution plan compliance calendar 2020 January through June
defined contribution plan compliance calendar 2020 July through December

January 2020

31   Last day to file Form 945 to report withheld federal income tax from distributions

31   Last day to furnish Form 1099-R to recipients of distributions in 2019

February 2020

14   Last day to furnish fourth quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

28   Last day to file Form 1096 and Form 1099-R on paper with the IRS

March 2020

15   Last day to refund excess contributions (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for 2019 to avoid 10% excise tax (unless plan is an EACA)

31   Last day to file Form 1099-R electronically with the IRS

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on 2018 plan year excess contributions or excess aggregate contributions where excess amounts not distributed (or forfeited, if forfeitable) by Mar. 15, 2019 (or by June 30, 2019 in case of an EACA)

April 2020

01   Last day to make required minimum distributions (for first distribution calendar year) to applicable plan participants

15   Last day to distribute excess deferrals in excess of 402(g) dollar limits for 2019 to applicable participants

15  Last day for C corporation employer plan sponsors to make contributions and take tax deductions for 2019 without corporate tax return extension

May 2020

15   Last day to furnish first quarter 2020 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

June 2020

30   Last day to refund excess contributions (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for 2019 to avoid 10% excise tax – in case of an EACA

July 2020

29   Last day to furnish Summary of Material Modifications (SMM) to participants and beneficiaries receiving benefits

31   Last day to file Form 5500 for 2019 without extension

31   Last day to file Form 8955-SSA without extension

31   Last day to provide a notice to terminated vested participants describing deferred vested retirement benefits (in conjunction with Form 8955-SSA)

31   (or the day Form 5500 is filed, if earlier) – Last day (without 5500 extension) to furnish annual benefit statement to a participant or beneficiary in an individual account plan that does not provide for participant investment direction

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on nondeductible contributions, prohibited transactions, certain employee stock ownership plan dispositions, and certain prohibited allocations of qualified securities by an ESOP (if applicable)

August 2020

14   Last day to furnish second quarter 2020 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

30   Last day to furnish annual participant fee disclosures in a participant-directed individual account plan (or up to 14 months from last disclosure notice, if later)

September 2020

15   Last day to pay balance of remaining required contributions for 2019 plan year to satisfy minimum funding requirements for plans subject to minimum funding requirements (such as money purchase pension plans)

30   Last day to furnish Summary Annual Report for 2019 plan year to participants and beneficiaries if an extension to file Form 5500 was not obtained

October 2020

15   Last day to file Form 5500 (with extension)

15   Last day to file Form 8955-SSA (with extension)

15   Last day to provide a notice to terminated vested participants describing deferred vested retirement benefits (in conjunction with Form 8955-SSA)

15   (or the day Form 5500 is filed, if earlier) – Last day (with 5500 extension) to furnish annual benefit statement to a participant or beneficiary in an individual account plan that does not provide for participant investment direction

15   Last day to adopt and implement retroactive corrective plan amendment to correct 2019 410(b) coverage or 401(a)(4) nondiscrimination failures

15   Last day for C corporation employer plan sponsors to make contributions and take a tax deduction for 2019 if 6-month automatic extension to file federal income tax return was obtained

November 2020

14   Last day to furnish third quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

December 2020

01   Last day to provide a notice of intent to use safe harbor contribution formula for 2020 plan year to eligible employees

01   Last day to provide an automatic contribution arrangement notice for 2020 plan year to all eligible employees

01   Last day to furnish a qualified default investment alternative (QDIA) notice for 2020 plan year to participants and beneficiaries on whose behalf an investment in a QDIA may be made

15   Last day (with 5500 extension) to furnish Summary Annual Report for 2019 plan year

31   Last day to refund excess contribution (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for the 2019 plan year

31   Last day to make required minimum distributions to applicable participants for distribution calendar years other than for the first distribution calendar year

31   Last day for plan sponsors to adopt discretionary plan amendments that would be effective for the current plan year

*This calendar is designed to provide a general overview of certain key compliance dates and is not meant to indicate all possible compliance dates that may affect your plan.

Copyright © 2020 by Findley, Inc. All rights reserved.

If you would like more specific information about each compliance item, you may review or print the calendar below.

Print 2020 Detailed Defined Contribution Plan Compliance Calendar

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Year-End Spending Bill includes the SECURE Act and other Retirement Plan Changes

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With the passage of the 2020 federal government spending bill less than a week before Christmas, Congress has gifted us with the most significant piece of retirement legislation in over a decade. This newly enacted legislation incorporates the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) that was overwhelmingly passed by the House of Representatives earlier this year but never considered by the Senate. The spending bill even has a few additional retirement-related tidbits that were not part of the SECURE Act.

Here are some of the key changes:

Frozen Defined Benefit Plan Nondiscrimination Testing

Currently- Defined benefit plans that were frozen to new hires in the past and operate with a grandfathered group of employees continuing to accrue benefits have ultimately run into problems trying to pass nondiscrimination or minimum participation requirements as the group of benefiting employees became smaller and normally higher paid. This problem for frozen defined benefit plans has been around for a while and the IRS has been providing stop-gap measures to deal with it every year.

Effective as of the date of enactment of this legislation and available going back to 2013 – plans may permit the grandfathered group of employees to continue to accrue benefits without running afoul of nondiscrimination or minimum participation rules so long as the plan is not modified in a discriminatory manner after the plan is closed to new hires. This special nondiscrimination testing relief also extends to:

  • defined benefit plans that close certain plan features to new hires,
  • defined contribution plans that provide make-up contributions to participants who had benefits in a defined benefit plan that were frozen.

Increasing the 10% Limit on Safe Harbor Auto Escalation

Currently – a safe harbor 401(k) Plan with automatic enrollment provisions cannot automatically enroll or escalate a participant’s contribution rate above 10%.

Effective for Plan Years beginning after Dec. 31, 2019 – the 10% cap would remain in place in the year the participant is enrolled but the rate can increase to 15% in a subsequent year.

Simplifying the Rules for Safe Harbor Nonelective 401(k) Plans

Currently – All safe harbor plans must provide an annual notice prior to the beginning of the year that provides plan details and notifies employees of their rights under the plan. Also, any plan sponsors that want to consider implementing a safe harbor plan generally must adopt the safe harbor plan provisions prior to the beginning of the plan year.

Effective for Plan Years beginning after Dec. 31, 2019 – the notice requirement for plans that satisfy the safe harbor through a nonelective contribution has been eliminated. Also, sponsors can amend their plan to become a nonelective safe harbor 401(k) plan any time up until 30 days prior to year-end. The safe harbor election can even be made as late as the end of the next year if the plan sponsor provides for at least a 4% nonelective contribution.

Open Multiple Employer Plans (Open MEPs)

CurrentlyMultiple employer plans (MEPs) are legal and actually quite common, but a couple of limitations have stunted the development of a concept called open MEPs. An open MEP is a situation where the employers within the MEP are not tied together through a trade association or some common business relationship. In 2012 the DOL issued an Advisory Opinion provided that a MEP made up of unrelated employers that did not have “common nexus” must operate as a separate plan for each of these unrelated employers and not as a single common plan. This advisory opinion took away much of the perceived advantages of operating an open MEP. Additionally, the IRS has followed a policy that provides if one employer within the MEP makes a mistake, that the error can impact the qualified status of the entire plan; this is known as the “one bad apple” rule, this policy is clearly a negative selling point for any plan sponsor that might consider signing up to participate in a MEP.

Effective for Plan Years beginning after Dec. 31, 2020 – the “common nexus” requirement and the “one bad apple” rule are eliminated. The new open MEP rules provide for a designated “pooled plan provider” that would operate as the MEPs named fiduciary and the ERISA 3(16) plan administrator. The open MEP will be required to file a 5500 with aggregate account balances attributable to each employer. These changes are expected to create a market for pooled plans that will offer efficient retirement plan solutions to smaller plan sponsors.

Required Minimum Distribution Age Now 72

Currently Required Minimum Distribution from a qualified plan or IRA must begin in the year the participant turns 70 ½.

Effective for Distributions after 2019, with respect to individuals who attain 70 ½ after 2019. – This is a simple change to age 72 for computation purposes, but note the effective date means that if the participant is already subject to RMD rules in 2019 they remain subject to RMDs for 2020 even though the person may not be 72 yet. Also, plan sponsors should be aware that distributions made in 2020 to someone that will turn 70 ½ in 2020 will not be subject to RMD rules and therefore would be eligible for rollover and subject to the mandatory 20% withholding rules.

Increase Retirement Savings Access to Long-Term Part-Time Workers

Currently– Plans can exclude employees that do not meet the 1,000 hours of service requirement

Effective for Plan Years beginning after Dec. 31, 2020 – Plans will need to be amended to permit long-term part-time employees who work at least 500 hours over a 3 year period to enter the plan for the purpose of making retirement savings contributions. The employer may elect to exclude these employees from employer contributions, nondiscrimination, and top-heavy testing.

Stretch IRAs are Eliminated

Currently– If Retirement plan or IRA proceeds are passed upon death to a non-spouse beneficiary; the beneficiary can set up an inherited IRA and “stretch” out payments based upon the beneficiary’s life expectancy. Depending upon the age of the beneficiary and the size of the IRA this strategy potentially provided significant tax advantages.

Effective for distributions that occur as a result of deaths after 2019 – Distributions from the IRA or plan are generally going to need to be made within 10 years. There are exceptions if the beneficiary is (1) the surviving spouse, (2) disabled, (3) chronically ill, (4) not more than 10 years younger than the IRA owner or plan participant, or (5) for a child that has not reached the age of majority, the ten year rule would be delayed until the child became of age.

Increased Penalties for Failure to File Retirement Plan Returns and Other Notices

Current Penalty Structure:

Failure to file Form 5500$25 per day maximum of $15,000
Failure to report participant on Form 8955-SSA$1 per participant, per day maximum of $5,000
Failure to provide Special Tax Notice$10 per failure up to a maximum of $5,000

New penalty structure:

Failure to file Form 5500$250 per day maximum of $150,000
Failure to report participant on Form 8955-SSA$10 per participant, per day maximum of $50,000
Failure to provide Special Tax Notice$100 per failure up to a maximum of $50,000

Other Retirement Plan Changes Effective for Years Beginning After December 31, 2019

  • Phased retirement changes – defined Benefit Plans can be amended to provide voluntary in-service distributions begin at age 59 ½, down from the current age 62 requirement.
  • Start-up credits – the cap on tax credits that small employers (up to 100 employees) can get for starting up a new retirement plan has gone up from $500 to $5,000.
  • Auto-Enroll credits for small employers – small employers can get an additional $500 tax credit for adopting an automatic enrollment provision.
  • More time to adopt a plan – currently a qualified plan must be adopted by the end of the employer’s tax year to be effective for that year. The new rule will permit a plan to be adopted as late as the due date of the employer’s tax return for the year.
  • Plan annuity provisions – in recognition that defined contribution plans typically do not offer lifetime income streams two changes have been added to encourage in-plan annuity options.
    • A fiduciary safe harbor standard that if followed, would protect plan sponsors from potential liability relating to the selection of an annuity provider.
    • Plans may permit tax-advantaged portability of lifetime income annuity options from one plan to another.
  • 403(b) changes include providing a mechanism for the termination of a 403(b) custodial account and clarification that non-qualified church controlled organizations (e.g. hospitals and schools) can participate in Section 403(b)(9) retirement income accounts.
  • Penalty free distribution for birth or adoption expenses – up to $5,000 could be distributed from a defined contribution or 403(b) plan to cover costs relating to birth or adoption of a child.
  • Special tax penalty relief and income tax treatment for distributions for qualified disaster distributions from qualified plans up to $100,000.  Additionally, plan sponsors can permit the $50,000 participant loan limit to be increased to $100,000 with increased repayment periods for participants that suffered losses in a qualified disaster area.

Other Changes with a Delayed Effective Date

  • Lifetime income disclosure – this provision will require a defined contribution plan to provide all participants with an annual statement that discloses the projected lifetime income stream equivalent of the participant’s account balance.  This requirement will become effective for benefit statements furnished one year after applicable DOL guidance has been issued that will be necessary to provide the prescribed assumptions and explanations that will be used to create this disclosure.
  • Combining 5500 – IRS and DOL have been directed to permit a consolidation of Form 5500 reporting for similar plans. Defined contribution plans with the same trustee, same-named fiduciary and same plan administrator using the same plan year and same plan investments may be combined into one 5500 filing. This is scheduled to begin no later than January 1, 2022, for 2021 calendar plan year filings.

What to Do Now

Obviously the SECURE Act is bringing a lot of changes to retirement plans. Many of the operational aspects to this new retirement legislation will need to be implemented immediately, in particular, tax withholding related items that will change in 2020 will necessitate plan sponsors and their recordkeepers act immediately to review tax withholding and distribution processes. Plans do have until the end of the 2022 plan year to adopt conforming amendments to their documents. The amendment deadline is the 2024 plan year for governmental plans.

If you have any questions about the SECURE Act and this new retirement plan legislation we encourage you to contact the Findley consultant you normally work with, or contact John Lucas at 615.665.5329 or John.Lucas@findley.com.

Published December 23, 2019

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2019 Health and Welfare Plans Compliance Calendar/Checklist

Significant Due Dates – Calendar Plan Year & Calendar Employer Tax Year*

2019 Health and Group Benefits Compliance Calendar

January 2019

31   Last day to report on Form W-2 to employees the cost of applicable employer sponsored coverage under a group health plan

February 2019

28   Paper Filing – Last day for applicable large employer member to file one or more Forms 1094-C and to file Form 1095-C for each employee who was a full time employee for any month of the calendar year 2018

28   Paper Filing – Last day for person that provides minimum essential health coverage to an individual during calendar year 2018 to file an information return with the IRS reporting the coverage. Filers will use Form 1094-B, Transmittal of Health Coverage Information Returns, to submit Forms 1095-B, Health Coverage, to IRS.

28   Notice of Breach of Unsecured Protected Health Information – breaches affecting fewer than 500 individuals. Last day for covered entities to notify HHS of a breach affecting fewer than 500 individuals. (Covered entities must notify affected individuals of such a breach without unreasonable delay and in no case later than 60 days following the discovery of a breach.)

March 2019

01   Medicare Part D Creditable Coverage Disclosure to CMS – Last day for employers offering prescription drug coverage to Medicare Part D eligible individuals to disclose to CMS whether coverage is creditable prescription drug coverage by submitting a completed online Creditable Coverage Disclosure to CMS Form

01   Last day to file electronically with DOL Form M-1 annual report for MEWAs (and certain entities claiming exception) for 2018 (without extension)

04   Last day for filers of IRS For 1095-B, Health Coverage, to furnish a copy of Form 1095-B to the person identified as the “responsible individual” on the form for coverage in 2018

04   Last day for an applicable large employer member to furnish a Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to each of its full-time employees

31   Electronic Filing – Last day for an applicable large employer member to file one or more Forms 1094-C and to file a Form 1095-C for each employee who was a full time employee for any month of the calendar year 2018. [IRS 2018 Instructions for Forms 1094-C and 1095-C provide that, while generally the Forms must be filed by March 31 when filing electronically, for calendar year 2018 the Forms are required to be filed by April 1, 2019 when filing electronically.]

31  Electronic Filing – Last day for person that provides minimum essential coverage to an individual during calendar-year 2018 to file an information return with the IRS reporting the coverage. Filers will use Form 1094-B, Transmittal of Health Insurance Offer and Coverage Information Returns, to submit Forms 1095-B, Health Coverage, to IRS. [The IRS 2018 Instructions for Forms 1094-B and 1095-B provide that, while generally the Forms must be filed by March 31 (when filing electronically) of the year following the calendar year of coverage, for Forms filed in 2019 reporting coverage provided in calendar year 2018 the Forms are required to be filed by April 1, 2019 when filing electronically.]

May 2019

15   Last day (unextended deadline) to file Form 990 series for a 2018 VEBA. An automatic filing extension of 6 months may be requested by filing Form 8868 by the due date of the Form 990

July 2019

29   Last day to furnish Summary of Material Modifications (SMM) to participants and beneficiaries receiving benefits

31   Last day to file Form 5500 for 2018 without extension

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on disqualified benefits under funded welfare plans

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on certain excess fringe benefits

31   Last day for plan sponsor of a self-insured plan to file Form 720 and pay the PCORI fee for 2018 plan year

September 2019

30   Last day to furnish Summary Annual Report (SAR) for 2018 plan year to participants and beneficiaries if an extension to file Form 5500 was not obtained

October 2019

14   Prior to Oct. 15, 2019 – Medicare Part D Creditable Coverage Notice – Employers offering prescription drug coverage to Medicare Part D eligible individuals must notify those individuals whether the offered prescription drug coverage is creditable coverage. Notice must be provided prior to Oct. 15, 2019.

15   Last day to file Form 5500 with extension

December 2019

15   Last day (with extension) to furnish Summary Annual Report (SAR) for 2018 plan year to participants and beneficiaries

*This calendar is designed to provide a general overview of certain key compliance dates and is not meant to indicate all possible compliance dates that may affect your plan.

Copyright © 2019 by Findley, Inc. All rights reserved.

To access other selected requirements with no specific deadline plus a detailed description of each compliance item, click below.

View 2019 Detailed Health and Welfare Plan Compliance Calendar/Checklist and other selected requirements with no specific deadline

Interested in other compliance calendars?

Defined Benefit

Defined Contribution

2019 Defined Contribution Plan Compliance Calendar

Calendar Plan Year & Calendar Employer Tax Year*

January - June 2019 Defined Contribution Plan Calendar Image

January 2019

31   Last day to file Form 945 to report withheld federal income tax from distributions

31   Last day to furnish Form 1099-R to recipients of distributions in 2018

February 2019

14   Last day to furnish fourth quarter 2018 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

28   Last day to file Form 1096 and Form 1099-R on paper with the IRS

March 2019

15   Last day to refund excess contributions (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for 2018 to avoid 10% excise tax (unless plan is an EACA)

April 2019

01   Last day to make required minimum distributions (for first distribution calendar year) to applicable plan participants

01   Last day to file Form 1099-R electronically with the IRS

01   Last day (unextended deadline) to file Form 5330 and pay excise tax on 2017 plan year excess contributions or excess aggregate contributions where excess amounts not distributed (or forfeited, if forfeitable) by Mar. 15, 2018 (or by June 30, 2018 in case of an EACA)

15   Last day to distribute excess deferrals in excess of 402(g) dollar limits for 2018 to applicable participants

15  Last day for C corporation employer plan sponsors to make contributions and take tax deductions for 2018 without corporate tax return extension

May 2019

15   Last day to furnish first quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

June 2019

30   Last day to refund excess contributions (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for 2018 to avoid 10% excise tax – in case of an EACA

July to December 2019 Compliance Calendar

July 2019

29   Last day to furnish Summary of Material Modifications (SMM) to participants and beneficiaries receiving benefits

31   Last day to file Form 5500 for 2018 without extension

31   Last day to file Form 8955-SSA without extension

31   Last day to provide a notice to terminated vested participants describing deferred vested retirement benefits (in conjunction with Form 8955-SSA)

31   (or the day Form 5500 is filed, if earlier) – Last day (without 5500 extension) to furnish annual benefit statement to a participant or beneficiary in an individual account plan that does not provide for participant investment direction

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on nondeductible contributions, prohibited transactions, certain employee stock ownership plan dispositions, and certain prohibited allocations of qualified securities by an ESOP (if applicable)

August 2019

14   Last day to furnish second quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

30   Last day to furnish annual participant fee disclosures in a participant-directed individual account plan (or up to 14 months from last disclosure notice, if later)

September 2019

15   Last day to pay balance of remaining required contributions for 2018 plan year to satisfy minimum funding requirements for plans subject to minimum funding requirements (such as money purchase pension plans)

30   Last day to furnish Summary Annual Report for 2018 plan year to participants and beneficiaries if an extension to file Form 5500 was not obtained

October 2019

15   Last day to file Form 5500 (with extension)

15   Last day to file Form 8955-SSA (with extension)

15   Last day to provide a notice to terminated vested participants describing deferred vested retirement benefits (in conjunction with Form 8955-SSA)

15   (or the day Form 5500 is filed, if earlier) – Last day (with 5500 extension) to furnish annual benefit statement to a participant or beneficiary in an individual account plan that does not provide for participant investment direction

15   Last day to adopt and implement retroactive corrective plan amendment to correct 2018 410(b) coverage or 401(a)(4) nondiscrimination failures

15   Last day for C corporation employer plan sponsors to make contributions and take a tax deduction for 2018 if 6-month automatic extension to file federal income tax return was obtained

November 2019

14   Last day to furnish third quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

December 2019

01   Last day to provide a notice of intent to use safe harbor contribution formula for 2020 plan year to eligible employees

01   Last day to provide an automatic contribution arrangement notice for 2020 plan year to all eligible employees

01   Last day to furnish a qualified default investment alternative (QDIA) notice for 2020 plan year to participants and beneficiaries on whose behalf an investment in a QDIA may be made

15   Last day (with 5500 extension) to furnish Summary Annual Report for 2018 plan year

31   Last day to refund excess contribution (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for the 2018 plan year

31   Last day to make required minimum distributions to applicable participants for distribution calendar years other than for the first distribution calendar year

31   Last day for plan sponsors to adopt discretionary plan amendments that would be effective for the current plan year

*This calendar is designed to provide a general overview of certain key compliance dates and is not meant to indicate all possible compliance dates that may affect your plan.

Copyright © 2019 by Findley, Inc. All rights reserved.

If you would like more specific information about each compliance item, you may review or print the calendar below.

Print 2019 Detailed Defined Contribution Plan Compliance Calendar

Interested in other compliance calendars?

Defined Benefit

Health & Welfare