Plan Amendments Survey Results & Analysis

Enterprise Iron Financial Industry Solutions, Inc.

Enterprise Iron offers a robust set of compliance and regulatory services to our clients. Plan Document maintenance has been an especially hot topic for our Compliance Services practice over the past couple of years. Our October 2022 issue of The Iron Chronicles included a survey aimed at better understanding how recent legislative changes have impacted our industry. In that survey, our clients shared their thoughts and challenges on keeping their plan documents compliant throughout the recent regulatory upheaval. We also hosted a panel discussion last Fall at the SPARK Forum 2022 in Palm Beach.

Lauren Leneis
Compliance Practice Lead

Kelli Reed QKA® QPA
Principal Consultant

Cycle 3 Restatements 

Many of our clients and respondents work with both pre-approved and individually designed documents; each of which comes with a specific set of challenges. However, most of their business uses pre-approved 401(k) and 401(a) plan documents, which were subject to the Cycle 3 Restatement due on July 31, 2022. Most respondents were able to get 95-100% of their plan population restated by the July deadline despite significant challenges.

Communication to Plan Sponsors came in first as the most challenging aspect of the Cycle 3 Restatement followed by out-of-date contact information on plan sponsors as the second most challenging aspect of the restatement. Both challenges are likely the result of new plan sponsors and other HR personnel changes at the plan’s employer. The pandemic triggered large turnover in workforce and that was felt throughout the restatement cycle.

New plan sponsors who were not present for the last plan document implementation required coaching and education throughout the process. And, of course, we cannot educate plan sponsors if we cannot find them!

Having current contact information on file for authorized signers, both plan sponsors and trustees, was critical to running an efficient and timely restatement effort. This proved especially challenging with government plans where trustees often are elected officials or board members that turnover on a regular basis.

Regarding restatements, plan document vendors are working on Cycle 2 Restatements for 403(b) plans now in preparation of the May 1, 2023 IRS submission deadline. That means that 403(b) sponsors will be gearing up to sign Cycle 2 Restatements in a couple years. 2023-2024 is a good time to review and audit your current plan documents, plan status, and plan contact information for existing 403(b) plans. Don’t wait until the last minute and put compliance with Cycle 2 Restatement deadlines at risk!

SECURE and CARES Amendments

With restatements completed in July 2022, plan design teams barely had a chance to rest before preparation began for the SECURE Act and CARES Act Amendments. Both were originally due by December 31, 2022. In a somewhat unexpected move, the IRS extended the SECURE Act deadline to December 31, 2025 for most plans. That was followed quickly by additional extension for the CARES Act to December 31, 2025 for most plans.

With these last-minute changes to deadlines, many plan providers were caught midstream while amending their plans. When asked if plan sponsors were going to amend now or wait, the results were split:

Many respondents and current Enterprise Iron clients felt it best to continue moving forward with amendments as quickly as possible, despite the extension of the deadline. The CARES Amendment specifically indicates how a plan operated in 2020. Similarly, the SECURE Act 1.0 features are already part of current plan operations. It is prudent to get those features reflected in current plan documents.

On the other hand, plan providers who decided to postpone were concerned primarily with charging their plan sponsors with another hefty amendment fee so soon after charging them for Cycle 3 restatements. Weighing client satisfaction against regulatory requirements is often a delicate balance. In either case, clear documentation of how plans operated in good faith with CARES and SECURE Act 1.0 is critical.

The SECURE 2.0 Act of 2022 presents another amendment requirement by the end of 2025. It could be a while before SECURE 2.0 amendments are published and we expect it to be a standalone amendment document.

With the additional responsibility of a SECURE 2.0 amendment looming, and because it’s important to stay current with plan operations, EI recommends moving forward with the SECURE Act 1.0 and CARES Amendments as quickly as possible. Our Compliance Services team can help get your plan documents current and ready for further SECURE 2.0 required changes.

SECURE 2.0 is Here

SECURE 2.0 was signed into law in December 2022 and includes over 90 changes to various features of retirement plans. Some changes are effective immediately, while many phase in over the new few years.

We asked our clients and respondents to predict what features would be most challenging for their business. The most listed answers included:

• Mandatory auto-enrollment

• Rothification of catch-up contributions

• Removal of Roth from RMD calculations

• Student loan match, collecting the necessary data and its impact on testing

• Required paper statements and the impact on cost

These are just a handful of the most common answers we received in the survey. The SECURE 2.0 Act represents significant change that will have broad impacts on our business models, recordkeeping systems, and operations. Enterprise Iron’s senior analysts are developing solutions that will make integration as smooth as possible.

Speak with our Retirement Plan Compliance Services (RPCS) Team to learn more about how we can make your SECURE 2.0 implementations a success!