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Fourth Quarter Plan Review Checklist – Some Suggestions

Most Plan Sponsors know the major filing dates for their benefit Plans. In fact, some of us probably have them seared into our brains (October 15 is the last possible day to file the Form 5500, QDIA and Safe Harbor Notices are due by December 1, etc.). However, with the end of the year fast approaching we thought we could offer some suggestions about things that can easily get lost in the shuffle. These are not official due dates; rather they are items that you may find useful to review before the end of the year:

  • Catch-up Contributions: For instance, if you have a Qualified Plan that allows for catch upcontributions; have you sent out a reminder to participants 50 and over encouraging them toparticipate? It’s certainly not a requirement but it can be a helpful thing for participants to makesure they capitalize on the availability of catch-up contributions within your Plan (if offered).
  • Year-end Payroll: Also, do you tell your employees the date of the last payroll and the last dayto make changes that will be included in the payroll? Again, this is not a requirement butsomething that participants have found useful to manage their account. You also may want toconfirm if your recordkeeper will post all 2018 payrolls in 2018, or If you may need to let youremployees know that the contributions on year-end statements may not match the amounts shownon their tax forms?
  • Forfeitures: You may wish to revisit your forfeiture remittance process, if there are forfeituresremaining in your Plan. Best practices suggest that you use them before the end of the year toreduce employer contributions (if your Plan allows). If not, you could consider reallocating themto participants. This is the type of item that could be reviewed upon an audit.
  • Required Minimum Distributions (RMDs): These need to be processed prior to the end of theyear. Some recordkeepers require Plan Sponsor approval before making these distributions. Yourrecordkeeper also has a cut-off date in December for making these distributions that you need tobe aware of. You also should begin making sure that you have good addresses available for thosethat will receive an RMD for the first time by sending a certified letter informing them of theupcoming distribution (not due until April 1).
  • True-up Contributions: If you issue true-up contributions for those who reached the deferrallimit early in the year you may want to have them posted at your recordkeeper by the end of theyear. True-ups are commonly required when a Plan operationally matches participant deferrals ona per-pay-period basis throughout the year, but the matching formula of the Plan Document statesthat the employer will match salary deferrals up to a percentage of a participant’s totalcompensation for the Plan Year. Survey data indicates that approximately 60% of Plans eitherhave a true-up provision or make their matching contribution annually. If you are unsure howyour Plan operates, now may be a good opportunity to confirm the practice that your organizationhas adopted.
  • Self-Analysis, An Operational Compliance Audit: Additionally, before the end of the year, isthe perfect time to do an operational compliance audit. Are you administering the Plan the waythat your documents say that you should? Often, Plan Sponsors may know “the way it’s alwaysbeen done” but is that the way that your Plan Document states it truly should be done?Undertaking this type of review, whether it is performed by internal staff or by yourrecordkeeper, can save you from an unwelcome surprise if your Plan comes under audit. Thegovernment recommends that all Plans regularly conduct this type of self-analysis. Items thatcommonly can cause errors include: the timing of posting employee money, the definition ofcompensation, and Plan eligibility rules. If you do find that you are out of compliance you maywant to speak to your ERISA counsel.
  • Discretionary Plan Amendments: If you still must finalize your non-discrimination testingand/or issue corrective distributions; they are due by year-end as are any amendments to removethe safe harbor feature from a Plan in 2019. Additionally, Discretionary Plan Amendments for 2018 generally must be signed by the end of the year in which they are effective (please note that some exceptions may apply).
  • Hardships: Finally, you may want to revisit your hardship withdrawal provisions considering thechanges in law made during 2018. For Plan Years beginning in 2019, you may now create anamendment that would allow for the withdrawal of earnings on most contributions. Additionally,Plan Sponsors can now include QNEC, QMAC, and certain Safe Harbor Contributions in thecalculation of available hardship amounts. Plan Sponsors also would no longer be required toforce participants to take a loan before they took a hardship or to incur a 6-month suspension aftertaking a hardship withdrawal; however, these two provisions are technically still within the safeharbor requirements. It is expected this potential conflict will be cleaned up early in 2019. Also,expenses for repairing damage to a principal residence that is not in a federally declared disasterzone is no longer considered eligible for safe harbor hardship withdrawals. We believe youshould speak with your recordkeeper and determine how they plan to implement any prospectivechanges and confirm they have the ability to do so. Lastly, please note that removing the 6-month suspension after hardships may be a mandatory change (even though it currently conflicts with the safe harbor rules). Also, it is unclear how the new hardship withdrawal rules apply to 403(b) Plans. We recommend you speak with your counsel and have them review any potential amendments regarding hardship withdrawals.

Remember this is not meant to be a list of every single due date you need to know regarding your Plan(s). This is more of a list of things that are not always top of mind, but you may want to make sure are addressed prior to the end of the year.