Think back to how you became involved with your organization’s retirement plan. Were you added as a plan fiduciary or trustee based on your role within the organization or your background, or was it a random assignment to add another task to your endless to do list?
Regardless of how you became a plan fiduciary or trustee, you have the responsibility to act in the best interest of plan participants and make educated decisions based on the current economic and regulatory environment. Operating the plan in accordance with current plan provisions is oftentimes a daunting task since many are not intimately familiar with the retirement plan environment. Common compliance errors related to implementing the definition of compensation, timeliness of contribution remittance, and timely entry of plan participants are just a few recurring items we uncover in our employee benefit plan audits.
In addition to the risks of noncompliance with plan provisions, several pieces of legislation have been enacted over the past few years which add another layer of compliance related concerns. These include the Bipartisan Budget Act of 2018; the Coronavirus Aid, Relief, and Economic Security Act (CARES Act); the Securing a Strong Retirement Act of 2021 (Secure Act); the American Rescue Plan Act of 2021; and, most recently, the Secure Act 2.0.
Provisions in these Acts include a combination of limited short-term relief, expanded definitions of plan provisions, and additional provisions that have implementation dates over the next several years.
The heavy compliance-driven environment of retirement plans increases the need to fully understand the regulatory environment and how it impacts your responsibility as a plan fiduciary or trustee. Engaging experienced qualified retirement professionals to guide you through these various changes and risks to your plans has never been more important.
Communication and coordination among your various retirement plan service providers is imperative to meet the plan’s compliance requirements and allow for a smooth audit process. Tasks performed by third party service providers include plan administration functions, compliance testing, Form 5500 preparation, investment custody, recordkeeping, investment advisory services, plan design and potential plan audits, and engagement of legal counsel. Certain providers may be engaged to perform multiple tasks for the plan.
Implementing the provisions of the legislation mentioned above will require continuous coordination between your service providers for several years. In particular, provisions included in the SECURE Act 2.0 must be implemented over the next five years. Two of the most publicized SECURE Act 2.0 provisions (of the Act’s 90 provisions) are an employer’s ability to help employees save for retirement by matching employee student loan payments with employer contributions, as well as the expansion of plan participation for long-term part-time employees. Both of these provisions are effective after January 1, 2025.
Whether or not your plan exceeds the participation requirement for an audit, plan fiduciaries should understand which of the SECURE Act 2.0’s 90 provisions impact the plan and, more importantly, when they are effective. Coordination among knowledgeable retirement professionals to determine which rules impact your plan and taking the necessary steps to stay in compliance with minimal disruption to your participants will keep you ahead of upcoming plan requirements.
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