Art of the Qualified Plan Audit

The Rule Individuals who turn age 72 after December 31, 2022, AND who reach age 73 before January 1, 2033, have a compulsory RMD age of 73. What It Means Individuals who turn 73 during 2023 must take an RMD for 2023 by April 1, 2024, but individuals who turn 72 during 2023 do not … Continued

Retirement Readiness vs. Immediate Financial Needs Life is a balancing act. Regulators strive to fight leakage by imposing penalties on early distributions, but they also don’t want to add to legitimate unforeseen and extreme emergency situations by imposing penalties when participants are in trouble. At the same time, regulators don’t want to impose administrative burdens … Continued

SECURE 2.0: Mandatory Automatic Enrollment Coupled with Corrective Contribution Relief Employees Plan to Make the Right Choice…Later When it comes to choosing to save for retirement, people tend to be short-sighted. Many eligible employees don’t choose to participate in their employer-sponsored retirement plans. Behavioral finance studies show that people tend to imagine themselves making the … Continued

In Summary Increasing Retirement Savings and Access: To expand coverage, new 401(k) and 403(b) plans must implement automatic enrollment and escalation starting in 2025. Additionally, the age for Required Minimum Distributions (RMDs) is raised to 73 in 2023 and 75 in 2033, and Roth accounts are exempt from RMDs while the participant is alive starting … Continued

In Summary Service Provider and Fiduciary Best Practices: Service providers should have a formal, documented cybersecurity program, conduct annual risk assessments, and secure a reliable third-party annual audit of security controls. Essential elements also include strong access controls, encrypting sensitive data, and maintaining an effective business resiliency program to address disaster recovery and incidents. Selecting … Continued

In Summary Expanded Self-Correction Possibilities: Eligibility for the Self-Correction Program (SCP) significantly increased, primarily by extending the time frame for correcting significant operational failures from two years to three years following the failure’s plan year. The ability to use a retroactive plan amendment to correct an operational failure was also broadened by removing the prior … Continued

In Summary Financial Flexibility Offered to Qualified Individuals: The CARES Act permitted eligible participants affected by COVID-19 to take coronavirus-related distributions up to $100,000 from their retirement plans. Qualified individuals include those diagnosed, or those experiencing adverse financial consequences like being furloughed or unable to work due to lack of child care. Repayment is allowed … Continued

In Summary Administrative Improvements for Retirement Plans: Additional time is allowed for employers to adopt plans after a taxable year’s close, provided it’s before the extended tax return due date. The IRS and DOL were directed to permit certain groups of defined contribution plans to file a single aggregated annual return under specific conditions regarding … Continued

In Summary Expanding Access to Retirement Plans for Employers: The SECURE Act permits unrelated employers to participate in Pooled Employer Plans (PEPs), easing previous restrictions on Multiple Employer Plans (MEPs). This change, coupled with the elimination of the “One Bad Apple” rule and the requirement for only one Form 5500 and plan audit, aims to … Continued

In Summary Hardship Withdrawal Access Expanded: The Bipartisan Budget Act of 2018 significantly expanded participant access to retirement funds in hardship situations. Key changes include eliminating the mandatory six-month suspension of deferrals after a hardship withdrawal and permitting plans to remove the requirement to maximize plan loans first. These rules became mandatory for plan years … Continued