Author: Steven Grieb
In late 2019, Setting Every Community Up for Retirement Enhancement Act (the SECURE Act) was passed into law. Shortly after the SECURE Act, at the beginning of the pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was passed in early 2020.
If a qualified defined contribution plan or defined benefit plan was required to — or chose to — adopt one of the provisions under the SECURE Act or the CARES Act, the deadline for each law was the end of the first plan year starting on or after January 1, 2022.
However, on August 3, 2022, the IRS issued Notice 2022-33:
- The Notice extends the deadline for all SECURE Act provisions, as well as some new distribution related rules for 403(b) plans and governmental 457(b) plans.
- The Notice extends the deadline for only one of the CARES Act provisions.
Under the new deadline, plans must amended no later than December 31, 2025. The date does not tie in any way to the plan year: December 31, 2025 is the new document amendment deadline for all plans, regardless of the plan year.
Although the deadline to amend the plan is extended, the plan must be operated in accordance with the new rules and, when the plan document is amended, the amendment should reflect the actual operations of the plan.
Summary of the SECURE Act and CARES Act
The SECURE Act, which was signed into law in 2019, contains many changes to the retirement plan compliance rules. For example, it increased the age for starting required minimum distributions (RMDs) for all qualified retirement plans from 70½ to 72, allowed plans to add distributions up to $5,000 upon the birth or adoption of a child and changed the rules for how death benefits must be paid. The SECURE Act also requires that 401(k) plans permit long-term, part-time employees to defer into the plan once they earn three consecutive years with at least 500 hours.
Passed along with the SECURE Act, the Bipartisan American Miners Act of 2019 (the Miners Act) changed the distribution rules for pension plans (including money purchase pension plans) and governmental 457(b) plans. Under the new rules, these plans can offer in-service distribution options to participants as young as age 59½.
The CARES Act was signed into law in 2020, in response to the economic impact of the pandemic. Among its many provisions, it included a number of retirement plan changes. For example, the law eliminated the requirement to pay RMDs for the 2020 year only. It also allowed plans to offer coronavirus-related distributions (CRDs) for participants who met certain requirements. Finally, it temporarily loosened the requirements for participant loans, including an increase in the maximum loan limit to $100,000, and allowed participants to cease loan repayments for a year.
Extended Deadline for the SECURE Act and the CARES Act
As noted above, the original deadline to amend plans for the SECURE Act and the CARES Act was the end of the first plan year starting on or after January 1, 2022. As a result, plans with a calendar plan year had a December 31, 2022 deadline for the necessary plan document amendments. Plans with a non-calendar plan year had a little additional time.
Now, the deadline is no later than December 31, 2025. The December 31, 2025 amendment deadline applies to all mandatory and discretionary changes under the SECURE Act and the Miner's Act.
The Notice does not give a reason the deadline is being extended. However, many SECURE Act rules still require additional guidance from the IRS before definitive plan document amendments can be completed. The extension gives the IRS some time to finalize additional regulations and other guidance, and prevents the plan sponsor from having to amend the plan document before getting a firm grasp on how the IRS interprets some of the new rules.
With respect to the CARES Act, the deadline has been extended only for the optional waiver of the RMD payment for defined contribution plan participants during the 2020 plan year. As a rule, any participant that turned age 70½ on or before December 31, 2019 and retired from the plan sponsor would have been required to receive a 2020 RMD. Many defined contribution plans opted under the CARES Act to not make that distribution. Any plan that didn't make RMD payments for the 2020 year won't have to amend their plan document for that rule until 2025. But for plans that allowed participants to take a CRD and/or loosened their participant loan rules, the current IRS guidance will still require a plan document amendment before the end of the current plan year.
In the last two years, every 401(k) plan, profit sharing plan or money purchase plan that uses a pre-approved plan document was required to complete a plan document restatement. The deadline for moving plan documents to a new restated version was July 31, 2022. However, the restated plan documents don't contain new changes for retirement plans required under the SECURE Act and the CARES Act, so your restated plan document must be amended for these new rules.
Any plan sponsors that added CRDs and/or loosened the participant loan requirements under the CARES Act should contact their plan document provider to help ensure that the required amendment will be completed before the end of the current plan year. Don't assume that the IRS will extend the deadline for these amendments. Further, understand that the additional time to complete the SECURE Act amendment doesn't mean that your plan has additional time for complying with the new rules. Each SECURE Act provision has a specific effect date in the statute. The Notice does not change the dates on which the plans must actually implement SECURE Act changes.
As always, feel free to contact your Gallagher consultant with any questions.