Compliance News | March 13, 2020
This is a reminder about two compliance issues that might need plan sponsor attention at this time: the March 31, 2020 deadline for correcting 403(b) plan documents and the need for operational compliance with hardship distribution procedural changes for 401(k) and 403(b) plans.
Sponsors of 403(b) plans* have until March 31, 2020, to retroactively correct (back to January 1, 2010) any defects in their plan document language. The March 31, 2020 date applies regardless of plan year.
Plan sponsors have a few options for correcting those defects:
After March 31, 2020, sponsors will no longer be able to self-correct plan language problems dating back to 2010. Instead, they will have to use one of the other IRS correction programs described in the Employee Plans Compliance Resolution System: the voluntary compliance program or audit closing agreements.
The Bipartisan Budget Act of 2018 made several changes to the requirements for hardship distributions from 401(k) and 403(b) plans. Plans will need to comply operationally with the following provisions. These changes took effect on January 1, 2020 (regardless of plan year):
Beginning with the 2019 plan year, these provisions are optional:
The Setting Every Community Up for Retirement Enhancement Act (SECURE Act), raised issues that might need plan sponsor attention now. For details, refer to our Update on the SECURE Act.
*Generally, only public educational organizations, non-taxable entities described in Internal Revenue Code §501(c)(3), which include, among other entities, private tax-exempt colleges and tax-exempt hospitals and churches, may sponsor 403(b) plans.
This publication is for informational purposes only and does not constitute legal or tax advice. Plan sponsors are encouraged to discuss the issues raised here with their legal, tax and other advisors before determining how they apply to their specific situation.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
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