Client Alert from the Employee Benefits Group - November 2011
2011 Year-End Compliance Items for
Sponsors of Benefits Plans
By Jeremy J. Sharp
Qualified Plans
Minimum Required Distributions for 2009. In response to the 2008 economic downturn, Congress permitted employers to amend qualified plans to suspend minimum required distributions for participants who had attained age 70 1/2. For employers that chose to suspend minimum required distributions for 2009, the deadline for plan amendments memorializing this suspension and the revised administrative practices is December 31, 2011. For employers that did not alter their administrative practices in response to this legislative change, amendment by December 31, 2011 is recommended as a "best practice" to facilitate future filings with the IRS (such as for determination letter or correction of operational issues).
Funding Based Restrictions for Defined Benefits Plans. Defined benefit pension plans that are underfunded below particular thresholds are subject to certain limitations regarding benefit payments under the Pension Protection Act of 2006 ("PPA"). Plans not already amended with respect to PPA restrictions must be amended by the end of the 2011 plan year.
Plan Restatement and IRS Determination Letter Filings for Cycle A Plans. Employers sponsoring individually-designed qualified plans must amend and restate their plans in five-year cycles dependent upon their employer ID number ("EIN," also referred to as federal tax ID number). Cycle A employers (those employers with EINs ending in 1 or 6 must file their amended and restated plan documents and determination letter requests with the IRS by January 31, 2012.
In-Plan Roth Conversions. Effective September 27, 2010, the Small Business Jobs Act permits in-plan Roth conversions for 401(k), 403(b) and 457(b) plans. For plans that permitted such conversions, the deadline for memorializing the respective amendment is December 31, 2011.
Annual Notices. 401(k) plan automatic enrollment notices, 401(k) plan safe harbor notices, and qualified default investment alternatives notices are due on December 1st of each year.
Group Health Plans
Annual Notices. Group health plans must provide annual notices to participants with respect to the Women's Health and Cancer Rights Act ("WHCRA"), Children's Health Insurance Program Reauthorization Act ("CHIPRA") and Medicare Part D. The Medicare Part D Notice deadline for 2011 was October 15, 2011, while WHCRA and CHIPRA notices must be provided by December 31, 2011 for calendar year plans (although most employers generally provide them during open enrollment).
Health Care Reform
Non-grandfathered plans must meet expanded requirements for Claims, Appeals, External Review. Effective January 1, 2012, non-grandfathered plans must have in place such administrative structures and procedures as are necessary to comply with new external review requirements for self-insured group health plans, such as contracting with at least two external review organizations.
Notice of Grandfathered Status. For so long as it retains grandfathered plan status, a grandfathered plan must display prominently a consumer notice declaring the plan's grandfathered status in the materials communicating plan benefits to participants.
For additional information regarding health care reform compliance concerns for later in 2012 and beyond, see the Update on Health Care Reform/Patient Protection and Affordable Care Act ("PPACA"). [link]
Miscellaneous - All Plans/Employers
FASB Reporting with respect to Multiemployer Pension Plan Obligations. In September 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2011-09, which requires expanded disclosures in financial statements with respect to contributions to multiemployer pension plans and the status of multiemployer plans to which an employer contributes. Employers now must disclose:
- Significant multiemployer pension plans to which the employer contributes (including plan name and identification number);
- Employer's level of participation in significant plans (e.g., employer's annual contributions to respective plan, whether employer's contributions constitute five percent of all contributions to such plan by all employers);
- Certain information regarding the fiscal health of significant plans (e.g., funding status, information regarding funding improvement plans, imposition of employer surcharges);
- Expiration dates of relevant collective bargaining agreements as well as any minimum funding arrangements.
Public companies must comply with the new FASB disclosure obligations for the first fiscal year ending after December 15, 2011, while nonpublic companies must comply for the first fiscal year ending after December 15, 2012.
Amendments. All amendments to all plans (e.g., qualified plans, health and welfare plans, nonqualified plans/ executive compensation arrangements) during the 2011 plan year must be formally memorialized in writing by the final day of the 2011 plan year.
Summary Annual Reports (SARs). Summary Annual Reports (SARs) to participants are due two months following the filing of IRS Form 5500 for the respective benefit plan. For plans that filed IRS Form 5500 at the October 15th deadline, SARs should be provided to participants by December 15, 2011. |
