Last call: don’t forget the year-end changes required to your pension plan for 2021 | Faegre Drinker Biddle & Reath LLP

As 2021 draws to a close, pension plan sponsors must confirm that their plan documents are amended by December 31, 2021, in order to comply with certain plan changes:

  • Distribution of difficulties. The 401 (k) and 403 (b) plans must be modified, if necessary, to comply with the final rule updating the rules for the distribution of difficulties. For hardship distributions made on or after January 1, 2020, plans must be amended by December 31, 2021 to: (i) eliminate the suspension of optional deferrals following a hardship distribution; and (ii) require employees who request hardship distributions to declare that they do not have sufficient cash or other liquid assets reasonably available to meet the need. or (ii) took effect no later than January 1, 2020 (such as eliminating the requirement to exhaust all available loans before receiving a hardship distribution, or allowing amounts paid as qualifying non-optional contributions (QNEC) or Eligible Matching Contributions (QMACs) and Income to be made available for Hardship Distributions), must adopt these changes by December 31, 2021.
  • PBGC tariffs. Defined benefit plans that refer to the Pension Benefit Guaranty Corporation (PBGC) immediate rate may need to be amended to reflect the fact that the PBGC stopped publishing monthly rates at the end of 2020. Such a change is expected to come into effect. effective January 1, 2021 (which, for calendar year plans, would require the adoption of an amendment by December 31, 2021).
  • Collectively Negotiated Cash Balance / Hybrid Defined Benefit Plans. The cash balance / hybrid defined benefit plans maintained under a collective agreement ratified on or before November 13, 2015 must be amended by December 31, 2021, in order to comply with the rate of return requirements of the market and other cash balance / hybrid plan requirements that generally applied to these plans as of January 1, 2017.
  • Discretionary changes. If a pension plan implements discretionary changes during the 2021 plan year, the pension plan sponsors must adopt an amendment to this effect no later than the last day of the 2021 plan year (December 31 2021, for a plan of one calendar year).

If any of the above applies to your pension plan, the plan must be amended by the deadline stated above (typically December 31, 2021). Sponsors of defined contribution and defined benefit plans can also consider the following changes to their pension plans:

  • Mandatory class action exemptions and arbitration provisions. Sponsors of defined contribution and defined benefit plans can remember to add Mandatory Class Action Waivers and Arbitration Provisions to their plan documents.
  • Amendments to the SECURE law and the CARES law. Defined contribution and defined benefit plans can be amended in 2021 for changes to the SECURE law and the CARES law, but the deadline for the adoption of the changes to the SECURE law and the CARES law is the end of the 2022 plan year (December 31 2022 for calendar year plans).
  • American Rescue Plan Act of 2021. The Internal Revenue Service (IRS) recently published the list of required changes for 2021 in IRS Notice 2021-64 (the “2021 List”). The only amendment required on the 2021 list is for multi-employer plans receiving special financial assistance under the American Rescue Plan Act of 2021 (ARPA). These diets can be amended in 2021 to incorporate this change, but the deadline for adopting the amendment is December 31, 2023.

Please contact your Benefits Advisor to ensure that your pension plan document has been (or will be) amended in a timely manner to incorporate the necessary changes.


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