With so much discussion surrounding the CARES Act, it is easy to forget that 2019 brought us some of the most significant changes to retirement plan law since the passage of the Pension Protection Act of 2006. This legislation came to us by virtue of The Setting Every Community Up for Retirement Enhancement (SECURE) Act that was signed into law on December 20, 2019. While many of the SECURE Act provisions are currently in effect, there are important provisions still to come that plan sponsors should be prepared for in 2021 and beyond.
2020 has been a difficult year with many unexpected challenges. For companies that sponsor retirement plans, some of these challenges came in the form of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. While the CARES Act provided much needed relief to plan sponsors and their participants, the relief also brought new complexity to retirement plan compliance.
Approximately every six years, the IRS requires that pre-approved qualified retirement plans update (or restate) their plan document to reflect recent legislative and regulatory changes. Plan restatements are divided into staggered six-year cycles depending on the type of plan (e.g. defined benefit plans or defined contribution plans, such as 401(k) and 403(b) plans). In Announcement 2020-7, the IRS confirmed that the next restatement cycle for pre-approved defined contribution plans is a 24-month period that began August 1, 2020 and will close on July 31, 2022. This restatement cycle is known as the “Cycle 3” restatement, as it is the third required restatement under the pre-approved retirement plan program.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on Friday, March 27, 2020. Besides the generalized financial relief afforded to individuals, as well as loans and other concessions for businesses, the massive relief bill for those suffering as a result of the Coronavirus Pandemic includes many provisions to help participants and employer sponsors of retirement plans.