Employee Benefits Year-End Checklist 2017

Planning Ahead for 2018

With the end of the calendar year drawing near, this is a good time for employers to conduct a year-end review to make sure their benefit plans are up-to-date and operating in compliance with the law. In addition, the end of the year brings a number of important deadlines. To assist you with your year-end projects, this newsletter provides a summary of some important dates and new developments:  

Important Reminders for 2017

  • Some (but not all) of the benefit limits will increase for 2018, so your payroll and recordkeeping systems will need to be updated. A table setting forth the 2017 and 2018 IRS limits appears at the end of this newsletter.
  • If you have participant-directed investments and utilize a “Qualified Default Investment Alternative” (“QDIA”) for “default” investments, you should provide your default investment informational notice by December 1, 2017 if you have a calendar year plan year. Your plan recordkeeper generally will assist you in preparing the notice and coordinating its distribution.
  • If you have a “safe harbor” 401(k) or 403(b) plan or want to adopt a safe harbor structure for 2018, you must provide your annual notice by December 1, 2017 if you have a calendar year plan year. This applies regardless of whether you are using a traditional safe harbor or an automatic enrollment safe harbor. Make sure the notice includes a warning that the employer retains the right to reduce or eliminate safe harbor contributions, in order to preserve this ability for you if you need it.
  • If you have an automatic enrollment 401(k) or 403(b) plan, regardless of whether it is a “safe harbor” plan, you must provide your automatic enrollment annual notice by December 1, 2017 if you have a calendar year plan year.
  • Participant-directed defined contribution plans must provide annual notices regarding plan expenses and investments. Plans should be sure they have met that obligation; the deadline will vary depending on the timing the plan has established. Disclosures must be provided no more than 14 months after the previous year’s fee disclosure.
  • If you want to make any amendments to your qualified retirement plan, you may need to adopt them before the end of the current plan year. Generally, an amendment to a qualified retirement plan that takes effect during a plan year must be adopted before the end of the plan year, unless Congress or the IRS has granted an extension.
    • Certain amendments necessary to reflect the IRS’s regulations on bifurcated distributions (i.e., distributions paid partly in the form of a lump sum or other form of payment subject to Section 417(e) of the Code and partly in the form of an annuity) are due by December 31, 2017.
    • Some amendments must be in place before the desired effective date (for example, if you are changing your contribution structure, an advance amendment may be required).
    • Changing a 401(k) or 403(b) plan to or from a “safe harbor” structure usually requires an amendment in advance of the start of the plan year, and certain changes to those plans cannot be made after the start of the year. If you have one of these plans, it is important to plan ahead.
    • Adding an automatic enrollment feature to a 401(k) or 403(b) plan may also require an amendment before the start of the plan year.
  • Benefit statements
    • Remember that you must provide benefit statements for your participant-directed plans within 45 days of the end of the quarter, and for non-participant-directed defined contribution plans by the filing date for Form 5500 for the plan year.
    • If you sponsor a defined benefit plan, you must either provide employed participants with an annual notice of the availability of a benefit statement on request, or with an actual benefit statement once every three years. (Bear in mind that the statute does not exempt frozen plans from these requirements.) Defined benefit plans sponsored by employers with intranet sites may also be required to make certain information available on the intranet site within 90 days of filing Form 5500.
  • Make sure that you or your insurer have provided all notices required under your group health plan this year, which may include the Women’s Health and Cancer Rights Act notice, notice of availability of the HIPAA privacy notice, and/or the Medicare Part D notice, and that you or your insurer provide required Summary of Benefits and Coverage documents during your open enrollment period. Congress failed to renew the Children’s Health Insurance Program (“CHIP”) in September 2017, and it is uncertain whether lawmakers will be able to reestablish the program by the end of 2017. We continue to track developments on the reestablishment of CHIP, including whether the Department of Labor will enforce the CHIP notice requirement for 2017.
  • Most retirement plan participants are required to receive annual “required minimum distributions” after turning age 70½ and terminating employment with the plan sponsor (or after turning age 70½, in the case of a more-than-5% owner). Time limits also apply to payment to beneficiaries of deceased participants. Each year’s payment must be made by December 31st, with the exception of a participant’s first required minimum distribution (due April 1st of the following year). Make sure that your plan has arranged to make all required payments, and has up-to-date addresses for affected participants and beneficiaries.
    • As the population ages, more and more plan participants are affected by these deadlines. The IRS and the Department of Labor have increased the resources dedicated to enforcing these rules, and now require plans to indicate on Form 5500 whether they failed to make required payments (see “Increased Regulatory Focus on Retirement Plan Payment Deadlines” below).
  • If you expect to have assets remaining in your defined contribution plan’s forfeiture account at the end of the year, you should review your options and obligations under the plan document to determine whether you can (and whether you must) make arrangements to use up your forfeiture account this year. The IRS has emphasized that plans generally should not be carrying forfeiture balances over from year to year. As a corollary of this analysis, make sure that your recordkeeper is processing forfeitures in a timely fashion when former employees take distributions or complete five breaks in service, so that the forfeited money can be put to proper use.
    • In this regard, it is worth noting that the IRS now allows forfeitures to be used to fund safe harbor contributions to 401(k) and 403(b) plans as well as certain other types of contributions for which forfeiture funding previously was disallowed. Employers that want to take advantage of this new rule should adopt any requisite amendments by the applicable deadline.

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