Experts in Personalized Retirement Plan Design & Administration

Benefit Plans Plus Year-End Retirement Plan Checklist

(St. Louis – November 24, 2008) Before we say good bye to 2008 it is important to review your qualified plan to identify any action items which should be addressed prior to the end of the year. The following checklist describes some of the potential year-end items that may be necessary to maintain the tax-qualified status of your retirement plan. You should contact your service provider to ascertain what is specific to your plan.

Annual Notice Requirements

Depending on the type of qualified plan and the plan’s features, one or more annual notices may be required. Please carefully review the list of annual notices below to confirm if any are required to be issued for your plan.

Safe-Harbor 401(k) Annual Plan Notice

  • Traditional Safe-Harbor Plan Notice. Safe-harbor 401(k) plans must provide an annual safe-harbor notice to all plan participants describing the safe-harbor contribution and other material plan features.
  • “Wait and See” Safe-Harbor Notice. Sponsors of safe-harbor 401(k) plans that intend to satisfy the safe-harbor requirements through a 3% non-elective contribution may have followed the “wait and see” approach. Under this approach, a sponsor provided a notice prior to the beginning of the 2008 year, notifying eligible employees that the safe harbor contribution may be made for 2008. The Sponsor must now communicate their decision to make or not make the 2008 safe harbor contribution. In conjunction with a decision to make the safe harbor contribution the Sponsor must adopt a corrective plan amendment allowing for the contribution. A subsequent “Wait and See” notice must also be issued at the same time for 2009.

The traditional safe-harbor, contingent and supplemental notices must be provided at least 30 days and no more than 90 days prior to the beginning of the plan year. Thus, calendar year plans will need to provide the applicable notice by December 2, 2008.

Qualified Default Investment Alternative (“QDIA”) Notice

A QDIA is an investment alternative (for example, a balanced fund or target-date fund) in a participant-directed 401(k) or profit sharing plan into which participant contributions are “defaulted” if the participant has not made an affirmative investment election. A plan fiduciary who properly selects a QDIA and follows the specific QDIA requirements, including initial and an annual notices, will generally receive fiduciary protection for those defaulted investments under Section 404(c) of the Employee Retirement Income Security Act of 1974 (ERISA) because participants will be “deemed” to have elected to invest their contributions into the QDIA.

Participant-directed 401(k) or profit sharing plans must provide an annual notice to all participants that have been defaulted into a QDIA. The notice must be provided at least 30 days before the beginning of each plan year. For calendar year plans, notice must be provided by December 2, 2008.

Note: One of the QDIA notice requirements is that it be “separate” from other notices that are provided. However, the QDIA notice may be (but is not required to be) combined with the safe-harbor notice described above and the automatic enrollment notice described below.

401(k) Plan Annual Automatic Enrollment Notice

Sponsors of 401(k) plans that automatically enroll participants must provide annual notices to all eligible employees describing the circumstances under which contributions will be automatically contributed to the plan. The notice must be distributed at least 30 days prior to the beginning of each plan year (December 2, 2008 for calendar year plans), and may be combined with the QDIA notice described above. Note: A number of different automatic enrollment arrangements, but all of them require a notice.

Defined Benefit Pension Plan Annual Funding Notice

Plan sponsors of single and multi-employer defined benefit pension plans must provide an annual funding notice to participants, beneficiaries, and labor organizations representing participants. The notice must contain certain information about the plan, including, among other items, the plan’s funding status for the previous two years and a statement of the plan’s assets and liabilities.

The notice must generally be provided within 120 days following the end of the plan year. Small plans (covering fewer than 100 participants) must provide the notice by the filing due date of the plan’s IRS Form 5500. Additional notice requirements apply if the plan is subject to benefit restrictions due to failure to meet certain funding targets.

For calendar year plans, the first notice is due on April 30, 2009. This notice will take the place of the summary annual report for a defined benefit plan.

Participant Benefit Statements

Depending upon the type of qualified plan, specific participant benefit statement requirements apply, as described below.

  • Defined Benefit Pension Plans Plan sponsors must either provide participant benefit statements every three years to vested participants who are active employees or provide an annual notice to participants describing how a benefit statement may be obtained. If a plan sponsor decides to provide an annual notice instead of providing a benefit statement every three years, the notice must be provided by December 31, 2008.
  • Participant-Directed Defined Contribution Plans Participant-directed defined contribution plans must provide participant statements on a quarterly basis. Plan sponsors are deemed to timely provide statements if they are provided within 45 days following the end of the calendar quarter.
  • Non-Participant-Directed Defined Contribution Plans Plans that do not permit participants to individually direct their account balances are required to provide statements at least once each calendar year. Plan sponsors are deemed to timely provide a statement if they are provided by the date the Form 5500 is filed for the 2008 plan year.

Plan Amendments

While amendments to comply with the Pension Protection Act of 2006 are generally not required to be adopted until 2009 (or later in some instances), certain plan amendments relating to discretionary or other compliance changes may be required to be adopted before the end of the plan year. Please review the list below to confirm if any of the plan amendments may apply to your plan.

Discretionary Changes

Plan amendments for discretionary changes (i.e., changes not required by law, such as plan design changes) must be adopted by the end of the plan year in which the amendment is effective. Thus, calendar year plans must adopt any discretionary changes by December 31, 2008.

Code Section 415 Amendments

Qualified plans (including both defined contribution and defined benefit pension plans) must be amended to comply with the final regulations under Section 415 of the Internal Revenue Code of 1986, (415 amendments). The final regulations are effective for limitation years beginning on or after July 1, 2007 (e.g., January 1, 2008 for plans with a calendar year limitation year). The regulations include two types of changes.

“Mandatory” changes must generally be adopted by the later of (i) the last day of the plan year during which a plan amendment is effective, and (ii) the due date for filing the employer’s tax return (plus extension) for the fiscal year during which the provision became effective.

Deadline – Mandatory Changes Mandatory 415 amendments for plans that have a calendar year limitation year and a calendar year fiscal year must be adopted by the due date plus extensions for the employer’s tax year ending December 31, 2008.

“Discretionary” changes are changes that a plan sponsor can choose whether or not to adopt and must be adopted by the end of the plan year in which they became effective.

Deadline – Discretionary Changes Discretionary 415 amendments for plans that have a calendar year limitation year and a calendar year fiscal year must be adopted by December 31, 2008.

Pension Funding Equity Act Amendments for Defined Benefit Plans

The Pension Funding Equity Act (PFEA) generally changed the actuarial assumptions used for determining the Code Section 415 limits for lump sum distributions made in 2004 and 2005. Amendments to adopt PFEA changes must be made by the end of the 2008 plan year. Thus, calendar year plans must be amended by December 31, 2008 to reflect PFEA changes.

Required Minimum Distributions

Participants (and certain beneficiaries) who have attained age 70.5 during or prior to 2008 may be required to withdraw a certain amount from their retirement accounts each year. This amount is referred to as a Required Minimum Distribution (RMD). Failure to withdraw an RMD by the deadline will result in an IRS excess accumulation penalty of 50% of the shortfall.


Those who own more than 5% of an organization sponsoring a plan with assets in a qualified plan, 403(b) account or 457 plan, must take an RMD from the account(s) if you are at least age 70.5 in 2008. If 2008 is the year you reached age 70.5, you have the option of delaying the initial RMD until April 1, 2009. This option to defer until April 1, 2009, applies only to your first RMD. However review this option with your tax advisor because your will have to distribute your 2009 RMD by December 31, 2009.


For qualified plans, 403(b) and 457 plans, you may defer beginning your RMD past age 70.5 until after you retire, provided the option to defer is allowed under the plan. Check with your plan administrator.


If you are the beneficiary of a retirement account, the following may apply to you:

  • If you inherited retirement assets and are taking distributions under the life expectancy method, you must begin receiving RMD amounts by December 31 of the year following the year the account owner passes away. For instance, if the owner passed away in 2006, you must begin life expectancy distributions by December 31, 2007. Also, if the account owner was of RMD age and died this year but failed to satisfy the RMD for this year before death, you must withdraw that RMD amount by year-end. The RMD for the year of death that was not satisfied by the decedent is treated as ordinary income to you.
  • If you are subject to the five-year rule, which is one of the options available if the retirement account owner dies before the required beginning date (RBD), you must fully deplete the account by December 31 of the fifth year following the year the owner dies. For instance, if the owner passed away in 2003, the account balance must be fully distributed by December 31, 2008. Some financial institutions provide calculations for inherited accounts as an added service. However, because of the amount of data that must be factored into the calculation, and the fact that most of it is not readily available to financial institutions, many do not provide such calculations.
  • If you are one of multiple beneficiaries, you may want to separate each beneficiary’s share into his or her own inherited account, so that each can use his or her own life expectancy to calculate post-death RMD amounts. This separation must be done by December 31 of the year following the year the account owner passes away. If the deadline is not met, each beneficiary must use the oldest beneficiary’s life expectancy to calculate post-death RMDs.

IRS Determination Letter Program

Under the IRS’s determination letter program, individually designed plans have staggered, five-year remedial amendment cycles. While not a year-end deadline, the period for submitting individually designed plans in the third remedial amendment cycle (Cycle C for employers with employer identification numbers that end in 3 or 8 and most governmental plans) began February 1, 2008 and ends January 31, 2009. Thus, plan sponsors with individually designed plans in Cycle C should begin (if they haven’t already) to amend (and possibly restate) their plans and to gather the other information required for the filing in order to ensure timely submission to the IRS. Employers adopting a pre-approved Volume Submitter or Prototype plan will be on the same remedial amendment cycle as their document sponsor. Most of these sponsors have a deadline of April 2010 to restate. Check with the sponsor of your document now to be sure you adopt a timely plan restatement.

Written Plan Document Deadline for Code Section 403(b) Plans

Final regulations under Code Section 403(b) were issued last year and, among other things, require that all 403(b) arrangements be maintained pursuant to a written plan document. Sponsors of Code Section 403(b) plans will need to update existing plan documents or adopt new plan documents by December 31, 2008 to comply with these final regulations.

For more information please visit our website or contact our team at 314.983.1200

CIRCULAR 230 DISCLOSURE “To ensure compliance with requirements imposed by the IRS, we are required to inform you that any U.S. federal tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of 1) avoiding penalties under the Internal Revenue Code or 2) promoting, marketing, or recommending to another party any transaction or matter addressed herein.”

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