An End-of-Year Checklist for DB Plans
It’s the time of year when Santa — and those who work with defined benefit plans — are making their end-of-year lists — and checking them twice.
To that end, the lawyers at Snell & Wilmer have prepared the following end-of-year “to do” list for DB plans.
Comply with Items on All Qualified Plans “To Do” List. The items on the All Qualified Plans list also apply to defined contribution plans.
Consider Hybrid Plans Amendments. In September 2014, the IRS issued final regulations on hybrid plans, which are effective for plan years that begin on or after Jan. 1, 2016 (the 2014 Final Hybrid Regulations). In November 2015, the IRS issued additional final regulations on hybrid plans which extended the due date for certain portions of the 2014 Final Hybrid Regulations. Snell & Wilmer suggests that plan sponsors review their hybrid plans to determine whether any amendments must be made before Jan. 1, 2016.
Post Portions of Form 5500 on Company’s Intranet. A plan sponsor of a DB plan that maintains an intranet website for the purpose of communicating with employees (and not the public) is required to post portions of the plan’s Form 5500 on the intranet.
Comply with Annual Funding Notice to Participants. Single employer DB plan sponsors must provide participants with an annual notice of the plan’s funding status within 120 days of the end of the plan year to which the notice relates. Plans with fewer than 100 participants do not have to provide the notice until the Form 5500 annual report is due for the plan year.
Comply with Participant Notice Requirement if Adjusted Funding Target Attainment Percentage is less than 80%. In addition to the annual funding notice described above, Section 101(j) of ERISA requires a plan administrator to provide a notice to participants if the plan is subject to a restriction on payment of benefits. These restrictions become applicable if the plan’s adjusted funding target attainment percentage is less than 80%. Plan administrators are not required to provide this notice to participants and beneficiaries in pay status.
Provide Participant Benefit Statements. DB plans should provide individual benefit statements every three years or upon request. Alternatively, Snell & Wilmer note, DB plans may satisfy the requirement by annually notifying participants that the pension benefit statement is available and how a participant may obtain such statement.
Provide Suspension of Benefits Notice, if Applicable. If required by the terms of the plan, plan administrators must provide notice of the suspension of benefits to participants who continue employment beyond normal retirement age and to rehired retirees. This notice should be given during the first month during which the benefit is suspended.