Checking it twice: Benefit plan end of year actions to consider | Eversheds Sutherland (US) LLP

With 2023 drawing to a close, it is a good time for employers to consider any actions needed before year-end with respect to their benefit plans. We made a list, and we encourage plan sponsors to check it twice.

Long-Term Part-Time Administrative Changes

  • Under SECURE and SECURE 2.0, certain long-term part-time employees (generally those who are in an eligible category under the plan and who have at least 500 hours of service over three consecutive years) will need to become eligible to make deferrals into a company’s 401(k) plan starting in 2024.
  • The IRS recently released proposed regulations providing guidance on long-time part-time employees, and plan sponsors will need to review their plans and prepare for any changes.
  • Plans that already have immediate eligibility for deferrals for all employees or eligibility after a short waiting period (e.g., 90 days) are generally not impacted by the long-term part-time employee rules. Plans that require 1000 hours of service in a 12-month period for eligibility may consider moving to a more generous eligibility requirement to avoid the complexities of the long-term part-time employee rules.

SECURE 2.0 Optional Changes

  • Under SECURE 2.0, there are certain optional changes available to plan sponsors of defined contribution qualified retirement plans, such as treating student loan payments as deferrals for purposes of determining employer matching contributions (2024), increasing small account balance mandatory cash-out limits to $7,000 from $5,000 (2024), and allowing Roth matching or employer non-elective contributions (2023).
  • If plan sponsors wish to implement any of these optional changes for 2024, they will need to start making administrative decisions now.

Pre-Approved Plans with Discretionary Match

  • Pre-approved 401(k) plans with discretionary matches are required to provide participants with notice of the matching contribution formula within 60 days after the match is made (for an annual match; payroll period matches have different timing requirements).

Qualified Retirement Plan Routine Year-End Maintenance

  • Ensure annual required minimum distributions are made.
  • Spend down any forfeitures from prior years, taking into account plan terms and Proposed Treas. Reg. section 1.401-7.
  • Finalize amendments for discretionary plan changes made during the year.

Gag Clause Prohibition Compliance

  • The Consolidated Appropriations Act, 2021 (CAA) amended the Internal Revenue Code and ERISA to prohibit group health plans and health insurance issuers from entering into
    agreements that prevent disclosure of cost or quality of care data and other data.
  • The CAA requires an annual attestation of compliance with these rules, which for self-insured plans must be fulfilled by the plan sponsor on behalf of the group health plan unless a provider agrees to handle the attestation. The first Gag Clause Prohibition Compliance Attestation is due December 31, 2023, which is done electronically via a Centers for Medicare & Medicaid Services website.
  • Employers should also address any group health plan contracts that contain gag clauses to the extent required for compliance with the CAA.

Mental Health Parity and Addiction Equity Act Comparative Analysis

  • Medical plans are required to prepare a comparative analysis showing that non-quantitative treatment limitations for mental health and substance use disorders are consistent with the requirements for non-mental health/ substance use disorders.

Cafeteria Plan “Family Glitch” Amendment

  • IRS guidance from 2022 allows cafeteria plans to be amended effective for 2023 to allow certain mid-year election changes for individuals who need to change from family coverage to employee-only coverage in order for a family member to enroll in coverage from the Health Care Marketplace exchange.
  • For the amendment to effective in 2023, it needs to be made by the last day of the plan year that begins in 2024.

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