Defined Contribution plans: Form 5500 news!

Effective for plan years beginning on or after January 1, 2023, the determination of a large or small plan will be based on the number of participants with an account balance as of the beginning of the year, rather than the number of participants eligible for the plan.

This is welcome news for plans that required an accountant’s audit as a large plan because there were more than 100 eligible participants but not all of those participants had balances. For new plans, the participant count will be based on the number of participants with an account balance as of the end of the year.

Defined Benefit plans: Plan Document news!

The two-year Cycle 3 restatement window for pre-approved defined benefit plan documents opened April 1, 2023, and will end March 31, 2025. Check with your document provider to confirm when they intend to update your plan document for your review and signature during this restatement period.

Reminders:

• Required amendments for SECURE Act, CARES Act and Miners Act: These were originally due as of the last day of the plan year beginning after January 1, 2022 (December 31, 2022, for calendar year plans). Due dates were extended as follows:
  • 401(k) plans, profit sharing plans, money purchase plans, defined benefit plans and 403(b) plans have until December 31, 2025.
  • Governmental plans (including governmental 457(b) plans) have until 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023.
  • The extension does not apply to tax-exempt 457(b) plans.
• Form 5500 relief for retroactively adopted plans: If a plan is adopted after the end of a plan year but before the employer’s tax filing deadline (including extensions), the plan is considered to be adopted on the last day of the taxable year. No Form 5500 is due for the initial plan year, but the subsequent year form will have a box checked to indicate it is a retroactively adopted plan permitted by SECURE Act Section 201.

Clarification:

• In the last edition, the example of Required Minimum Distribution (RMD) age increases from 72 to 73 should have read as follows:
  • For participants who turn 73 in 2023, they were 72 in 2022 and subject to the age 72 RMD rule in effect for 2022.
  • For those who turn 72 in 2023, their 1st RMD will be due by December 31, 2024 or they may opt to delay it until April 1, 2025. If they choose the latter, they will take both their 1st and 2nd payment in 2025.