SECURE and CARES Amendments Deadline Postponed But Plans Should Still Review Year-End Needs

When the SECURE Act was passed in late 2019 and the CARES Act in Spring 2020, retirement plans were expected to adopt appropriate amendments by the end of 2022. While the IRS in Notice 2022-33 and Notice 2022-45 extended the deadline for retirement plans to adopt the amendments required by the SECURE Act and the CARES Act until December 31, 2025, there are still some amendments and other actions that may be required by the end of 2022. Moreover, individually designed plans can choose to adopt amendments reflecting the SECURE Act and CARES Act changes despite the postponement, and some have already done so. There is value in keeping a plan up to date with operational changes.

SECURE Act and CARES Act Changes Effective 2020

Because most of the important changes that the SECURE Act required of retirement plans were effective in 2020, retirement plans have already adopted a number of them in operation. The most notable change required retirement plans to extend the age for required minimum distributions from age 70-1/2 to age 72 (or retirement date, if later). The SECURE Act also changed the distribution requirements for death benefits, eliminating lifelong payouts for many beneficiaries. It required 401(k) plans to allow salary deferrals by "long term, part time" employees after three years. Then the CARES Act allowed plans to offer pandemic-related loans or distributions up to $100,000 for a limited time, and to allow participants to skip their 2020 required distributions.

SECURE Act and CARES Act Amendments

The deadline for all SECURE Act and CARES Act amendments has now been postponed until December 31, 2025. (There is a separate, later deadline for governmental plans.) The IRS did not give an express reason for the SECURE Act postponement in Notice 2022-33. Perhaps it was because the IRS had not yet issued final regulations or model language for many of the SECURE Act changes. More likely the reason was that further legislation, usually referred to as "SECURE 2.0," was pending in several versions in Congress. That legislation would make further changes to the SECURE Act provisions, and it would provide the same extension to adopt amendments both for the SECURE Act and SECURE 2.0.

Until Notice 2022-45 was issued almost two months later, it appeared that CARES Act provisions that retirement plans put in place in 2020 (such as the expanded COVID-related loans or distributions) would have to be amended by December 31, 2022. Notice 2022-45 notes that it allows amendments for CARES and SECURE to be "adopted on a single date," but doesn't explain why the IRS didn't provide this extension with the SECURE Act extension.

Of course, individually designed plans can choose to adopt amendments reflecting the SECURE Act and CARES Act changes anyway, and some have already done so. Other plans may simply document the changes made in operation and amend later. There is value in keeping the plan up to date with operational changes. Simply be aware that there is no longer a looming deadline, and some of the same provisions will need to be amended again if SECURE 2.0 becomes law.

Pre-Approved Plan Amendments

While the SECURE Act and CARES Act changes were being put in place, restatements of pre-approved defined contribution plans were also being required. The window for adopting those restated plans closed on July 31, 2022. The language for those pre-approved plans was set years before, so none of them includes SECURE Act or CARES Act changes. Don't assume that those changes are already covered just because you recently restated your pre-approved plan. A separate amendment will still be needed for them. Some pre-approved plan providers have already issued SECURE/CARES Act amendments. Work with your plan provider to determine which provisions in those amendments require action on the employer's part, if any. However, the deadline for these amendments is also December 31, 2025.

Plan Design Changes

Also don't lose sight of the fact that December 31 (or the plan year end if not on a calendar year) is the deadline to adopt amendments for any plan design changes you may have put into place this year. For example, with the tight labor market, employers may have implemented enhanced matching contributions or made participation earlier in order to attract talent.

Notices for 2023

Finally, any calendar year plan that has safe harbor contributions, auto-enrollment, or a QDIA is required to give an annual notice by December 1 preceding the plan year in which any of those features applies. The IRS will soon announce updates to the 401(k) dollar limits for 2023, which will be substantial due to the high inflation rate over the measuring period. So this is also a good time to get ready to update your annual plan notices.