Navigating the New Landscape: How Will SECURE 2.0 Impact Plan Compliance?

SECURE 2.0 introduced significant changes to employer-sponsored retirement plans.  These changes aimed to enhance retirement savings, ensure more widespread access to workplace retirement plans, and alleviate administrative and financial burdens for plan sponsors.  Employers should be aware of mandatory and optional provisions under SECURE 2.0 that could impact the compliance of their retirement plan.

Given the recent legislative changes, compliance is top of mind for most plan sponsors.  These shifts mean learning new rules and successfully navigating Department of Labor audits.  A recent article in BenefitsPro, penned by Wendy Baker, assistant general counsel at 401(k) provider Human Interest, touted the relative ease of preparing for DOL audits, and highlighted four best practices for plan sponsors to follow for success.

  1. Conduct an in-house audit: Ms. Baker noted, “Look at your plan documents, participant notices, contribution and distribution reports, plan policies, procedures, timing, reporting, and limits.  Take a thorough look for any red flags or issues. If you notice errors, correct them as soon as possible.  Common errors to watch out for are:
  • late deposits of employee contributions into the plan,
  • failure to implement employee deferral elections and
  • failure to provide required notices.”

Look to the IRS’ Employee Plans Compliance Resolution System (EPCRS) to help you fix any errors and avoid having your plan disqualified.  Keep detailed documentation of the error and how it was corrected, so if the DOL conducts an audit, you’ll be able to provide them evidence that the mistake is being or was addressed.

  1. Document all decisions: ERISA, the law that governs retirement plans, “requires that plan providers use a ‘prudent process’ when selecting funds, and if participants feel that an investment is not the best option, they may make allegations of a fiduciary breach.  If this allegation is made, a plan provider must prove their prudent process,” Ms. Baker wrote.

Ms. Baker advised plan sponsors to create an Investment Policy Statement (IPS) that declares, in writing, how the plan’s investment options are selected and monitored. The IPS should include information about alternative investments and the company’s position on them.  Ms. Baker also recommended that detailed notes and meeting minutes be kept when discussing the plan’s investments and logged with the IPS.  While not a legal requirement, keeping detailed documentation can help demonstrate your prudent process.

  1. Stay organized: Making sure your records are detailed, organized and up-to-date helps save time and headaches when the DOL comes knocking. Ms. Baker suggested “Keep plan records, payroll reports from your payroll provider, and the above prudent process reports in a secure place that the plan administrator and other key company leaders can access.”
  2. Consider audit support: Some attorneys, CPAs, and 401(k) providers offer audit help so you don’t have to go it alone.  Keeping your rolodex up to date with the names of professionals who can help is a good way to prepare for an audit, even if you don’t hear from the DOL for years.  Ask your 401(k) provider if they offer audit support.  You can keep this information with your other important plan documentation so you have it handy in the event of a plan audit.

SECURE 2.0 made sweeping changes to retirement plans that impact compliance.  By implementing these simple best practices, plan sponsors can ensure their plans remain in compliance and that they’re well-prepared in case of a DOL audit.


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