Regulatory Briefs

Key Takeaway

The following is a listing of important regulatory items for sponsors of qualified retirement plans.

Important Limits

Important Limits	2021	2022	2023	2024
IRC § 402(g) calendar year limit on 401(k), 403(b), and 457 elective deferrals	$19,500	$20,500	$22,500	$23,000
Catch-up deferral (age 50 or older) limit on 401(k), 403(b), and governmental 457	$6,500	$6,500	$7,500	$7,500
SIMPLE 401(k)/IRA calendar year limit	$13,500	$14,000	$15,500	$16,000
SIMPLE catch-up contribution limit	$3,000	$3,000	$3,500	$3,500
Annual limit on compensation	$290,000	$305,000	$330,000	$345,000
Highly compensated employee: over 5% owner or compensation over	$130,000 in 2020	$130,000 in 2021	$135,000 in 2022	$150,000 in 2023
Key employee: over 5% owner, over 1% owner > $150,000, or officer over	$185,000	$200,000	$215,000	$220,000
Limit on annual contributions to a defined contribution plan	$58,000	$61,000	$66,000	$69,000
Social Security taxable wage base	$142,800	$147,000	$160,200	$168,600
Defined benefit plan annual benefit limit	$230,000	$245,000	$265,000	$275,000

For off-calendar plan year ends, the deferral limits are based on the calendar limits as noted above. The compensation limit is based on the calendar year in which the plan year begins (e.g., for a 10.01.2023 – 09.30.2024 PYE, the 2023 limit of $330,000 is used).

Return of Excess

Return of Excess*	Description	Due Date
Excess Contribution 401(k) contributions that fail ADP test	Contribution and earning refunds will be taxed in the year of distribution. Employers are subject to a 10% excise tax on the refund if excess contributions are returned more than 2½ months after the end of the plan year. Must be corrected by the end of the next plan year.	March 15 For calendar-year plans
Excess Aggregate Contribution 401(m) contributions that fail ACP test	Contribution and earning refunds will be taxed in the year of distribution. Employers are subject to a 10% excise tax on the refund if excess contributions are returned more than 2½ months after the end of the plan year. Must be corrected by the end of the next plan year.	March 15 For calendar-year plans
Excess Deferral Elective deferrals in excess of calendar year limit	If distributed by April 15 following the year the excess is realized, the excess deferral is included in income in the year of deferral. The corresponding earnings are included in income in the year of distribution. If not distributed by April 15, excess deferrals will be taxed twice — once in the year of deferral and once in the year of distribution.	April 15
Excess Annual Addition Limit on annual contributions to plan	If excess amount is due to (a) the allocation of forfeitures, (b) a reasonable error in estimating compensation, or (c) determining the maximum salary deferral, it may be corrected in accordance with the terms of the plan document, generally by the end of the following limitation year.	December 31 (Generally) For plans with calendar-year limitation year
Correction Programs	EPCRS (employee plans compliance resolution system) — IRS program that provides specified correction methods for failures. VFCP (voluntary fiduciary correction program) — DOL program designed to allow plans to avoid potential ERISA civil actions or penalties.	Timing varies based on type of failure

*If excess contributions are not corrected, a disqualification condition may exist. Please see last page for important disclosures.

Administrative Reminders

Plan Requirements	Description	Due Date
Deposit of employee deferrals and loan payments	The Department of Labor (DOL) requires employers to deposit employee deferrals (pre-tax, after-tax, and Roth) in the plan as soon as administratively feasible. Plans of less than 100 participants at the beginning of the year must submit deferrals and loan payments by the seventh business day following the payroll date. All others must submit contributions as soon as possible following payroll. The DOL takes an aggressive enforcement approach on this issue.	No later than 7th business day for plans with <100 participants; all others ASAP
Calculation of matching contributions	The terms of your plan control whether matching contributions are calculated on a payroll or annual basis. If matching contributions are calculated on a payroll basis, participants must spread their salary deferrals over the entire plan year to receive the maximum matching contribution. If the plan annualizes the match, timing of deferrals is not important. For example: Assume the match is 50% on the first 6% of employee deferrals, the participant's annual salary is $100,000, and he/she defers $6,000 by mid-year then stops. If the match is made on a payroll basis, it would be $1,500 (50% x 6% x $50,000). In contrast, if the match is annualized, it would be $3,000 (50% x 6% x $100,000).	Throughout plan year
Form 5500	Due at the end of the seventh month after plan year end. A two-and-a-half- month extension can be obtained by filing Form 5558 before the due date for Form 5500. Extension may also be granted until due date of employer’s federal tax return. For a short plan year, Form 5500 and applicable schedules are due by the last day of the seventh month after short plan year ends.	July 31 For calendar- year plans (October 15 with an extension)
Summary annual report (SAR)	Summary of Form 5500 that includes a basic financial statement of the plan.	Two months after Form 5500 is due
Military leave	Employees who are, or have been, on military leave have rights regarding retirement benefits. With regard to the retirement plan, an employer must credit a returning veteran with any employer contribution they would have received, and the employee must be given the opportunity to make up any salary deferral contributions. If the employee makes up salary deferrals, then any matching contribution must be credited to them.	Each time a participant returns from military leave
Summary plan description (SPD)	Plan summary required to be delivered to all eligible participants and beneficiaries. If you have employees who do not read English, attach the following statement to the SPD in the employee’s native language. “This booklet contains a summary in English of your plan rights and benefits under (Plan Name). If you have difficulty understanding any part of this booklet, contact (Name), the plan administrator, at (address). Office hours are from (Time) a.m. to (Time) p.m. Monday through Friday. You may also call the plan administrator’s office at (Phone Number) for assistance.”	Within 90 days after an individual becomes an eligible participant or beneficiary
Summary of material modification (SMM)	Description of changes to the information contained in the SPD, as well as any material modifications to the plan.	210 days after plan year change was made
Notices and disclosures	In addition to the above, most qualified plans are required to send certain notices and disclosures to participants on a regular basis. This requirement may include, but is not limited to, Participant Plan and Investment Fee Disclosure, Safe Harbor Notice, Qualified Default Investment Alternative Notice, Automatic Enrollment and Automatic Escalation Notice, and Universal Availability Notice.	Generally, upon enrollment and annually 30 days before the beginning of the plan year

This communication is provided for informational and discussion purposes only and is subject to change without notice. Trust services are offered through Alerus Financial, N.A., which does not offer legal or tax advice. Plan sponsors should always consult the plan’s legal counsel or tax advisor to determine how this information may impact your situation and the application of any law to your plan. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy.