401(k) Update: Q1 2022


2021 Year-End Census Information Due Now!

It’s that time again! Perhaps one of the most pressing compliance matters is the submission of census data to begin compliance testing. Sponsors of calendar-year 401(k) plans subject to the Average Deferral Percentage (“ADP”) or Average Contribution Percentage (“ACP”) Tests (i.e. all Non-Safe Harbor Plans) must submit their 2021 census data now to ensure timely results.

Be sure to submit your annual census data and compliance questionnaires to your recordkeepers by their specific deadlines. Typically, this information is due no later than January 31st, though we have seen due dates as early as January 15th. This allows the recordkeepers sufficient time to process the year-end tests and deliver results to you before March 15th, which is the deadline for employers to process corrective refunds (for failed ADP tests, if applicable) without paying a 10% excise tax. Please contact Vita Planning Group if you have questions regarding your recordkeeper’s year-end requirements.

For other important dates on the horizon, download our online Compliance Calendar.

2022 Contribution Limits1

As a reminder, the employee contribution limit for 2022 is increasing by $1,000 from last year.

Elective Deferral Limit: $20,500

Additional Catch Up Amount (age 50+): $ 6,500

Plan Document Restatement2

Approximately every 6 years, the IRS requires employer-sponsored retirement plans to update their plan documents through a process called “restating” the document. Most 401(k) and 403(b) plans use an IRS-pre-approved plan document created by their recordkeeper or third-party administrator and this cyclical process ensures that documents are updated to incorporate regulatory changes from any mandatory or voluntary amendments that may have been adopted since the last time the document was restated.

This process is owned by your plan’s recordkeeper, or third-party administrator so be on the lookout for this task over the coming months. Generally, the restatement involves providing you with the updated plan document for review and adoption (i.e. signature).

Many plans will have already completed the Plan Restatement Process; those that have not should expect to receive the restatement documents from their recordkeeper in the next few months. The deadline to restate plan documents is July 31, 2022. 

401(k) News

Retirement Plan Legislation3

There are now four bills making their way through Congress regarding retirement plans: 

  1. SECURE Act 2.0 from the Ways and Means Committee (House)

  2. RISE Act from the Education and Labor Committee (House)

  3. Retirement Security and Savings Act (Senate)

  4. Improving Access to Retirement Savings Act (Senate)

The first two House bills were passed out of their respective committees unanimously by voice vote. The last two Senate bills have not yet come out of committee.

While the details of each of these bills are different, the major areas being addressed are outlined below. 

  • Required Minimum Distributions (“RMDs”):

    • Pushing out the starting age to 75 by 2032

    • Waiving the RMD requirement for those with less than $100,000 in retirement savings

    • Reducing the penalty for not taking an RMD from 50% to 25%

  • Catch-up Contributions:

    • Increasing the amount by $3,500 (for a total of $10,000) for those over age 60

    • Requiring that all catch-up contributions be made as Roth

    • Possibility of employers matching in Roth dollars

  • Student Loan Debt:

    • Allowing employers to make retirement plan contributions for employees whose student loan repayments prevent them from participating in a retirement savings plan

  • Incentives or requirements for Automatic Enrollment are considered.

  • Mandatory eligibility of Part-time Employees who work more than 500 hours for two years consecutively is also in review.

Separately from these four bills is a provision in the Build Back Better bill, currently stalled in Congress, which eliminates the ability of retirement plan participants to convert either pre-tax or after-tax contributions to Roth, commonly known as “Backdoor Roth Conversions”.4

We will monitor the progress of the various bills currently in Congress pertaining to retirement savings plans and report back on the final provisions of any legislation. 

Market Update5

Markets in Q4 2021 were able to shake off concerns about rising inflation and the end of easy fiscal and monetary policy to finish the year strongly higher. US equity markets finished the year on a high note with the S&P 500+ up 11.03% in Q4 resulting in a rise of 28.71% for all of 2021. Even the bond markets managed a small positive return for Q4 with the up 0.01%, though the index was down 1.54% for the year. Overseas equity markets were divided between developed markets which performed well and emerging markets which struggled. Overall, the was up 6.5% for 2021 but developed markets as measured by the MSCI EAFE Index were up 11.78% for the year, emerging markets, the MSCI EM Index, was down 2.22% in 2021. Surprisingly, the best performing market sector in 2021 was US real estate. Increased post-pandemic mobility, decreasing vacancy rates and rising asset prices delivered a 39.9% return in the FTSE NAREIT Index in 2021. 

The American economy showed remarkable resilience to the outbreak of yet another COVID-19 variant recession at the end of 2021. While US GDP growth slowed in Q3 2021, recording 2.3% annualized growth, the expectation is that growth in Q4 will have accelerated to as much as 7%, annualized. If this is the case, then the economy will have reversed all of the loss to GDP due to the COVID pandemic since Q4 2019; the US economy will be right back on its 20-year growth line of 2.0% per year. Economist forecasts for the first half of 2022 are coming in at between 2.0% and 3.0%, with a return to trend line growth after that.

A tight labor market and inflation are expected to be features of the economy in 2022. The US unemployment rate in November 2021 was 4.2% and wages rose by 5.9% year-over-year. Wage growth coupled with a high level of job openings would indicate a continued tight labor market well into 2022. Inflation was recorded at 6.9% year-over-year in the Consumer Price Index, but much of that can be attributed to transitory factors: the rise of energy prices (34% rise in oil prices in November) and supply-train disruptions due to transportation bottlenecks and offline manufacturing capacity. The core PCE deflator used by the FED excludes food and energy and is running at 4.0% at the end of 2021 with expectations that it will fall to 3.0% in 2022. 

During the 2021/2022 COVID pandemic, governmental monetary and fiscal stimulus has been two to three times larger than that of the Global Financial Crisis of 2008/2009. Those policies were largely successful in preventing a sustained recession and propping up asset prices. However, 2022 should see a diminished level of government stimulus spending (e.g., the Build Back Better bill being stalled in Congress) and an end to quantitative easing. High equity valuations and bond market expectations of the Fed raising interest rates rise as early as the second half of 2022 could make it difficult to replicate the gains recorded 2022.



1) IRS 401(k) Limits

2) Third Six-Year Cycle Pre-Approved DC Plans

3) Article: Proposed Retirement System Changes

4) Article: Congress to End Backdoor Roth Conversions 

5) Unless otherwise indicated, data and commentary for the Market Update is sourced from three JPMorgan Asset Management sources: 1) Guide to the Markets – U.S. Economic and Market Update, 1Q 2022, December 31, 2021, 2) the “4Q21 Guide to the Markets Webcast” on January 3, 2022, and 3) Eye on the Market Outlook 2022, Reflation: Endgame, January 1, 2022. 


This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.

+The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock's weight in the index proportionate to its market value.

++ Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.

The Bloomberg Barclays US Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the US bond market.

The MSCI All Country World Index ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 23 Emerging Markets (EM) countries*. With 6,062 constituents, the index covers approximately 99% of the global equity opportunity set outside the US.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.

The MSCI Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 21 emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. Equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.

The Consumer Price Index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies.


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