News

Ascensus Receives Top Honors for Exceptional Support from Retirement Plan Sponsors and Advisors

Firm Receives Most Best in Class Awards in <$50MM Segments in PLANSPONSOR Defined Contribution (DC) Survey and Wins 2019 PLANADVISER Adviser Choice Award

Dresher, PA—Ascensus—whose technology and expertise help millions of people save for retirement, education, and healthcare—is pleased to announce that it has received the most Best in Class Awards among all providers for plan segments up to $50 million in the 2019 PLANSPONSOR Magazine Defined Contribution (DC) Survey. This marks the second consecutive year that the firm has received the most overall awards for those retirement plan size segments. Overall, Ascensus won a total of 56 awards across the under $5 million, $5 to $25 million, and $25 to $50 million plan segments.

For over two decades, PLANSPONSOR’s annual DC Survey has been a significant retirement industry benchmark, measuring and evaluating 401(k) and other DC providers according to feedback from their own plan sponsor clients. “Plan sponsors rate their providers by category, and those ratings are compared to benchmarks to establish ‘Best in Class’ standards.”

Ascensus received PLANSPONSOR Best in Class recognition in the following categories:

  • 15 Awards for Technology;
  • 15 Awards for Plan Administration;
  • 9 Awards for Communication and Education;
  • 9 Awards for Sponsor Service/Support; and
  • 8 Awards for Investments and Fees.

The firm received Best in Class status for all plan segments up to $50 million in every possible category for Plan Administration and Sponsor Service/Support. The firm’s participant and plan sponsor websites also achieved “Best in Class” status across all of these segments, demonstrating that Ascensus’ approach to digital experiences continues to meet the needs of savers and employers. In 2019, Ascensus received nine more “Best in Class” awards in the $25 to $50 million plan segment relative to 2018, reflecting an added investment in products and services for growing businesses.

“We’re thrilled to see that our flexible, scalable service model and leading technology have enabled us to achieve notable recognition from both our small and mid-sized plan sponsor clients,” states Shannon Kelly, head of Ascensus’ retirement line of business. “Through our WellBusiness framework, we will continue to focus on providing value-add services and support that promote plan and overall business health for employers of all sizes.”

Ascensus has also been named a winner in the recordkeeping category of the 2019 PLANADVISER Adviser Choice Awards. The Adviser Choice Awards recognize the firms that retirement specialist advisors favor most as indicated in PLANADVISER’s annual Retirement Plan Adviser Survey. Ascensus received top rankings in the following categories:

  • #1 for Fee Clarity, Accounting, Disclosure, Benchmarking
  • #2 for Best Overall Service, Micro Plans (under $5 million)

“We’re delighted to receive this recognition from our plan sponsor clients and advisor partners,” states Rick Irace, chief operating officer of Ascensus’ retirement line of business. “These phenomenal results validate that our expert service and technology continue to deliver on our purpose to help clients and their employees save for a more secure retirement.”

Ascensus will be honored as a 2019 PLANSPONSOR DC Survey Standout and PLANADVISER Adviser Choice Award winner at the 2020 PLANSPONSOR/PLANADVISER Excellence in Retirement Awards on March 26, 2020.

 

About Ascensus
Ascensus helps millions of people save for what matters—retirement, education, and healthcare. Our market insights and business knowledge enhance the growth and success of our partners, their clients, and savers. Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. For more information, visit ascensus.com. Explore the Ascensus’ latest data and insights on savings behaviors at pulse.ascensus.com and view career opportunities at careers.ascensus.com.


Reporting Relief Provided in Light of SECURE Act’s RMD Age Change

The IRS has issued Notice 2020-6, guidance that addresses required minimum distribution (RMD) reporting by IRA custodians, trustees, and issuers. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, contained within the broader Further Consolidated Appropriations Act (FCAA), 2020, altered the age when IRA owners must begin taking mandatory annual distributions, or RMDs. Under a provision of the SECURE Act, those who reach age 70½ in 2020 or a later year can delay beginning RMDs until age 72. Those who reached age 70½ in 2019 or earlier years must continue taking annual RMDs.

IRA custodians, trustees, and issuers are required to inform IRA owners by January 31 if an RMD is required to be taken by them for that year. Because of the timing of the FCAA’s enactment in December of 2019, IRA processing and reporting systems may still be programmed to inform account owners turning 70½ in 2020 that an RMD is required to be taken for this year. This information would be incorrect, as these individuals are not required to begin receiving RMDs from their IRAs until they reach age 72. This would constitute a reporting failure by the IRA custodian, trustee, or issuer.

Notice 2020-6 informs these financial organizations that they will be granted relief for such reporting errors, if—by April 15, 2020—they inform affected IRA owners that no RMD is due for 2020. For IRA owners turning age 70½ in 2020, an IRA custodian, trustee, or issuer reporting information to the IRS on the 2019 Form 5498, IRA Contribution Information, should not include a check in Box 11, Check if RMD for 2020, or make entries in Boxes 12a, RMD date, or 12b, RMD amount.

The IRS further notes that it is “considering what additional guidance should be provided … including guidance for plan administrators, payors and distributees if a distribution to a plan participant or IRA owner who will attain age 70½ in 2020 was treated as an RMD.”

Not addressed in this guidance is whether an IRA owner (or plan participant) who receives such a distribution would be granted an extended period of time—beyond 60 days—to complete a rollover of the distributed amount back into a tax-qualified savings arrangement.


Rick Irace Shares Thoughts on the Outlook for Retirement Savings in 2020

In a recent WealthManagement.com article​​, Rick Irace, COO of Retirement, shares his thoughts on potential developments that retirement plan consultants should monitor through 2020. As always, plan consultants should keep up with the latest issuances from the Department of Labor, the SEC, and other government agencies. 2020 is also an election year, which means “it’ll be interesting to see what—if any—changes to the retirement plan landscape are discussed.” Advanced analytics are continuing to gain more and more prominence among plan sponsors and service providers, alike, which should advance the ability to forecast retention, gauge plan effectiveness, expand data points, and improve services.


Retirement Spotlight: January 2020 Spotlight on Important SECURE Act Provisions For Financial Advisors

The new year promises to provide plentiful opportunities for financial advisors to gain business and to demonstrate expertise to existing clients. As you likely know, the SECURE Act was signed into law on December 20, 2019. Many of the Act’s provisions took effect on January 1, 2020. Most of them offer real benefits to your clients; other provisions may not be as helpful, but you still need to understand them to provide the best service possible. This Retirement Spotlight focuses on a half-dozen SECURE Act provisions that will make the most significant impact on your retirement plan practice.

Let’s start with three provisions that you will most certainly get questions on.

  1. Traditional IRA owners can now contribute after age 70½. Since they were first available in 1998, Roth IRAs could receive contributions from individuals over 70½ provided that they were otherwise eligible. That is, Roth IRA owners had to have earned income—but not too much Now Traditional IRA owners will enjoy the same benefit. Your clients that continue to work—or that have working spouses—will be able to contribute even after they reach age 70½.

    More of your clients may be working well past the “normal retirement age”; now they can also keep contributing to their Traditional IRAs. Even though they may have to take required minimum distributions at the same time that they contribute to their IRAs, there is a good chance that they will be able to contribute more than they have to distribute each year. So this provision is a great way for your clients to ensure that they have sufficient retirement assets once they stop working.

  2. Traditional IRA required minimum distributions (RMDs) will now start at age 72. Not only can your clients make Traditional IRA contributions past age 70½, but now they can begin taking RMDs later. If your clients turn age 70½ in 2020 or later, they now can wait until age 72 to begin taking RMDs. Specifically, they will have until April 1 of the year following the year they turn 72 to take their first RMD. This year-and-a-half delay is not necessarily the big relief that some in the retirement industry had hoped for. But this change certainly provides some benefit.

    Based on increased life expectancies over the past several decades, Congress could have increased the starting age to 75 or later. There are, however, significant revenue implications for any delay in the RMD starting date. So this age-72 requirement was a bit of a compromise. The important thing to remember is this: if your client already turned age 70½ by the end of 2019, then RMDs cannot be delayed under the new rule. In other words, all of your clients born on or before June 30, 1949, are subject to the old rule, which makes the 70½ year the first distribution year.

  3. “Stretch IRAs” as we now know them are disappearing. For decades, IRA and qualified retirement plan (QRP) beneficiaries were able to take death distributions over their life expectancies. For example, a 20-year-old grandchild could distribute a grandparent’s IRA balance over 63 years. But now this generous provision has been altered to require faster distributions (generally over a 10-year time frame), which is designed to increase federal revenue. Nonspouse beneficiaries of account owners who die on or after January 1, 2020, are subject to this new rule, unless they are
    • disabled individuals,
    • certain chronically ill individuals,
    • beneficiaries who are not more than 10 years younger than the decedent’s age,
    • minor children of the decedent (they must begin a 10-year payout period upon reaching the age of majority), or
    • recipients of certain annuitized payments begun before enactment of the SECURE Act.

    We expect that this change to the distribution rules will create considerable confusion for clients. They may be subject to two separate sets of beneficiary distribution rules, depending on the date of the account owner’s death. Some beneficiaries, such as spouses, will have the same options that we are familiar with; many others will face an accelerated payout. It may take time for the industry to sort through the many questions that will arise. And we may have to wait for definitive guidance from the IRS. But meanwhile, you can assure your clients that, while the beneficiary rules for both IRAs and QRPs have changed considerably, no immediate action is needed.

  4. The second group of changes involves employer-sponsored retirement plans and not IRAs specifically. Still, each of them could provide potential benefits to your clients.

  5. Employers may adopt a qualified retirement plan (QRP) up until their tax return due date, plus extensions. If you have clients that are also business owners, you have probably been asked at year end, “What can I do to reduce my tax burden?” For employers without a retirement plan, establishing such a plan can be a great idea. But QRPs were generally required to be adopted by the end of the employer’s tax year. (SEP and SIMPLE IRA plans have different deadlines.) Trying to quickly establish a new plan at year-end could cause unwanted stress and could lead to hasty decisions and compliance problems. Starting with 2020 tax years, employers may establish a QRP by their tax return due date, plus extensions. For example, unincorporated business owners could establish a plan for the 2020 tax year until October 15, 2021, if they have a filing extension.

    This new rule aligns the deadline for QRP establishment with the current SEP IRA plan adoption deadline. And though we still expect that some of your client employers will wait until the last minute to act, at least this new provision gives them more flexibility and options. Keep in mind, however, that salary deferrals must be made prospectively. So establishing a 401(k)-type “cash or deferred arrangement” will not allow plan participants to defer salary or wages that they have previously earned.

  6. Safe harbor 401(k) plans now have more contribution flexibility. Businesses with employees sometimes struggle to pass certain 401(k) testing requirements. Simply stated, plans are generally not allowed to provide highly compensated employees (including owners) with benefits that disproportionately favor them over the nonhighly compensated employees. One such test compares the salary deferrals of these two groups. To pass this test, owners (especially) often end up with much smaller deferrals than they would like. Fortunately, a “safe harbor” 401(k) provision deems this test to be passed, but only if the plan guarantees a healthy matching or nonelective contribution for rank-and-file employees. Unfortunately, detailed notification and timing requirements made these safe harbor provisions less than user friendly. For example, under one scenario, an employer could have made a three percent nonelective contribution in order to pass the nondiscrimination test—but only if the employer had notified employees, before the plan year started, that she might make this contribution to pass the test. In addition, the employer would have had to amend the plan before 30 days of the plan year end in order to take advantage of the testing relief. Now, employers can get the same testing relief, without a “pre-notice” and with substantially more time to amend the plan: instead of amending before the end of the current plan year, employers can amend their plan up until the end of the following plan year end if they make a four percent contribution to all eligible employees rather than a three percent contribution.

    All of this is to say that employers now can enjoy much more flexibility when they adopt a safe harbor 401(k) plan. By some credible estimates, 30-40% of 401(k) plans that cover employees (in addition to owners) use this safe harbor feature. Making compliance easier for these plans—and for yet-to-be-adopted plans—is a great benefit. And learning more details about this provision will help you better serve your clients.

  7. Tax credits for small employers may help jump-start retirement plans. The SECURE Act provides two tax credits for small employers: one provision gives a $500/year startup credit for new 401(k) or SIMPLE IRA plans that include an automatic enrollment provision; another provision increases a startup credit (up to $5,000) for any small employer that adopts a qualified plan, SEP, or SIMPLE plan. Both credits are available to employers for three tax years, beginning with the start-up year. While these incentives may not—in and of themselves—convince an employer to adopt a retirement plan, they may take some of the financial sting out of the decision and prove that Congress is serious about increasing retirement plan coverage in America. Letting your clients know about these helpful tax credits can solidify your value in their eyes.

These six new provisions are likely to get a fair amount of coverage in the mainstream media and in the retirement industry. This Retirement Spotlight should help you discuss these changes more effectively with your clients. But keep in mind that the SECURE Act contains the most significant retirement plan changes in 15 years. There are many other provisions that affect IRAs and QRPs—and there are many questions that have already arisen about specific provisions and how certain changes should be implemented. As federal guidance is released, Ascensus will continue to share thoughtful analysis and practical insights.

 

Click here for a printable version of this issue of the Retirement Spotlight


IRS Updates Determination Letter and VCP Submission Information

The IRS has issued Revenue Procedure (Rev. Proc.) 2020-4, which updates 2019 guidance on determination letter and Voluntary Correction Program (VCP) submission procedures. Changes from the prior year Rev. Proc. 2019-4 include the following.

Section 3.04 is revised to state that a determination letter issued regarding the qualified status of a retirement plan will include a determination on the exempt status of any related trust or custodial accounts (does not include an adopting employer of a pre-approved plan).

Section 3.06(2) is revised to change an “Appeals Office” reference in Rev. Proc. 2019-4 to now read “Internal Revenue Service Office of Appeals (Independent Office of Appeals),” with corresponding changes made throughout Rev. Proc. 2020-4.

Section 6.02 is revised to provide a list of applicable documents that should be submitted to enable the Service to more efficiently process determination letter requests.

Section 8.02 notes that determination letter requests for certain hybrid (defined contribution and defined benefit) plans will be accepted through August 31, 2020, and certain individually designed merged plans on an ongoing basis.

Section 9.07 removes a former cautionary statement that a favorable determination for a plan executing a de-risking of its pension obligations by lump sum distribution does not constitute a determination of federal tax consequences.

Sections 30.07 and 31.03 are revised to note that user fees under VCP must be paid electronically using www.pay.gov, and that the Service no longer accepts paper VCP submissions.

Section 31 is revised to update mailing addresses.


Senators Cruz, Braun Introduce Legislation to Expand HSAs

Senators Ted Cruz (R-TX) and Mike Braun (R-IN) have announced the introduction of the Personalized Care Act of 2019. The legislation is intended to make health savings accounts (HSAs) accessible to more Americans, and to enhance HSA provisions. (This legislation has not yet been posted to the official congressional website. The provisions listed below are based on legislative text provided by the office of Sen. Cruz.)

The legislation as released by the senators would do the following.

  • End the restriction that requires health coverage only by a high-deductible health plan (HDHP) in order to make HSA contributions.
  • Permit those participating in Medicare and certain other health care financing programs to contribute to HSAs.
  • Permit use of HSA assets to pay health insurance premiums.
  • Allow HSA assets to be used for direct primary care and certain other direct medical care arrangements.
  • Increase maximum annual HSA contribution limits from $3,550 (2020) to $10,800 for those with individual insurance coverage, and from $7,100 (2020) to $29,500 for those with family coverage.
  • Expand HSA qualified medical expense coverage of over-the-counter (OTC) medicines.
  • Allow HSAs to pay the costs of participation in certain health care sharing ministries.
  • Reduce penalties for use of HSA assets for certain nonqualifying expenses.