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Ascensus SECURE Act Video Series: Lifetime Income Disclosure

Ascensus is excited to present the SECURE Act Video Series. This multi-video series will provide a snapshot of retirement-related SECURE Act provisions, included in the Further Consolidated Appropriations Act, 2020.

For more coverage from our experts on the SECURE Act and its implications, check out our latest news.


IRS Provides Guidance for Employers to Claim Tax Credits for Emergency Paid Sick Leave Act and Expanded FMLA Payments

The IRS has posted at its website much-anticipated guidance for claiming tax credits for amounts paid by employers under the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Expanded Leave Act (Expanded FMLA), as provided in the Families First Coronavirus Response Act (FFCRA). The guidance contains 66 FAQs that cover all aspects of the tax credits.

The FFCRA was passed in response to the coronavirus pandemic and provides that employers may claim tax credits for amounts required to be paid for qualifying EPSLA or Expanded FMLA leave of absence that is taken April 1, 2020, through December 31, 2020.


Washington Pulse: New Coronavirus Law Provides Retirement Plan and Healthcare Relief

With virtually every part of the U.S. economy facing unexpected financial challenges from the coronavirus (COVID-19) pandemic, Congress has passed the largest relief package in U.S. history. Signed into law on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act is designed to assist the millions of Americans affected by the outbreak. The legislation has multiple provisions that affect retirement and health savings arrangements.

 

Retirement Savings Provisions

Most financial experts advise against using assets that have been set aside for retirement. But many individuals may have to do just that in order to supplement their income. The following provisions are intended to help individuals access their IRA and retirement plan assets and to replenish those assets later on.

  • New coronavirus-related distributions (CRDs). Individuals may withdraw up to $100,000 in aggregate from eligible retirement plans without paying the 10 percent early distribution penalty tax.
    • A CRD is defined as a distribution made on or after January 1, 2020, and before December 31, 2020, to a qualified individual, defined as
      • an individual (or the spouse or dependent of the individual) who is diagnosed with the COVID-19 disease or the SARS-CoV-2 virus in an approved test; or
      • an individual who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reduced hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Treasury Secretary.

The CARES Act clarifies that employers may rely on participants’ certification that they meet the CRD requirements.

    • An eligible retirement plan is defined as a qualified retirement plan (e.g., a 401(k) plan), 403(b) plan, governmental 457(b) plan, or an IRA.
    • CRDs will meet the retirement plan distribution requirements, as long as all distributions from one employer do not exceed $100,000.
    • Individuals may repay CRDs over three years beginning with the day following the day a CRD is made. Repayments may be made to an eligible retirement plan or IRA.
    • CRD repayments made within the three-year period will be treated as having satisfied the general 60-day rollover requirement.
    • CRDs will be taxed ratably over a three-year period, unless an individual elects otherwise.
    • Although CRDs may be rolled over, they are not considered “eligible rollover distributions” for certain purposes. Employers are not required to offer a direct rollover option. Employers are also not required to withhold 20 percent on a CRD or provide a 402(f) notice, which explains the tax and rollover options required by IRC Sec. 402(f).
  • Waiver of RMDs in—or for—2020. Financial markets have taken a hit in the wake of the coronavirus outbreak. To help savers retain more in their retirement accounts, the CARES Act waives the required minimum distribution (RMD) in 2020 for plan participants, IRA owners, and beneficiaries.
    • RMDs normally required to be taken for 2020 are waived.
    • This waiver also applies to individuals who turned 70½ in 2019 but who did not take their first RMD before January 1, 2020. In the absence of additional relief, the next RMD for those individuals must be taken by December 31, 2021.
    • For purposes of counting the five-year period for beneficiary distributions, 2020 is disregarded and one year is added to the remaining period. For example, for deaths occurring in 2019, the five-year period in which the inherited assets must be distributed will end on December 31, 2025, instead of on December 31, 2024.
    • A distribution that is taken in 2020—but that is not an RMD because of the waiver—may be rolled over to another eligible retirement plan or to an IRA within 60 days of the distribution. Though such distributions may be rolled over, they are similar to CRDs in that they are not treated by employer plans as eligible rollover distributions for purposes of the 20 percent mandatory withholding, the 402(f) notice, or the direct rollover requirements.
  • Increased maximum plan loan amount. The retirement plan loan maximum for a qualified Individual (defined as meeting the COVID-19 or SARs-CoV-2 conditions described previously) is increased to the lesser of $100,000 or 100 percent of the participant’s vested balance. This increased amount applies to loans made during the 180-day period beginning on March 27, 2020.
  • Delayed plan loan repayment date. Retirement plan loan repayment dates that occur between March 27, 2020, and December 31, 2020, can be delayed for one year, with the amortization period—including the five-year repayment deadline—adjusted accordingly.
  • Funding relief for defined benefit plans. For single-employer defined-benefit pension plans, the minimum required contributions due during 2020 can be delayed to January 1, 2021 (adjusted for interim earnings). Employers also have an option to use an alternative funding target percentage.
  • Expanded DOL authority to postpone certain deadlines. In addition to taking action in response to a disaster or terroristic threat, the DOL may now postpone certain deadlines under ERISA if a public health emergency (like the COVID-19 pandemic) occurs.
  • Amendment guidance. Plan sponsors generally must amend their retirement plans for these provisions by the last day of the 2022 plan year (government plans have an additional two years), or such other date as the Treasury Secretary may prescribe, with operational compliance during the interim period.

 

Health-Related Provisions

  • Allowable Services. Health insurance plans can pay for telehealth and remote care services without first requiring an individual to satisfy a deductible. Such payments will be deemed not to violate existing HSA requirements. This relief applies to plan years that begin on or before December 31, 2021, and promotes diagnosis and treatment while helping individuals avoid possibly risky in-person contact.
  • New qualified medical expenses. Certain medicines or products do not need to be a “prescription” to be qualified medical expenses for HSA, HRA, MSA, and health FSA purposes. The CARES Act specifically includes over-the-counter menstrual care products.

Although the CARES Act represents the largest relief package in U.S. history, there may be more to come. Government officials have stated that more relief will be available if needed. For now, the CARES Act should help many Americans get some of the financial relief that they desperately need. We are closely reviewing the CARES Act and other possible COVID-19 guidance. Visit ascensus.com for the latest information and developments.

 

 Click here for a printable version of this edition of the Washington Pulse.


IRS Announces Extension of Deadlines for 403(b) and Pre-Approved DB Plans

The IRS on Friday, March 27, announced in a website posting that it is extending the last day of the initial remedial amendment period for pre-approved and individually designed 403(b) plan documents, from March 31, 2020, to June 30, 2020. Plan sponsors will have until this June date to update their pre-approved and individually designed 403(b) plan documents. The IRS noted that existing guidance (Revenue Procedure 2019-39) specifying the earlier deadline will be modified to reflect the extension.

The IRS also noted in the same posting that it is extending from April 30, 2020, to July 31, 2020, the end of the six-year remedial amendment cycle for pre-approved defined benefit (DB) pension plans. That deadline will also apply for employers to adopt a pre-approved DB plan and—if eligible—to submit a determination letter application under the second six-year remedial amendment cycle.

The third six-year remedial amendment cycle for pre-approved DB plans will begin August 1, 2020, and end on January 31, 2025. The submission period for on-cycle, pre-approved plan opinion letter applications for the third six-year remedial amendment cycle will begin (unchanged) August 1, 2020, and end on July 31, 2021. Future IRS guidance will reflect these DB plan changes.


Ascensus Supports Small Businesses

Small businesses are the backbone of the American economy. With these businesses and their workers bearing the brunt of the hardship associated with the coronavirus (COVID-19) pandemic, it’s incumbent on the financial services industry to do whatever we can to support them. Many believe that this support will come mainly through federal relief, and that smart legislation—providing financial stimulus and other appropriate relief—will help right the ship.

But there are three ways that the financial services industry can help, as well.

1. Do all within our power to serve our clients faithfully. In this tumultuous time, our clients—along with their clients—need us more than ever. Although the vast majority of retirement industry teams are now working remotely, we must ensure that employers neither see nor feel any differences regarding the services we provide. That means continuing to fulfill our duties—such as processing payrolls accurately, responding promptly to employer and employee questions, and providing thoughtful plan design guidance—in spite of technological and social obstacles.

2. Speak with one voice to Congress and to regulatory officials, who can help employee benefits plans weather this economic storm. Even with major federal legislation recently being signed into law, we continue to advocate for individual and business relief. We can actively support further legislative and regulatory efforts to make plan operations easier for employers and more beneficial for workers. Some of the provisions we think make sense are:

  • Granting employers funding relief. Both defined contribution plans and defined benefit plans would benefit from delayed deadlines and reduced funding obligations.
  • Extending deadlines for reporting and corrections. The federal government should recognize that small businesses may find it especially difficult to meet deadlines for certain required annual reporting. Deadlines should be extended and penalties for late reports should be lessened, especially in light of recent increases under the SECURE Act.
  • Making hardship and coronavirus-related distributions easier for employers to process. If employers allow their participants to distribute their plan assets on account of hardship or coronavirus expenses, they should be able to expedite the payment—and then gather proof of the expenses later.
  • Advocating for financial relief for workers.
    • Relax loan repayments. Employees who struggle to repay plan loans during this crisis should be given some reprieve to avoid a downward financial spiral.
    • Remove the 10% early distribution penalty. This penalty should be eliminated for hardship distributions and for expenses related to the COVID-19 outbreak.
    • Waive 2020 required minimum distributions (RMDs). Without a waiver, individuals would have to take distributions based on valuations that occurred before the markets declined, resulting in disproportionately high RMDs. Individuals who have already taken 2020 RMDs should be allowed to roll over such distributions in the event that a 2020 RMD waiver is enacted.

Already, our efforts have helped several relief provisions—including the 2020 RMD waiver noted above and an extended plan amendment deadline—become part of a bill that was just enacted. The provisions listed above represent just a few of Ascensus’ advocacy efforts that are intended to assist those employers, employees, and service providers adversely affected by the COVID-19 outbreak.

3. Support the long-term success of workplace retirement plans. As we all know, many small business owners have overcome financial and administrative obstacles to offer retirement benefits to employees. Now—of all times—we should help these businesses maintain their plans through this financial downturn. The president has just signed into law a massive relief bill, which includes a number of beneficial retirement plan provisions. But this is just the start of a longer-term effort to guide our clients through the many questions and concerns they will have about implementing all the new rules. We still have a monumental responsibility to push for effective relief from the IRS and other federal agencies that will interpret the new statutes.

Our industry shouldn’t lose sight of the importance of facilitating long-term retirement savings—by serving our constituents faithfully, by pushing for specific federal retirement plan relief, and by giving our clients tools to stay in their plans for the long run.

Our country will eventually emerge from this situation stronger than ever. If historical patterns hold true, financial markets will also rebound. When that happens, businesses that have maintained their plans—and workers who have allowed their retirement savings to go untouched—will be in a position to see that their retirement goals are intact and on the road to recovery.

This is why financial services firms must do their part to reinforce and sustain the employers and workers that have helped keep our economy vital for so long.

Legislative and regulatory information contained in this piece will be refreshed as events continue to unfold. Please check back regularly for updates.


House Passes Senate’s Coronavirus Response Bill Unchanged, President Trump Signs Into Law

The House of Representatives today passed—by an expedited procedure—the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was passed by the Senate late on Wednesday, March 25. This afternoon, President Trump signed the legislation into law.

The CARES Act has many elements intended to aid businesses and workers, and to assist the U.S. healthcare system in dealing with the coronavirus (COVID-19) pandemic. As noted in a prior announcement, it also contains the following key provisions that would affect retirement savings arrangements, health savings accounts (HSAs), Archer medical savings accounts (MSAs), health reimbursement arrangements (HRAs), and health flexible spending arrangements (FSAs).

 

Retirement Savings Provisions

  • (As originally drafted, this legislation extended the income tax return filing deadline from April 15, 2020, to July 15, 2020. Prior to its enactment, however, the Treasury Department issued guidance extending the deadline and clarified other acts that are extended—including the ability to make IRA, HSA, and certain employer plan contributions—to July 15 for tax year 2019.)
  • Up to $100,000 in coronavirus-related distributions (CRDs) can be withdrawn by an individual from eligible retirement plans. These distributions will be exempt from the 10 percent early distribution penalty tax.
    • A CRD is defined as any distribution made on or after January 1, 2020, and before December 31, 2020, to a qualified individual, defined as
      • an individual (or the spouse or a dependent of that individual) who is diagnosed with COVID-19 or SARS-CoV-2 in an approved test; or
      • an individual who suffers related adverse financial consequences, or suffers from other factors as determined by the Secretary of the Treasury.

Plan administrators can rely on plan participants’ certification that they meet these requirements.

    • An eligible retirement plan is defined as a qualified retirement plan (e.g., a 401(k) plan), 403(a) plan, 403(b) plan, governmental 457(b) plan, or an IRA.
    • CRDs will be treated as meeting retirement plan distribution requirements, so long as all distributions from one employer—including members of a controlled group—do not exceed $100,000 to an individual.
    • There will be a three-year repayment period beginning the day after distribution, during which one or more repayments may be made, not to exceed, in aggregate, the amount distributed. Taxpayers can recontribute these amounts to an eligible retirement plan or IRA.
    • CRDs that are recontributed within the three-year period will be treated as having satisfied the general 60-day rollover requirement.
    • CRDs will be taxed ratably over a three-year period, unless an individual elects otherwise.
    • CRDs are not considered statutory “eligible rollover distributions” for purposes of 20 percent mandatory withholding, the notice provided to recipients of distributions eligible for rollover (i.e., “402(f) notice”) and direct rollover requirements (but do remain eligible for rollover).
  • The retirement plan loan maximum for a qualified individual (defined as meeting the COVID-19 or SARs-CoV-2 conditions described above) will increase to the lesser of $100,000, or 100 percent of a participant’s vested balance.
    • Retirement plan loan repayment dates that occur between the date of enactment and December 31, 2020, can be delayed for one year. Due dates of subsequent payments (payments after those that may be delayed one year) and the five-year amortization period will be adjusted accordingly.
  • Plan sponsors will generally be required to amend their retirement plans for these provisions by the last day of the 2022 plan year (government plans will have an additional two years), or such other date as the Secretary of the Treasury may prescribe, with operational compliance during the interim period.
  • Individuals, including beneficiaries, will not be required to take their 2020 required minimum distributions (RMDs) from their defined contribution plans or IRAs. This RMD waiver would also apply to individuals who turned 70½ in 2019 but did not take their RMD before January 1, 2020).
  • The 2020 year will not be counted for purposes of a five-year payout period for a beneficiary. (This provision will not alter a required beginning date for years after 2020.)
  • Single employer defined benefit pension plan minimum required contributions due during 2020 can be delayed to January 1, 2021 (adjusted for interim earnings). This provision will also provide an option to use an alternative funding target percentage.
  • This legislation adds “public health emergency” to those events that allow the Department of Labor to postpone certain deadlines governed by ERISA Section 518.

Health Savings Arrangement-Related Provisions 

  • For plan years before 2022, health insurance plans can pay for telehealth and remote care services without first satisfying HSA-qualifying deductible conditions.
  • A medicine or drug need not be obtained by prescription to be a qualified medical expense for HSA, HRA, MSA, and health FSA purposes. This includes over-the-counter menstrual care products.

Further developments, including any clarifying guidance issued by the IRS or other governing agencies, will be shared on ascensus.com.

 


Senate Approves Massive Coronavirus Response Bill, with Significant Retirement Savings and Health Elements

On Wednesday night, March 25, shortly before midnight, Eastern Time, the U.S. Senate cleared lingering objections of both Democrat and Republican members and unanimously passed H.R. 748, the Coronavirus Aid, Relief and Economic Security, or CARES Act. The legislation has many elements intended to aid businesses and workers, and assist the U.S. health care system in working through the coronavirus (COVID-19) pandemic. It also contains multiple provisions that would affect retirement savings arrangements, health savings accounts (HSAs), Archer medical savings accounts (MSAs), health reimbursement arrangements (HRAs), and flexible spending arrangements (FSAs).

The next move is up to the U.S. House of Representatives, where a strategy known as “unanimous consent” could speed up passage of the legislation there, resulting in quicker delivery to President Trump for his signature. If there are objections to that strategy by House members, that body—currently in recess—may have to be recalled to the Capitol for a vote. Following are key provisions that would impact tax-favored retirement and health savings arrangements.

Retirement Savings Provisions

  • This legislation would extend the income tax return filing deadline from April 15, 2020, to July 15, 2020. (The Treasury Department has already extended the deadline as described above and clarified other acts that are extended as a result—including the ability to make IRA, HSA, and certain employer plan contributions by July 15 for tax year 2019.)
  • Up to $100,000 in coronavirus-related distributions (CRDs) could be withdrawn by an individual from eligible retirement plans. These distributions would be exempt from the 10 percent early distribution penalty tax.
    • A CRD is defined as any distribution made on or after January 1, 2020, and before December 31, 2020, to a qualified individual, defined as
      • an individual (or the spouse or a dependent of that individual) who is diagnosed with COVID-19 or SARS-CoV-2 in an approved test; or
      • an individual who suffers related adverse financial consequences, or suffers from other factors as determined by the Secretary of the Treasury.

Plan administrators could rely on plan participants’ certification that they meet these requirements.

    • An eligible retirement plan is defined as a qualified retirement plan (e.g., a 401(k) plan), 403(a) plan, 403(b) plan, governmental 457(b) plan, or an IRA.
    • CRDs would be treated as meeting retirement plan distribution requirements, so long as all distributions from one employer—including members of a controlled group—do not exceed $100,000 to an individual.
    • There would be a three-year repayment period beginning the day after distribution, during which one or more repayments may be made, not to exceed, in aggregate, the amount distributed. Taxpayers could recontribute these amounts to an eligible retirement plan or IRA.
    • CRDs that are recontributed within the three-year period will be treated as having satisfied the general 60-day rollover requirement.
    • CRDs would be taxed ratably over a three-year period, unless an individual elects otherwise.
    • CRDs are not considered statutory “eligible rollover distributions” for purposes of 20 percent mandatory withholding, the notice provided to recipients of distributions eligible for rollover (i.e., “402(f)” notice) and direct rollover requirements (but do remain eligible for rollover).
  • The retirement plan loan maximum for a qualified individual (defined as meeting the COVID-19 or SARs-CoV-2 conditions described above) would increase to the lesser of $100,000, or 100 percent of a participant’s vested balance.
    • Retirement plan loan repayment dates that occur between the date of enactment and December 31, 2020, could be delayed for one year. Due dates of subsequent payments (payments after those that may be delayed one year) and the five-year amortization period would be adjusted accordingly.
  • Plan sponsors would generally be required to amend their retirement plans for these provisions by the last day of the 2022 plan year (government plans would have an additional two years), or such other date as the Secretary of the Treasury may prescribe, with operational compliance during the interim period.
  • Individuals would not be required to take their 2020 required minimum distributions (RMDs) from their defined contribution plans or IRAs. This RMD waiver would also apply to individuals who turned 70½ in 2019 but did not take their RMD before January 1, 2020).
  • The 2020 year would not be counted for purposes of a five-year payout period for a nonperson beneficiary. (This provision would not alter a required beginning date for years after 2020.)
  • Single employer defined benefit pension plan minimum required contributions due during 2020 could be delayed to January 1, 2021 (adjusted for interim earnings). This provision would also provide an option to use an alternative funding target percentage.
  • This legislation would add “public health emergency” to those events that would allow the DOL to postpone certain deadlines governed by ERISA Section 518.

Health Savings Arrangement-Related Provisions 

  • For plan years before 2022, health insurance plans could pay for telehealth and remote care services without first satisfying HSA-qualifying deductible conditions.
  • A medicine or drug need not be prescribed to be a qualified medical expense for HSA, HRA, MSA, and health FSA purposes. This includes over-the-counter menstrual care products.

Further progress of this legislation will be monitored and developments shared on ascensus.com

 


Dan Basile Shares Best Practices for Fostering Engagement with Financial Wellness Programs

In a PLANSPONSOR webcast​ presented on March 25, Dan Basile, Ascensus’ head of retirement product, shared perspective on tactics employers can leverage to foster employee engagement with their financial wellness offerings. He encourages employers to utilize multi-channel communications tactics and to identify employee advocates who can act as champions of the program to their colleagues.

He also shared insight on why Ascensus chose to partner with Financial Finesse and how we’ve incorporated their wellness tools and services into our core retirement plan product to ensure employees across businesses of all sizes could access the tools and education they need to chart a personalized savings strategy. Watch a full recording of the webcast here​.