Defined contribution plan

Financial Transaction Tax May Have Little Chance to Become Law

Firms in the financial sector were galvanized into opposition recently when Democrats in the U.S. Senate and House of Representatives introduced the Wall Street Tax Act of 2019. The legislation would impose a tax of 1/10th of 1 percent on securities or derivatives trading transactions to offset the federal budget deficit.

Sponsors include Senators Jeff Merkley (D-OR), Chris Van Hollen (D-MD), Kirsten Gillibrand (D-NY), and Brian Schatz (D-HI), and Representatives Peter DeFazio (D-OR) and Alexandria Ocasio-Cortez (D-NY).  A previous version of this legislation proposed tax credits to offset the tax effects on transactions tied to tax-favored savings accounts, such as IRAs and 401(k) plans, but there appear to be no defined offsets or exemptions for such accounts in this version of the legislation.

Although the highly controversial legislation has received significant publicity, it is given little chance of enactment in this Congress given the Republican majority in the Senate, regardless of what happens in the Democrat-controlled U.S. House of Representatives.

Tax-Related Deadline Relief Granted for Alabama Disaster Victims

The IRS has issued news release AL-2019-01, announcing an extension of time to complete certain time-sensitive tax-related acts as a result of tornadoes, storms, and straight-line wind events in Alabama. At this time, the only area to which the relief applies is Lee County, but the IRS periodically updates the disaster relief to include other areas.

News release AL-2019-01 provides that certain tax-related acts with deadlines falling on or after March 3, 2019, and on or before July 31, 2019, are extended to July 31, 2019. It notes that this extension applies to IRA contributions, as well as to the numerous time-sensitive acts described in Treasury Regulation Section 301.7508A-1(c)(1). These acts include completion of rollovers,  recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under this regulation.

This relief applies specifically to residents of the identified area, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area who is injured or killed as a result of the events is also entitled to deadline relief.

Affected taxpayers who reside or have a business located outside the covered disaster area are required to call the IRS disaster hotline at 866-562-5227 to request relief.

Senate Tax Extenders Bill Has Disaster Provisions Impacting Retirement Plans

Senate Finance Committee Chairman Charles Grassley (R-IA) has introduced the Tax Extender and Disaster Relief Act of 2019 (S. 617). The primary aim of the legislation is to extend a number of expired or expiring tax provisions, which generally are viewed as tax incentives or as offering special tax options.

This legislative vehicle is also being used to provide tax-related relief to victims of several 2018 natural disaster events. These include presidentially-declared disasters that occurred between January 1, 2018, and March 1, 2019 (this bill’s relief does not include victims of California wildfires, for whom similar relief was provided by Public Law 115-123).

The bill’s following tax relief provisions specific to retirement savings arrangements apply to distributions taken from IRAs and tax-qualified employer-sponsored retirement plans.

  • “Qualified disaster distributions” would include amounts not to exceed $100,000, received by a person whose principal residence was located in a covered disaster area and who suffered economic loss as a result.
  • Qualified distributions would include those taken on or after the first day of the covered disaster period, and before a date 180 days after enactment of this legislation.
  • The 10 percent excise tax for early distributions would not apply to qualified disaster distributions.
  • Inclusion in income of qualified disaster distributions would be done ratably over a three-year period, unless a taxpayer chose otherwise.
  • Such distributions could be repaid over a three-year period.
  • Qualified disaster distributions from employer plans would not be subject to mandatory 20 percent withholding.
  • Certain retirement plan distributions taken for purchase of a principal residence, but not used due to disaster events, could be recontributed.
  • Loan amounts up to $100,000 could be taken from an eligible employer plan.
  • Plan loan repayments following disaster events could be delayed up to one year, or 180 days after this legislation’s enactment, whichever is later; this delay would not alter loan amortization (in effect, lengthening a five-year amortization period).
  • A plan amendment necessary to comply with these provisions could be made up to, and including, the last day of the 2020 plan year, or a later date if prescribed by the Secretary of the Treasury (two years later for governmental plans).

The prospects for this legislation to be enacted are unclear at this time, due in part to differing leadership positions on whether the tax cost of these provisions must be offset with new revenues, offset with spending cuts elsewhere, or enacted without offsets. Progress of this legislation will be monitored closely, and developments reported at this News as warranted.


GAO Recommends Further Guidance for Retirement Assets Escheated to States

The U.S. Government Accountability Office (GAO) has released the findings of a survey conducted to measure the effects transfers from qualified retirement plan sponsors and IRA trustees to state unclaimed property funds.

GAO was asked to study what happens after retirement assets transfer to states and to review IRS and DOL guidance to determine steps that can be taken by either agency to improve these transactions. The survey included responses from 22 states, and a variety of 401(k) service providers and IRA trustees.

GAO found that current guidance has resulted in uneven practices across service providers and trustees. To ensure the consistent administration of benefits, GAO has made three recommendations.

  1. The IRS should clarify if transfers to states are considered distributions subject to taxation and withholding requirements.
  2. The IRS should consider whether a transfer to a state is a permissible reason to extend the 60-day rollover period.
  3. The DOL should specify under what circumstances uncashed distribution checks from active qualified retirement plans may be transferred to a state.

The IRS has responded that it will work to implement the suggestions, while DOL has stated it will consider making the changes but will need to consider input from stakeholders before doing so.

The GAO released a Fast Facts summary, highlights of its findings, and the full report.



IRA Updates Nonresident Alien Tax Withholding Publication and Tax Treaties

The IRS has released the 2019 tax year version of Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. This publication contains information on several aspects of withholding to satisfy potential tax obligations of nonresident aliens, one of which is associated with payments from retirement savings arrangements.

Such payments are subject to withholding at a 30 percent rate, unless a more favorable tax rate applies according to the tax treaty between the U.S. and the nonresident alien’s home country. To qualify for a treaty rate, the individual must provide the payor a completed Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting.

The treaty rates were formerly included in Publication 515, but are now found directly at the tax treaties page IRS website.


Rick Irace Discusses Emerging Trends from 2018

In a recent Wealth Management article, Chief Operating Officer Rick Irace discusses retirement industry trends that emerged in 2018. He mentions advisors’ transition from commission-based models to fee-based, increased utilization of auto-enrollment, the emergence of financial wellness programs, and the increased availability of Roth options in smaller plans. He also ​notes that business owners are looking for additional administrative services. “Business owners face many challenges just running their day-to-day businesses. At the same time, they want to help their employees prepare for their financial futures. Many are looking to their providers and TPAs for additional administrative services, perhaps even to take on 3(16) fiduciary responsibility,” he adds.

Rick Irace Discusses the “Quality Deficit” Among Small Retirement Plans

In a recent article published by Wealth Management, Rick Irace, chief operating officer of Ascensus retirement,  cites several points as evidence of a “quality deficit” for small  retirement plans versus their large market counterparts. As for closing this gap, Irace suggests that small business owners consider consulting with a third-party administrator (TPA). “I do think that for the sponsor that’s really concerned about administrative burdens and other things, the TPA can…step in and consult on specialized plan design. They can talk about technical details in a way that’s much easier understood for the sponsor and their employees,” adds Irace.

Washington Pulse: Familiar Retirement Reforms Already in Play in New Congress

The new 116th Congress begins with a blank slate as bills introduced in the 115th Congress have sunset with the transition. But lawmakers and Hill watchers may justifiably have a sense of déjà vu, as familiar retirement legislation has been introduced in the brief period since the new Congress convened in January. Despite the U.S. House of Representatives flipping to Democratic control in November’s midterm elections, retirement reform remains an issue where significant bipartisan support is evident, and clearly growing.

The Retirement Enhancement and Savings Act of 2019 (RESA 2019) is the latest version of a bill that has been introduced in Congress multiple times since 2016. But, despite bipartisan support the legislation has failed to advance.

RESA 2019, whose primary sponsors are Rep. Ron Kind (D-WI) and Mike Kelly (R-PA), would make many changes to the retirement saving landscape that are primarily intended to achieve three objectives: encourage more employers to offer retirement plans, and encourage greater accumulation and preservation of savings in retirement plans and IRAs

Several significant items included in the bill and intended to address the bill’s objectives are described below.

Allow Pooled Employer Plans to Encourage Offering Workplace Saving Options

More than one-third of Americans have no access to an employer-sponsored retirement plan. Often-cited obstacles for employers considering establishing a plan —especially among small to mid-size employers—are the cost, administrative responsibility, and potential fiduciary liability. One proposed remedy in RESA 2019 is enhancement of the multiple employer plan (MEP) option. MEP arrangements allow many employers to participate in a commonly-administered plan, with the flexibility to tailor provisions to their respective needs. Proponents hope this will yield economies of scale that lead to reduced cost, greater sharing of administrative burden and reduced fiduciary liability for participating employers

Past regulatory restrictions have required MEP-participating employers to have a commonality among them (e.g., common ownership, business purpose, etc.). This has greatly limited use of the MEP concept. Among other MEP enhancements, RESA would permit “open MEPs” by creating “pooled employer plans” (PEPs). PEPs would be exempt from the commonality requirement and would be required to specify a “pooled plan provider” that is the plan’s named fiduciary and plan administrator. The result could be more employers offering a retirement plan to their employees.

Lifetime Income Investments – a Solution to Outliving Retirement Savings?

In addition to the issue of workers having no workplace retirement plan, there is great concern that the savings of many will not be enough to support them through their retirement years. An often-proposed solution is greater use of so-called “lifetime income investments,” which can be used to transform accumulated savings into an income stream throughout retirees lives. Such investments, whose payout in retirement can resemble a payment stream from a defined benefit pension plan, have seen limited use in the past. A major obstacle to their use has been the concern of retirement plan sponsors over potential fiduciary liability for the soundness of the lifetime income provider.

RESA 2019’s sponsors hope to address employers’ fear of fiduciary liability. The bill would require an annual statement that projects potential lifetime income payments—using a participant’s actual accumulation—in the hope of stimulating increased saving and increased use of lifetime income products to provide a secure retirement. The legislation also offers a new fiduciary safe harbor to encourage more employers to offer these investments in their plans.

Will Tax Incentives Motivate Employers and Savers?

RESA 2019 contains several tax incentives for establishing retirement plans and for workers to save more. The maximum tax credit for small employers establishing a plan would be 10 times greater. A new credit for implementing automatic enrollment of employees would be created. All workers—or those whose spouse has earned income—would be eligible to make Traditional IRA contributions beyond age 70½.

Proposal to Eliminate Life Expectancy Payments to Nonspouse Beneficiaries Remains

While RESA’s provisions generally have been welcomed, one that is particularly complex would require most nonspouse beneficiaries of IRA and employer plan accounts to distribute them and pay any taxes owed within five years, for aggregate balances that exceed $450,000. Lesser amounts could be distributed and taxed over a beneficiary’s lifetime. This provision is included in RESA 2019—as it has been in other legislation—to raise tax revenue in order to offset various incentives and enhancements the bill contains.

And More …

RESA 2019 contains many more provisions that address a host of retirement saving issues. Some would offer greater latitude in when employer plans can be established and plan design changes made. Others would address the insolvency of the insurance program for defined benefit pension plans, limit pre-retirement leakage from plans, and make it easier to successfully terminate 403(b) plans.

For a more complete description of RESA 2019 provisions—which mirror those contained in RESA 2018—see the March, 2018, Ascensus Washington Pulse and watch News for the latest developments.

Click here for the printable version.

Congressmen Reintroduce RESA Legislation with Retirement Savings Enhancements

Representatives Ron Kind (D-WI) and Mike Kelly (R-PA) have introduced the Retirement Enhancement and Savings Act (RESA) of 2019. Versions of this legislation have been introduced in several sessions of Congress dating back to 2016, including introduction in March of 2018. In the past, this legislation has had broad bipartisan support.

RESA of 2019 includes several provisions affecting retirement, which among other things, would results in the following if enacted.

  • Greater ability for employers to participate in multiple-employer plans (MEPs)
  • Incentives for plans to offer lifetime income investments
  • Liberalized IRA provisions
  • Expanded tax credits for establishing retirement plans and implementing automatic enrollment

Watch this News for a detailed analysis on this introduced legislation.

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

Firm Receives Most “Best in Class” Awards in <$50MM Segments in PLANSPONSOR Defined Contribution (DC) Survey and Wins 2018 PLANADVISER Adviser Choice Award

Dresher, PA—Ascensus—whose technology and expertise helps 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 the under $50 million plan segments in the 2018 PLANSPONSOR Magazine Defined Contribution (DC) Survey. Overall, the firm won a total of 45 awards across the under $5 million, $5 to $25 million, and $25 to $50 million plan segments. Ascensus was also announced as a winner of the 2018 PLANADVISER Adviser Choice Award for recordkeeping services.

For 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. Major providers are rated in the various client categories they serve, and benchmark information is collected for plan sponsors to gauge their plans against their peers.

Ascensus received the following “Best in Class” recognition from PLANSPONSOR:

  • 16 awards in the under $5 million Micro Market segment;
  • 16 awards in the $5 to $25 million Small Market segment; and
  • 13 awards in the $25 to $50 million Small-Mid Market segment.

The firm received “Best in Class” status across the three market segments listed above in every possible category for Plan Administration and Sponsor Service/Support. Ascensus’ participant call centers were also recognized with top honors across all of these segments, highlighting its service team’s exceptional expertise and ability to consult with employees on their savings plans.

Ascensus has also been named a winner in the recordkeeping category of the 2018 PLANADVISER Adviser Choice Awards. The Adviser Choice Awards recognize the firms that retirement specialist advisers favor most as indicated in PLANADVISER’s annual Retirement Plan Adviser Survey. Ascensus received top rankings in the following categories:

  • Best Overall Service, Micro Plans (under $5 million)
  • Value for Price
  • Fee Structure for Plan Sponsors
  • Fee Structure for Advisers

“We’re delighted to receive this recognition from our plan sponsor clients and advisor partners,” states Rick Irace, chief operating officer of Ascensus’ retirement division. “It validates the work that we do every day to enhance our services based on their feedback.”

“These phenomenal results and the industry recognition we’ve received further strengthen our commitment to delivering the technology and expertise that our clients and their employees need to plan for the future,” concludes Irace.

Ascensus will be honored as a 2018 PLANSPONSOR DC Survey Standout and 2018 Adviser Choice Award winner at the 2019 PLANSPONSOR/PLANADVISER Excellence in Retirement Awards on March 28, 2019.

About Ascensus
Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit View career opportunities at