Defined contribution plan

House Bankruptcy Bill Would Impact Retirement Plans

H.R. 7370, the Protecting Employees and Retirees in Business Bankruptcies Act of 2020, has been introduced by Rep. Jerrold Nadler (D-NY). This bill would modify provisions related to Chapter 11 bankruptcy, including expanding claims and priorities for payment of benefits for employees and retirees, and protections related to reduction or denial of benefits.

Specifically, H.R. 7370 would do the following

  • increase the avenues by which retirement and employee health and welfare benefit plans could be funded after the filing of bankruptcy;
  • discourage the reduction or elimination of employee benefit and retirement plans by employers in bankruptcy;
  • allow those who hold employee stock in a retirement plan to potentially recover losses caused by fraud or breach of fiduciary duty; and
  • prevent employers from later rewarding insiders, executives, and highly paid employees if employee benefits are reduced in bankruptcy.

H.R. 7370 currently resides with the House Committee on the Judiciary, which has held a mark-up session on the bill.


Prospects Questionable for New House of Representatives Pandemic Relief Bill

The House of Representatives on Monday released text of a revised coronavirus (COVID-19) pandemic relief bill, expected to be voted on this week before the House recesses for pre-election campaigning. The bill is based on the previously introduced HEROES Act.

However, the legislation substantially exceeds the level of assistance and cost that the GOP-controlled Senate and the Trump administration have expressed willingness to support. House passage of this estimated $2.2 trillion proposal is seen by some as potentially providing incumbents up for reelection with campaign talking points even if the bill is not taken up in the Senate.

In addition to general provisions that include financial aid to state and local governments and schools, direct cash payments to taxpayers, extended unemployment benefits, and aid to struggling employers, the bill contains the following benefits-related provisions.

  • Targeted small business loan relief and other revisions of the Paycheck Protection Program
  • Coverage for COVID-19-related treatment with no cost sharing
  • Amendments to the Emergency Paid Leave Act
  • Relief for struggling union pension plans
  • Relief for single-employer pension plans
  • Extension of the deadline to roll over waived 2019 and 2020 RMDs
  • Clarification of the CARES Act’s application to money purchase pension plans
  • Grants to assist low-income women and victims of domestic abuse in obtaining QDROs
  • Technical corrections to SECURE Act provisions regarding funding for community newspaper pension plans
  • Creation of a union “composite plan” consisting of 401(k) and defined benefit plan provisions

IRS Issues Final Regulations on Default Withholding Rate for Periodic Retirement Plan Distributions

The IRS has issued a pre-publication version of final regulations on the default tax withholding rate to be applied to periodic and annuitized distributions from retirement plans. These final regulations are a response to Internal Revenue Code changes contained in the Tax Cuts and Jobs Act (TCJA), legislation enacted in 2017, and provide guidance for 2021 and future calendar years.

Prior to the change, in the absence of a withholding election, the amount to be withheld on a periodic payment was determined by treating the taxpayer as a married individual who had claimed three withholding exemptions. TCJA amended this provision to eliminate this fixed formula, providing flexibility such that—in the absence of a withholding election—the rate of withholding on periodic payments (the default rate) would instead be determined under rules prescribed by the Secretary of the Treasury.

Comments received after these regulations were issued in proposed form included the suggestion that a 10 percent flat rate of withholding apply rather than the default married-with-three-exemptions formula, but that any change to current rules not apply before 2022.

These final regulations align with TCJA in specifying that rules and accompanying procedures for future years’ periodic distributions will be communicated in applicable IRS forms, instructions, publications, or other guidance. However, they also note that—for 2021—the rate for withholding on period distributions when no election is made will remain unchanged. That is, the rate for 2021 will be applied as if the recipient is married and has claimed three exemptions.


IRS Announces Deadline Relief for Alabama Victims of Hurricane Sally

The IRS has announced in News Release AL-2020-02 an extension of deadlines for completing certain time-sensitive tax-related acts for Alabama victims of Hurricane Sally. In addition to extending certain tax filing and tax payment deadlines, the relief also includes completion of many acts under Treasury Regulation 301.7508A-1(c)(1), such as completion of rollovers, making loan payments, filing Form 5500, etc.

Affected taxpayers with a covered deadline that is on, or after, September 14, 2020, and on, or before January 15, 2021, will have until January 15, 2021, to complete the act. Affected taxpayers automatically include those who reside, or have a business located, within the designated disaster area, which at this time includes Baldwin, Escambia, and Mobile counties. Affected taxpayers who reside or have a business outside the covered disaster area may contact the IRS at 866-562-5227 to request this relief.


NAPA Names Two Ascensus Regional Vice Presidents to 2020 100 Top Defined Contribution (DC) Wholesalers List

Bryan Bracchi, AIF® and Yen Nguyen Recognized as Leading DC Wholesalers, as Voted on by Thousands of Retirement Plan Advisors

Ascensus—whose technology and expertise help millions of people save for retirement, education, and healthcare—announced that two regional vice presidents, Bryan Bracchi, AIF® and Yen Nguyen, have been named to the seventh annual list of NAPA 100 Top Defined Contribution (DC) Wholesalers by the National Association of Plan Advisors (NAPA).

Bracchi serves financial advisors and retirement plan clients within the Northern Texas region, including northern Texas and Oklahoma. Nguyen oversees the Southern Texas region, including south Texas and Louisiana.

The finalists for this year’s list, which recognizes the top recordkeeping and Defined Contribution Investment Only (DCIO) external wholesalers, were selected by thousands of retirement plan advisors from a list of hundreds of wholesalers nominated by NAPA Firm Partner recordkeepers and DCIOs.

“We congratulate Bryan and Yen for being named among NAPA’s Top DC Wholesalers,” says Jason Crane, head of retirement distribution at Ascensus. “Receiving this recognition

from the financial advisors we support affirms Ascensus’ commitment to attracting and retaining highly talented and dedicated professionals, as well as our focus on offering independent solutions that enable these advisors’ unique value propositions.”

“Our capable associates across the organization will continue to raise the bar to help ensure that Ascensus remains an essential partner to this critical audience,” concludes Crane.

The complete 2020 100 Top DC Wholesalers list is available on NAPA Net and will be published in the fall issue of NAPA Net the Magazine.

About Ascensus
Ascensus helps millions of people save for what matters—retirement, education, and healthcare. Through co-branded, private-labeled, and other governmental partnerships, our technology, 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.

Get the latest trends and insights based on our proprietary data from more than 115,500 retirement plans, 6.2 million 529 accounts, 405,000 health savings accounts, and 22 ABLE plans.* Inside America’s Savings Plans highlights average savings levels across these tax-advantaged accounts and showcases plan features that drive participation and growth. The State of Savings report outlines how plan contribution and withdrawal behaviors have shifted over the course of 2020 and since the passage of the CARES Act.

*As of June 30, 2020.


DOL Proposes Rule to Clarify Employee or Independent Contractor Status

The Department of Labor (DOL) Wage and Hour Division has issued a news release and a notice of proposed rulemaking, the latter of which the agency states is intended to clarify “the definition of ‘employee’ under the Fair Labor Standards Act (FLSA) as it relates to independent contractors.” The DOL sees this action as streamlining and providing consistency to the process by which a worker’s status is determined to be that of an “employee” or an “independent contractor.” This determination is of both regulatory compliance importance and worker tax status.

The proposed rule employs an “economic reality” test, which considers whether a worker is in business for himself or is economically dependent on an employing entity. It also considers the degree of control an individual has over his work, and the opportunity for individual profit or loss.

The proposed rule takes into account skills required, permanence of relationship, and the degree to which an individual’s output is integrated into other elements of the enterprise’s products or services. It also advises that actual work practices are of greater significance than a contractual arrangement when determining “employee” or “independent contractor” status.

Public comments will be accepted for a 30-day period beginning when the notice of proposed rulemaking is published in the Federal Register.

 


IRS Extends Tax Filing and Payment Deadlines for Oregon Wildfire Victims

The IRS has issued news release IR-2020-215, announcing a tax filing and payment deadline extension for certain persons and businesses affected by recent wildfires and straight-line winds that began September 7, 2020, in the state of Oregon.

The relief postpones tax filing and payment deadlines that occurred starting on September 7, 2020. As a result, affected individuals and businesses will have until January 15, 2021, to file returns and make certain payments that were originally due during this period.

The news release specifically notes that affected individuals or businesses with an extended tax return filing deadline of October 15, 2020, will have until January 15, 2021, to complete those tax filings. Certain actions that are tied to a tax filing deadline, like establishing a simplified employee pension (SEP) plan, or making certain employer contributions to a retirement plan, would similarly be extended. However, no reference is made in the news release to the Treasury regulation that permits postponement of numerous other time-sensitive tax-related acts, such as the completion of rollovers, filing Form 5500, etc.

At this time, the areas of the State of Oregon identified as eligible for the relief include the counties of Clackamas, Douglas, Jackson, Klamath, Lane, Lincoln, Linn, and Marion. The IRS notes that “taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief.”


Interim Final Rule Published for Lifetime Income Projections

Published in today’s Federal Register is a Department of Labor Employee Benefits Security Administration (EBSA) interim final rule (IFR) to guide defined contribution retirement plans that must begin to furnish projections of potential lifetime income streams to participants. A pre-publication version of this guidance was issued by EBSA on August 18, 2020.

Lifetime income projections are required under provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which mandates that a participant’s accrued benefit must periodically be reflected on their benefit statements as an estimated lifetime income payment stream.

Plan administrators of covered plans must express a participant’s current account balance both as a single life annuity, and a qualified joint and survivor annuity income stream. As noted by EBSA, these projections—which are required to be on the same benefit statement—“will help participants better understand how the amount of money they have saved so far converts into an estimated monthly payment for the rest of their lives, and how this impacts their retirement planning.”

This IFR is effective September 18, 2021, and will apply to benefit statements furnished to participants after that date.  Written comments on the interim final rule must be received by EBSA no later than November 17, 2020.