SECURE Act

IRS Notice Addresses 401(k)/403(b) Safe Harbor SECURE Act Provisions

The IRS has issued Notice 2020-86, providing guidance for implementing provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. Specifically, the SECURE Act provisions addressed deal with features and procedures of 401(k) and 403(b) plans that incorporate safe harbor designs for satisfying nondiscrimination testing requirements, and automatic enrollment and automatically increased deferral rates.

In general, provisions of the SECURE Act increased from 10 percent to 15 percent the maximum automatically-increased elective deferral rate for automatic-enrollment safe harbor plans, eliminated certain safe harbor notice requirements for plans making safe harbor nonelective contributions, and added provisions for retroactive adoption of a safe harbor design.

Notice 2020-86 provides guidance in question-and-answer format and includes the following issues.

  • Voluntary nature of the SECURE Act’s higher maximum automatic-increase deferral rate
  • Amending for the SECURE Act’s enhanced safe harbor design and adoption provisions
  • Elimination of certain safe harbor notice requirements for plans that meet specified nonelective contribution requirements
  • Interaction between delayed safe harbor design adoption and employer notice of possible contribution suspension
  • Safe harbor status of plans that suspend and subsequently resume safe harbor contributions
  • Deductibility of prior-year contributions under late-adopted safe harbor provisions

Washington Pulse: DOL Releases Final Rule for Pooled Plan Provider Registration

The SECURE Act makes pooled employer plans (PEPs) a reality as of January 1, 2021. Many details need to be clarified by the Department of Labor (DOL) and IRS. But one initial hurdle has been cleared: The DOL has issued final regulations on registering as a pooled plan provider (PPP), which is one of the initial steps that such providers must take before offering PEPs. While the final rule is quite similar to the proposed rule (published on September 1, 2020), it contains several noteworthy revisions, including a provision that makes it easier to register in time for the January 1 PEP effective date.

Background

Last December, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was enacted. The SECURE Act revised both ERISA and the Internal Revenue Code to allow unrelated employers to participate in a pooled employer plan, which is a type of open multiple employer plan (MEP). While we expect detailed guidance on many other aspects of PEP implementation, we now have a clear picture of the registration process. This article focuses on the PPP registration requirements. For more background information on PEPs, see Ascensus’s September 11, 2020 Washington Pulse.

The SECURE Act added pooled plan provider language both in Internal Revenue Code Sec. 413(e) and in ERISA Sec. 3(44). These parallel provisions require that PPPs

  • designate and acknowledge in writing that the PPP is a named fiduciary and plan administrator under ERISA,
  • act as the person responsible to perform all administrative duties to ensure that the plan meets Internal Revenue Code and ERISA requirements,
  • ensure that all those who handle plan assets or act as plan fiduciaries meet ERISA’s bonding rules, and
  • register as a pooled plan provider.

Participating employers delegate significant responsibility to the PPP. This is why the last requirement—that PPPs register with the DOL and IRS—is so important. Registration before beginning operations enables both of these entities to immediately monitor those who become pooled plan providers. Information about PPPs and participating employers would eventually be captured when employers filed Form 5500, Annual Return/Report of Employee Benefit Plan. But there would be a lengthy delay between plan establishment and the first Form 5500 return due date. Hence the rule that PPPs must file a registration statement before operating a PEP.

Specific Registration Requirements

The DOL’s Employee Benefits Security Administration has released Form PR – Registration for Pooled Plan Provider in conjunction with publishing the final regulations. PPPs must file this form with the DOL electronically, which will ensure that the DOL and IRS receive all required information. (Filing the Form PR with the DOL satisfies the SECURE Act requirement to register with the IRS.) This electronic format will also expedite information requests made by interested stakeholders performing due diligence on PPPs.

Filing obligations. PPPs must file Form PR in several different contexts, with all filings intended to keep the DOL and IRS fully informed of any changes to a provider’s PEP operations.

  • Initial registration – The PPP must register at least 30 days before beginning operations. Under the proposed regulations, this meant at least 30 days before publicly marketing a PEP. But some entities may initiate certain public marketing activities before they decide to commit to entering the PEP market. So the final rule defines “initiating operations” of a PEP as “when the first employer executes or adopts a participation, subscription, or similar agreement for the plan specifying that it is a pooled employer plan, or, if earlier, when the trustee of the plan first holds any asset in trust.”
  • Supplemental filings – The final regulations identify two types of supplemental filings: one upon actual commencement of operations and the second when any changes happen after the initial registration. In the first type of supplemental filing, the PPP may not have submitted certain information (e.g., plan number and trustee data) with the initial registration. In this case, a supplemental filing is needed. But if all the required information had already been provided with the initial registration, the PPP would not need a supplemental filing before beginning PEP operations. PPPs must also submit a supplemental filing within the later of 30 days after the calendar quarter in which a change occurs or 45 days after the change. This deadline is later than what the proposed regulations called for. The following changes (or “reportable events”) require the PPP to submit a supplemental filing:
  • Changes in information previously reported.
  • Changes in corporate or business structure.
  • Receipt of notice of new administrative proceedings or enforcement actions.
  • Receipt of notice of finding of fraud, dishonesty, or mismanagement.
  • Receipt of notice of filing of criminal charges
  • Amendment and correction of registration information – Errors and omissions related to the initial registration and supplemental filings must be corrected by amending the filing within a reasonable period following discovery. The DOL expects to add a new question on the Form 5500 that would ask whether the PPP has filed its registration and any required updates. This will enhance the DOL’s power to enforce the registration process.
  • Final Filing – The PPP must complete a final filing when it terminates the last PEP it administers and all assets have been properly distributed. This final Form PR must be filed by the later of 30 days after the calendar quarter in which the final Form 5500 was filed or 45 days after such filing.

Consistent with regulatory efforts to simplify procedures and become paperless, the DOL will administer the registration process online with the same “EFAST 2” electronic filing system currently used to receive the Form 5500.

Special transition period. Because the final regulations were released so close to the commencement date for PEPs, they became effective immediately upon publication in the Federal Register on November 16, 2020. They also contain a special provision that allows a PPP to file an initial registration any time before February 1, 2021, provided that it is filed on or before the PPP begins operations. This modification essentially waives the 30-day waiting period between registration and the start of plan operations—as long as the PPP files the registration by February 1, 2021.

Registration content requirements. In developing Form PR, the DOL tried to balance three overlapping considerations: 1) its own need for information to oversee PPPs, 2) employers’ need for information as they perform due diligence on PPPs, and 3) the possible administrative burden and expense involved for PPPs and the plans they operate. Form PR requires specific information on PPPs.

  1. Legal business name and any trade name (“doing business as”).
  2. Federal employer identification number (EIN).
  3. Business mailing address and phone number.
  4. Address of any public website or websites.
  5. Name, mailing address, telephone number, and email address for the PPP’s “responsible compliance official.”
  6. The PPP’s agent for service of legal process (that is, the person or entity that is authorized to receive legal documents) and the address at which these documents may be served on the agent.
  7. Approximate date when pooled plan operations are expected to commence.
  8. Description of the administrative, investment, and fiduciary services that will be offered or provided in connection with the PEPs, including a description of the role of any affiliates in such services.
  9. Statement disclosing any ongoing federal or state criminal proceeding (or any criminal convictions) against the PPP (or any officer, director, or employee) related to services to any employee benefit plan. (This generally applies to matters within 10 years of the registration date.)
  10. Statement disclosing any ongoing civil or formal administrative proceedings against the PPP (or any officer, director, or employee) involving fraud or dishonesty with respect to any employee benefit plan, or involving mismanaging plan assets.

While the final Form PR requires largely the same information that was required in the proposed regulations, the DOL did revise a number of items. For example, it clarified that a “compliance officer” can be identified by name, title, or office and that a PPP does not have to hire or promote an individual with any particular degree or certification. The DOL also more precisely defined “administrative proceeding” to exclude routine regulatory oversight activities and to specifically limit the term to formal administrative hearings.

More to Come

The DOL and IRS will certainly release more guidance on PEPs and PPPs. For instance, we’ll need detailed direction on the “one bad apple” rule—and how to remove such a noncompliant employer from the PEP. And we will need standard IRS text for amending prototype documents in addition to broad guidance on PEP administrative concerns. But at least regarding the registration requirements, we have a clear path. The DOL and IRS have coordinated to develop the final regulation. So registration with the DOL also satisfies the requirement to register with the IRS. And we expect continued coordination as further guidance is released. Meanwhile, the DOL has reiterated in the final regulations an important safe harbor: employers and pooled plan providers who comply in good faith with a reasonable interpretation of the SECURE Act’s PEP and PPP provisions before guidance is issued will not be treated as failing to meet such guidance once it is issued.

Ascensus will continue to follow any new guidance as it is released.

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


IRS Issues Updated Life Expectancy and Distribution Tables for Determining RMDs

The IRS has issued a pre-publication version of final regulations containing guidance and life expectancy tables to be used in the calculation of required minimum distributions (RMDs) from IRAs and other tax-qualified retirement savings arrangements, such as 401(k) plans. Those affected will include IRA owners, plan participants, beneficiaries, and employer-sponsored retirement plan administrators.

These final regulations will take effect on the date of their publication in the Federal Register, and the life expectancy tables they contain are to be used for calculations for distribution calendar years beginning January 1, 2022. The purpose for providing these updated life expectancy and distribution tables is to ensure that future required payments from retirement savings arrangements better reflect actual life expectancies of those who receive such payments.


Sequel to SECURE Act Introduced in Final Days Before General Election

House Ways and Means Committee Chairman Richard Neal (D-MA) and GOP Ranking Member Kevin Brady (R-TX) have introduced the Securing a Strong Retirement Act of 2020, legislation that is described as building on major retirement legislation enacted in December 2019. The new legislation is being referred to as “SECURE 2.0,” a reference to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 that preceded it.

It is not generally expected that this legislation will be acted upon before the November 3 elections, or necessarily even during the “lame duck” period between November 3 and the seating of the 117th Congress in January. Instead, it could represent the first attempt at bipartisan retirement legislation to be considered in 2021.

The following provisions are included in the proposed legislation.

  • Require automatic enrollment of eligible employees in 401(k), 403(b) and SIMPLE IRA plans with certain exceptions and grandfathering provisions
  • Further enhance the small retirement plan start-up credit, with a maximum credit of 100% (vs. the current 50%) for employers with no more than 50 employees
  • Increase the amount of, and eligibility for, the “saver’s credit” for taxpayers making IRA contributions or deferral contributions to employer-sponsored retirement plans
  • Exempt up to $100,000 of accumulated retirement account balances from required minimum distribution (RMD) requirements
  • Reduce the penalty for failure to satisfy RMD requirements from 50% to 25%; if an IRA RMD failure is timely corrected, the penalty would be further reduced to 10%
  • Permit 403(b) plans to invest in collective investment trusts
  • Increase the RMD age to 75 from 72 (increased from 70½ to 72 by the SECURE Act)
  • Align ESOP rules of S Corporations with those of C Corporations
  • Provide for indexing of IRA catch-up contributions
  • Provide a second, higher tier of catch-up deferral contributions for those age 60 and older, with indexing provision
  • Permit 403(b) plans to participate in multiple employer plan (MEP) arrangements
  • Permit certain student loan repayments to qualify for employer retirement plan matching contributions
  • Allow a small employer joining a MEP or pooled employer plan (PEP) arrangement to potentially claim a small plan start-up credit during the first three years of the MEP/PEP arrangement’s existence
  • Provide a new small employer tax credit for enhanced plan eligibility for military spouses
  • Enhance options for correcting employee salary deferral errors
  • Increase the qualifying longevity annuity contract (QLAC) RMD exemption
  • Permit increasing payments in IRA and defined contribution plan life annuity benefits
  • Allow retirement plan fiduciaries additional discretion in whether to seek recoupment of accidental overpayments
  • Simplify retirement plan disclosures to non-participating employees
  • Create a national online “lost and found” database to connect individuals with unclaimed retirement account benefits
  • Expand the IRS retirement plan correction program to permit self-correction of certain inadvertent IRA errors
  • Permit tax-free qualified charitable contributions to be made from employer-sponsored retirement plans (now permitted only from IRAs)
  • Make certain technical corrections to SECURE Act provisions

House Passes Revised Pandemic Relief Bill, Disagreements Remain

The House of Representatives has passed by a vote of 214-207 a revised version of the HEROES Act estimated at $2.2 trillion to provide pandemic relief. As mentioned earlier this week, there are several benefits-related provisions included in the bill.

  • 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 qualified domestic relations orders
  • 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

The revised package has been reduced from the approximately $3.4 trillion stimulus bill that was passed by the House in May. Disagreements remain with Senate Republicans on several components of the relief package as well as the overall price tag—which is significantly higher than their proposed “skinny” package that was blocked by Senate Democrats just weeks ago. With elections just over a month away, time is running out on negotiations, as many legislators will be heading back out on the campaign trail.

 


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.


Washington Pulse: IRS Provides Additional SECURE Act Guidance

At the end of 2019, the President signed the most comprehensive retirement reform package in over a decade: the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The SECURE Act is one of multiple bills that were included in the Further Consolidated Appropriations Act, 2020 (FCAA).

The SECURE Act’s primary goals include expanding retirement savings, simplifying existing rules, and preserving retirement income. As with any major legislation, the SECURE Act created numerous outstanding questions. And while the IRS has previously provided some answers, no SECURE Act guidance has been as detailed as the recently released IRS Notice 2020-68. In addition to providing guidance on the SECURE Act, this Notice provides guidance on the Bipartisan American Miners Act, which is also part of FCAA.

 

SECURE Act Guidance

Qualified charitable distributions and the repeal of the Traditional IRA contribution age limit

Effective for 2020 and later taxable years, taxpayers with eligible compensation can make Traditional IRA contributions at any age, not just for years before reaching age 70½. Notice 2020-68 states that financial organizations that accept such contributions must amend their Traditional IRA plan agreements and disclosure statements and provide the amended documents to IRA owners.

Although most financial organizations  are likely to adopt the relaxed eligibility requirements, Notice 2020-68 states that they are not required to accept such contributions. Keeping the old contribution limitation—or delaying implementing the new rule—may benefit organizations who face possible programming concerns.

The Notice confirms that, because IRA contributions and required minimum distribution (RMDs) are reported as two separate transactions, IRA owners may not offset their RMD amount for a taxable year by the amount of contributions made for the same year. So while Traditional IRA owners may contribute past age 70½ (if they are otherwise eligible), they may also have to take an RMD for the same year.

In addition to allowing individuals to make contributions after age 70½, the SECURE Act made changes to qualified charitable distributions (QCDs). Beginning at age 70½, IRA owners and beneficiaries may donate—while satisfying their RMDs—up to $100,000 of IRA assets tax-free to a qualified charity.

The SECURE Act requires that IRA owners age 70½ and older who make deductible Traditional IRA contributions reduce the amount that they can exclude from income when taking a QCD. Notice 2020-68 confirms the formula that IRA owners should use to determine this amount.

Example: In 2020, Mike attains age 70½ and makes a $7,000 deductible contribution to his Traditional IRA. Mike also takes a $9,000 distribution payable directly to his church, which is a qualified charity. How much of the $9,000 QCD can Mike exclude from income?

Excludable QCD amount = A – (B – C)

A = the QCD amount for a year before any reduction

B = the aggregate deductible contributions made for all tax years beginning with Mike’s 70½ year

C = prior year income exclusion reductions made as a result of the SECURE Act

Excludable QCD amount = $2,000, which is $9,000 – ($7,000 – $0)

NOTE: In future years, deductible contributions made after age 70½ will continue to lessen the amount by which QCDs will be excluded from income. Contributions that reduced the excludable QCD amount in previous years are ignored; contributions that have not reduced prior-year excludable QCD amounts are aggregated with current-year deductible contributions to determine what amount of the current QCD is included in income.

 Participation of long-term, part-time employees in 401(k) plans

Effective for 2021 and later plan years, employees who have three consecutive 12-month periods with at least 500 hours of service (and who satisfy the plan’s minimum age requirement) generally must be allowed to make elective deferrals in an employer’s 401(k) plan. The current, more restrictive, eligibility rules could continue to be applied to other contribution sources (such as matching contributions) and to ADP/ACP safe harbor plans. Employers may also exclude such part-time employees from coverage, nondiscrimination, and top-heavy test rules. The SECURE Act states that no 12-month period that begins before January 1, 2021, is considered when determining the three years of service for eligibility.

Notice 2020-68 confirms that an employer can apply the new eligibility rule to employer contributions that are subject to vesting requirements. But then for vesting purposes, the employer must generally consider each 12-month period for which the employee has at least 500 hours of service starting from the employee’s date of hire—including periods of service incurred before January 1, 2021. An employer may, however, continue to exclude periods of service described in Internal Revenue Code Section (IRC Sec.) 411(a)(4) (such as periods of service incurred before age 18 or before the plan was established).

It may be difficult for some employers to determine the correct periods of service for an employee who was previously excluded from the employer’s plan. As a result, the IRS is seeking comments on how to reduce possible administrative concerns related to counting years of vesting service beginning before January 1, 2021.

Small-employer automatic-enrollment tax credit

The SECURE Act created a new tax credit for small employers that include an eligible automatic contribution arrangement (EACA) feature in their new or existing qualified employer plan. A “qualified employer plan” includes a 401(a) plan, a 403(a) plan, a simplified employee pension (SEP) plan, and a savings incentive match plan for employees of small employers (SIMPLE) plan. To be eligible for the credit, employers must have had 100 or fewer employees who earned at least $5,000 in compensation during the previous calendar year. The maximum annual tax credit is $500 for each of the first three years that the employer includes an EACA in a qualified employer plan. This provision is effective for 2020 and later taxable years.

Notice 2020-68 clarifies that employers may receive a credit for each year during a single three-year period, starting in the first year that an employer adds an EACA. In addition, employers that maintain more than one qualified employer plan must offer an EACA in the same qualified employer plan for each year of the three-year period. For example, an employer that maintains two different 401(k) plans cannot receive a tax credit in 2021 if it adds an EACA to Plan A in 2020, amends to remove the EACA from Plan A in 2021, and then amends to add the EACA to Plan B in 2021.

Notice 2020-68 also clarifies that each eligible employer that participates in a multiple employer plan (MEP) may receive the tax credit. The three-year period begins with the first taxable year that an eligible employer includes an EACA under a MEP. An employer will continue to be eligible for the credit even if it spins off and establishes its own single-employer plan.

Qualified birth or adoption distributions (QBADs)

As of January 1, 2020, distributions taken within 12 months of the birth of a child or adoption of an “eligible adoptee” are exempt from the 10 percent early distribution penalty tax. An eligible adoptee is a child under the age of 18 or an individual who is physically or mentally incapable of self-support. An eligible adoptee does not include a child of the individual’s spouse. Each parent may distribute up to $5,000 in aggregate, per birth or adoption event, from an IRA, a 401(a) defined contribution plan, a 403(a) or 403(b) annuity plan or contract, or a governmental 457(b) plan.

Individuals may repay these amounts to an IRA or eligible retirement plan. While there is currently no stated deadline for repaying a QBAD, the Treasury Department plans to issue regulations under IRC Sec. 72(t) that will address recontribution rules, including rules related to the timing of recontributions.

Notice 2020-68 clarifies that individuals are “physically or mentally incapable of self-support” if they meet the disability definition found in IRC Sec. 72(m)(7). According to this definition, an individual is disabled if he “is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration.”

In addition, the Notice addresses several other matters.

  • Individuals may receive a QBAD for each birth and each adoption. For example, an individual who gives birth to twins may distribute $10,000 from her IRA and treat the entire amount as a QBAD.
  • A QBAD is not treated as an eligible rollover distribution for purposes of the direct rollover rules, the IRC Sec. 402(f) notice requirement, and the 20 percent mandatory withholding requirement.
  • A QBAD is an optional distributable event, so employers are not required to add the feature to their plans.
  • A plan administrator may rely on a reasonable representation that the individual is eligible for a QBAD, unless the administrator has actual knowledge to the contrary.
  • An eligible retirement plan must accept QBAD recontributions if 1) the retirement plan permits QBADs, 2) the individual received a QBAD from that plan, and 3) the individual is otherwise eligible to make a rollover contribution to that plan at the time he wishes to recontribute the QBAD to the plan.
  • A QBAD that is recontributed to an eligible retirement plan is deemed to be an eligible rollover distribution that meets the 60-day rollover rule.
  • A participant who receives an in-service distribution from a plan that does not offer QBADs may still claim that distribution as a QBAD on her income tax return and recontribute the amount to an IRA.

Difficulty-of-care compensation eligible for IRA contributions

Certain foster care providers receive payments that are not includable in taxable income and therefore were not considered to be compensation. As a result, such individuals may not have been able to contribute to a retirement plan. Now such after-tax “difficulty-of-care payments” will qualify as eligible compensation for IRAs and defined contribution plans. This provision is effective for IRA contributions made after December 20, 2019, and for contributions made to defined contribution plans in 2016 and later plans years.

Notice 2020-68 confirms that difficulty-of-care payments to an employee must be made by the employer in order to be treated as eligible compensation. Employers that make difficulty-of-care payments to their employees must amend their retirement plans to include difficulty-of-care payments in their plan’s definition of compensation. Notice 2020-68 also notes that the IRS will release future guidance to address whether the six percent penalty tax will apply to excess IRA contributions that are based on difficulty of care payments.

 

Bipartisan American Miners Act Guidance

Under IRC Sec. 401(a)(36), pension plans could allow in-service distributions at age 62. Effective for 2020 and later plan years, the Bipartisan American Miners Act allows in-service distributions at age 59½ to participants in governmental 457(b) plans and 401(a) pension plans.

Notice 2020-68 verifies that allowing participants to take in-service distributions starting at age 59½ does not solely affect the plan’s normal retirement age. A pension plan’s definition of normal retirement age must still meet the requirements of Treas. Reg. 1.401(a)-1(b)(2), which states that a plan’s normal retirement age may not be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. A normal retirement age that is age 62 or later is deemed to satisfy the reasonably representative requirement. Notice 2020-68 also states that employers may continue to rely on the proposed regulations that were issued in 2016 for governmental pension plans. Employers are not required to offer the age 59½ in-service distribution.

 

Amendment Guidance

To help synchronize amendment deadlines for the SECURE Act, the Bipartisan Miners Act, and the Coronavirus Aid, Relief, and Economic Security Act, Notice 2020-68 states that employers with qualified retirement plans and 403(b) plans that are not maintained by a public school will have until the last day of the first plan year beginning on or after January 1, 2022, to amend their plans for the SECURE Act and the Bipartisan American Miners Act. This is a change from the Bipartisan Miners Act, which gave employers until the end of their 2020 plan year to amend their plan documents. Those employers with qualified governmental plans under IRC Sec. 414(d), collectively bargained (union) plans, and 403(b) plans maintained by a public school have until the last day of the first plan year beginning on or after January 1, 2024.

Governmental 457(b) plan administrators must amend their documents for the SECURE Act and the Bipartisan American Miners Act by the later of the last day of the first plan year beginning on or after January 1, 2024, or if applicable, the first day of the first plan year beginning more than 180 days after the date of notification by the IRS that the plan was administered in a manner that is inconsistent with the requirements of IRC Sec. 457(b).

Notice 2020-68 provides long awaited IRA amendment guidance. The Notice states that financial organizations must amend their IRA plan agreements and disclosure statements for the SECURE Act by December 31, 2022, or a later date as prescribed by the Treasury Secretary. The IRS expects to issue revised model IRA documents and an updated Listing of Required Modifications (LRMs). The LRMs will contain sample language that document providers may use when updating their IRA prototype documents. Employers must amend their deemed IRA documents based on the deadline applicable to the retirement plan under which the deemed IRA is established.

 

Next Steps

If they haven’t already, employers and financial organizations should educate themselves and their staff on the new requirements and determine whether they will offer any of the optional provisions. They should also start considering the amendment process for their retirement plan and IRA documents.

The IRS is requesting comments on the topics covered in Notice 2020-68—especially on the provision relating to long-term, part-time employees. Comments must be submitted on or before November 2, 2020, and should refer to Notice 2020-68. The Treasury Department and IRS are still expected to provide further guidance—including new regulations—on the SECURE Act and Bipartisan American Miners Act.

Ascensus will continue to follow any new guidance as it is released. Visit ascensus.com for the latest developments.

 

 

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


IRS Seeks More Information on Forms 5500, Public Comments Invited

The IRS has published in today’s Federal Register a notice offering the general public and other federal agencies the opportunity to comment on proposed changes to the information the agency collects on Form 5500, Annual Return/Report of Employee Benefit Plan, and the other returns in this series, Form 5500-SF, and Form 5500-EZ.

The IRS is proposing to add to these returns a checkbox to indicate if the plan was retroactively adopted under Section 201 of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. It is also proposing to add checkboxes to Form 5500-EZ to indicate if the plan return was filed under an automatic extension or under a special extension.

Written comments must be received by November 2, 2020, to be considered.


IRS Issues SECURE Act and Miners Act Guidance in Q&As

The IRS has issued Notice 2020-68, guidance in question-and-answer (Q&A) format on provisions of legislation enacted in December 2019 that made significant changes to retirement savings arrangements. These changes were found within the Setting Every Community Up for Retirement Enhancement (SECURE) Act, and Bipartisan American Miners Act, both of which were contained within the Further Consolidated Appropriations Act of 2020.

SECURE Act topics addressed in the Notice 2020-68 Q&As include the following.

  • Small employer automatic enrollment tax credit (Sec. 105)
  • Repeal of maximum age for Traditional IRA contributions (Sec. 107)
  • Participation of long-term, part-time employees in 401(k) plans (Sec. 112)
  • Qualified birth or adoption distributions (Sec. 113)
  • Difficulty-of-care compensation eligible for IRA contributions (Sec. 116)

The Notice 2020-68 Q&As also addressed the reduced minimum age for certain retirement plan distributions, part of the Bipartisan American Miners Act (Sec. 104). In addition, it provides guidance on the timing for plans to amend for provisions of the SECURE Act and Bipartisan American Miners Act.