Buried in Sections 41113 and 41114 of the recent Bipartisan Budget Act of 2018 are provisions designed to facilitate hardship withdrawals from 401(k) and 403(b) plans. Because these provisions take effect for plan years beginning after December 31, 2018, sponsors of these plans will want to consider whether to broaden their hardship withdrawal provisions – or even add such provisions.
Although the main feature of the Tax Cuts and Jobs Act is a significant reduction in the corporate federal income tax rate, the Act also makes a number of significant changes to the rules governing employer-sponsored retirement plans and individual retirement accounts. From plan loans to hardship withdrawals and Roth recharacterizations, employers should make sure that they understand how these new rules might affect them.
In what has become something of a ritual, the IRS is once again extending the deadline by which single-employer defined benefit plans must be amended to implement the regime of funding-based benefit restrictions imposed by the Pension Protection Act of 2006 (“PPA”). Notice 2012-70, issued last week, pushes the general deadline back one more year, to the end of the 2013 plan year. As explained below, this most recent postponement seems to originate in confusion generated by the IRS itself.
Sponsors of single-employer defined benefit pension plans will need to amend those plans by the end of the 2012 plan year to comply with a new regime of distribution restrictions imposed by the Pension Protection Act of 2006 (the “PPA”). As explained more fully in this article, meeting this deadline is crucial because the IRS has conditioned anti-cutback relief on a timely amendment. If the cutbacks required under the PPA are implemented without a timely amendment, the plan risks disqualification, and the plan sponsor may be liable to participants and beneficiaries.