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Legislation

“CARES” Act Requires Immediate Decisions by Retirement Plan Sponsors

A third round of relief from the coronavirus pandemic has made its way through the Senate and House and has been signed by President Trump. The Coronavirus Aid, Relief and Economic Security (or “CARES”) Act provides over $2 trillion in relief for businesses and individuals. It also offers new avenues for defined contribution retirement plan participants to withdraw funds from their accounts in order to pay COVID-19-related expenses, if their employer elects to open those avenues. Some of the largest 401(k) and 403(b) plan record keepers are forcing employers to make that choice on just a few days’ notice.

SECURE ACT – Defined Benefit Plans

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE” Act) has broad implications for retirement plans.   Although the Act’s primary focus is on defined contribution plans, several provisions of the Act and its sister legislation apply only to defined benefit plans.

This is the fourth in a series of articles describing key provisions of the legislation.  Our focus in this article is on the provisions applicable to defined benefit plans – in-service withdrawals, required minimum distributions, and nondiscrimination testing relief.

SECURE ACT – Provisions Unique to
403(b) Plans, Governmental 457(b) Plans, and IRAs

On December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act, 2020, which includes the Setting Every Community Up for Retirement Enhancement Act (the “SECURE” Act).   The SECURE Act represents the most significant retirement legislation in more than a decade (i.e., since the Pension Protection Act of 2006).

This is the third in a series of articles describing key provisions of the SECURE Act.  Our focus in this article is on the provisions that are unique to Section 403(b) tax-sheltered annuity plans, governmental Section 457(b) plans, and Individual Retirement Accounts/Annuities (IRAs).  Many of the SECURE Act provisions that are broadly applicable to retirement plans (such as the increase in the age at which required minimum distributions must begin, and the new rules curtailing the ability to “stretch” post-death minimum distributions under defined contribution plans over the life expectancy of the participant’s designated beneficiary) also apply to 403(b) plans, 457(b) plans, and IRAs.  Because we addressed those provisions in the second article in this series, we will not do so again here.

SECURE Act – Broad Implications for Retirement Plans

On December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act, 2020, which includes the Setting Every Community Up for Retirement Enhancement Act (the “SECURE” Act). The SECURE Act amounts to the most significant retirement legislation in more than a decade.  Our focus in this article is on the legislation’s effect on retirement plans generally, including provisions broadly applicable to defined contribution, defined benefit, 401(k), 403(b), and certain 457(b) plans.

SECURE Act Generates Changes and Opportunities for Retirement Plans

In the waning days of 2019, President Trump signed into law the most significant retirement legislation in more than a decade.  The Setting Every Community Up for Retirement Enhancement – or “SECURE” – Act includes far-reaching changes that affect qualified retirement plans, 403(b) and 457(b) plans, IRAs, and other employee benefits.  In a series of articles, we will describe key provisions of the Act.  Our first article provides an overview of the Act’s key provisions and their effective dates.  Some of the changes under the SECURE Act are effective immediately, while others are effective for plan or tax years beginning on or after January 1, 2020.  Although the Act generally provides sufficient time to amend plan documents, employers must modify certain aspects of plan administration (and potentially financial planning decisions) now to align with the SECURE Act’s more immediate requirements.

Congress Eases Restrictions on Hardship Withdrawals

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.

Tax Cuts and Jobs Act – Modified Rules for UBTI

For many years tax exempt organizations and retirement plan trusts have been permitted to avoid tax on income generated by unrelated trades or businesses they hold by netting the gains, losses, and deductions among those trades or businesses.  The Tax Cuts and Jobs Act modifies those rules, increasing the likelihood that such entities must report, and pay tax on, UBTI.

Tax Cuts and Jobs Act – New Rules for Retirement Plans and IRAs

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.

Tax Cuts and Jobs Act – Affordable Care Act Changes

Although the recent Tax Cuts and Jobs Act eliminates the ACA individual mandate, the employer mandate, ACA benefit mandates, and ACA reporting requirements remain in effect.  Thus, employers should continue to be mindful of and comply with their obligations under the ACA.

Tax Cuts and Jobs Act – New Executive Compensation Rules

This is the second in a series of articles by which the Spencer Fane LLP Employee Benefits Practice Team will explain key changes made in the employee benefits area by the Tax Cuts and Jobs Act (Public Law 115-97), which was signed into law on December 22, 2017.  In addition to establishing new rules for transportation fringe benefits (see our first article in this series), the Act makes a number of changes that may affect how employers structure their executive compensation programs.  This article describes the Act’s impact on for-profit employers, and outlines options that those employers should consider for their compensation arrangements.

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