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.
The U.S. Department of Labor (DOL) has proposed a new “safe harbor” rule to allow retirement plan disclosures to be posted online (assuming certain notice requirements are satisfied) to reduce printing and mailing expenses for plan sponsors and to make the disclosures more readily accessible and useful for plan participants.
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.
Earlier this year, the IRS issued Notice 2017-44. This Notice provides model amendments that plan sponsors may use to amend qualified defined benefit plans to offer a bifurcated distribution option. Because the IRS has terminated its determination letter program (except in limited circumstances), plan sponsors may find the model language helpful as they consider design changes to their defined benefit plans for 2018.
It is common for employers to contract with one or more third parties (sometimes referred to as “leasing companies”) to provide individuals to perform services for the employer. Various issues may arise regarding the treatment of such individuals under a retirement plan maintained by the employer.
The IRS is now accepting applications for updated determination letters on behalf of individually designed retirement plans falling within “Cycle E” of the determination-letter program. These include plans sponsored by employers having either a “5” or “0” as the last digit of their employer identification number, as well as governmental plans that elected not to file during Cycle C.