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.
In Notice 2019-63, the IRS has granted health insurers and large employers 30 more days to issue the appropriate 2019 ACA-reporting forms to their insureds and full-time employees. Rather than January 31, 2020, these Forms 1095-B and 1095-C will now be due by March 2, 2020. The IRS has also extended the “good-faith” standard for compliance with these reporting rules. Finally, in view of the zeroing out of the penalty for failing to comply with the ACA’s individual mandate, insurers and large employers will now have an additional compliance option.
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.
The IRS has issued final regulations modifying and clarifying the rules for in-service hardship distributions from 401(k) and 403(b) plans. The final regulations are substantially similar to the proposed regulations issued in November of 2018, but they contain a few changes of which plan sponsors should be aware.
The IRS issued Revenue Ruling 2019-19 to describe the tax and reporting treatment of uncashed distribution checks from tax-qualified retirement plans. The ruling describes a situation in which a plan is required to make a distribution and the participant receives the distribution check, but does not cash it. The ruling makes clear that, regardless of why the participant does not cash the check (or even if the participant cashes the check in a later year), the distribution is subject to applicable tax withholding and reporting in the year in which the distribution is made. In addition, the participant must include the distribution in his or her gross income for that same year.
Cyberattacks have managed to invade all walks of life, and employee benefit plans are no exception. When a plan is attacked, the fallout can be overwhelmingly expensive and burdensome to correct. Many plan sponsors are purchasing cyber liability insurance coverage to supplement their data security measures. Understanding those policies – and their exclusions – is important for sponsors who are exploring such coverage.
In a recent decision, the Sixth U.S. Circuit Court of Appeals resolved an important question in a way that should put administrators of ERISA plans in a far stronger position vis-à-vis claimants who disagree with the administrators’ plan interpretations. Essentially, the court in Clemons v. Norton Healthcare Retirement Plan held that the contract-interpretation doctrine of “contra proferentum” has no application once a court has determined that a plan document grants the administrator the type of broad discretion approved by the U.S. Supreme Court in its 1989 Firestone decision.
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.
When the Department of Labor (“DOL”) delayed by 90 days the date by which ERISA plans were required to comply with a set of disability claims and appeals regulations issued in the waning days of the Obama Administration, we predicted that a further delay – or even a complete withdrawal – of the regulations could be in the works. As it turns out, we were wrong. Instead, the DOL announced in early January that the regulations will become fully applicable on April 1st – and without change.
The Affordable Care Act (“ACA”) imposed reporting requirements on health coverage providers (including self-funded employer plans) and “applicable large employers” (those with 50 or more full-time employees). For health coverage provided during both 2015 and 2016, the IRS extended the deadline for issuing certain of the required reporting forms. In Notice 2018-06, the IRS has now granted a similar extension with respect to reporting health coverage provided during calendar-year 2017.