SECURE Act Brian Graff SECURE Act Setting Every Community Up for - PowerPoint PPT Presentation

SECURE Act Brian Graff

SECURE Act • Setting Every Community Up for Retirement Security (SECURE) Act of 2019 (H.R. 1994) • Introduced in the House ‐ March 29, 2019 • Passed House Ways & Means Committee ‐ April 2, 2019 • Passed House 417 ‐ 3 – May 23, 2019 • Provisions effective 2020 plan year (except 2021 for open MEPs/PEPs) • Waiting on Senate action

Pooled Employer Plans • New Name for Open ‐ MEPs (Sec. 101) – No common interest requirement – Applies to 401(k)s and payroll deduction IRAs but not 403(b)s – One bad apple rule eliminated ‐ process for spinning off assets of bad “employer” plan needs guidance • Must Have Designated Pooled Plan Provider – Must be PEP’s named fiduciary – Responsible as 3(16) plan administrator including proper testing with respect to the plan and the employees of each employer in the plan (qualification requirements) – PPP must register with DOL/IRS and declare they are responsible as the named fiduciary and plan administrator – Must ensure person responsible for handling plan assets are adequately bonded – bond limit increased to $1 million

Pooled Employer Plans • Other PEP Requirements – Must designate one or more trustees who meet IRS requirements – Must provide that each adopting employer maintains responsibility for selection and monitoring of the PPP or any other named fiduciary – Employer responsible for monitoring investment options unless otherwise delegated to another fiduciary by the PPP • Other Issues – Self ‐ dealing PTEs will be needed for B/Ds and investment manufacturers – B/Ds and RIAs may want to outsource PPP to RKs – IRS and DOL have authority to audit the PPP for Code and ERISA compliance – IRS and DOL directed to issue guidance

SECURE – Other Provisions • QACA Max Contribution Rate Increases to 15% After the First Year of Participation (which is 10%) (Sec. 102) • 401k Safe Harbor Improvements (Sec. 103) – No notice required for non ‐ elective safe harbor – Non ‐ elective 401k safe harbor can be elected up to 30 days before the end of plan year – Within 30 days of the close of the plan year permits adoption of non ‐ elective safe harbor at 4% • Increase in Small Employer Start ‐ Up Credit (Sec. 104) – Up to $5k per year (for 3 years) in tax credits for starting up a new qualified plan – Up to $500 per year (for 3 years) in tax credits for adopting automatic enrollment in new or existing plans

SECURE – Other Provisions • Repeal of Max Age for Making IRA Contributions (Sec. 107) • Prohibit Credit Card Plan Loans (Sec. 108) • Portability of Lifetime Income Options (Sec. 109) – Allows rollover of in ‐ plan annuity contracts/investments to another plan or IRA when the investment option is no longer available in the plan without regard to in ‐ service distribution rules • Allows In ‐ kind Distribution of 403(b) Custodial Account from Terminated 403(b) Plan (Sec. 110) • Participation of Long ‐ Time Part ‐ Time Workers (Sec. 112) – Plans would be required to make eligible workers who have worked at least 500 hours for 3 consecutive years – No employer contributions are required for these workers and they are disaggregated for testing

SECURE – Other Provisions • Allows Penalty ‐ Free Withdrawals Up to $5k for Birth or Adoption of Child (Sec. 113) – Amounts withdrawn can be recontributed without impacting limits • Increase Required Beginning Date for MRDs to 72 (Sec. 114) • Plan Adopted by Tax Filing Date (with extensions) May be Treated as in Effect for That Tax Year (Sec. 201) • Combined Annual Report for Group of Plans (Sec. 202) – Allows for single form 5500 – Must have same trustee and named fiduciaries – Must have common plan years

SECURE – Other Provisions • Lifetime Income Disclosure Retirement (Sec. 203) – DC plans must annually disclose the value of a participants account balance in the form of a monthly annuity (both QJSA and single life) – DOL will provide safe harbor assumptions to be used – Effective after guidance provided • Fiduciary Safe Harbor for Selection of Lifetime Option (Sec. 204) – Insulates plan sponsor from liability after distribution of annuity from plan – Plan sponsor must go through on “objective, thorough, and analytical search” when selecting an annuity provider – Must include consideration of the “financial capability” of the annuity provider • Must meet specified state insurance and audit requirement – Must conclude that costs, fees, and commissions associated with the amount are reasonable – but NOT required to choose lowest cost provider

SECURE – Other Provisions • Non ‐ Discrimination Testing Relief for Frozen DB Plans (Sec. 205) • PBGC Premium Relief for Cooperator and Small Employer Charity DB Plans (Sec. 206) • Allow Tax ‐ Free 529 Distributions for Apprenticeship Programs and Student Loan Repayments (Sec. 302) • Changes to Post ‐ Death RMD Rules (Sec. 401) – Generally requires all DC and IRA distributions after death of the account owner within 10 years – Does not apply to designated beneficiaries that are surviving spouses, disabled, or chronically ill – Does not apply if the designated beneficiary is within 10 years of age of the deceased account owner – Also does not apply to minor children until they reach the age of majority (plus 10 years)

Penalty Increases (Sec. 403) Current Law SECURE Act as passed by House Form 5500 $25/day $250/day $15,000 maximum $150,000 maximum Annual Registration $1/participant x number of days $10/participant x number of Statement of continued failure days of continued failure $5,000/plan year maximum $50,000/plan year maximum Notification of Changes in $1/day $10/day $10,000 maximum for any Registration $1,000 maximum for any failure failure Withholding Notices $10/failure $100/failure $5,000 maximum for all failures in $50,000 maximum for all calendar year failures in calendar year Effective Date n/a Required docs/filings after 12/31/2019

Hope for RESA or SECURE!

DOL Update • DOL Fiduciary Rule – Rutledge publicly announced rule will align with Reg BI – Expected exemption for IRA advice – Looking for guidance to clarify how 401k advisors can give advice on rollovers – Unclear whether plan advice will be addressed – Expected by end of year • E ‐ Disclosure – Working on guidance that will make electronic delivery default mechanism – Addressing how to deal with non ‐ work desk employees – Part of Trump Executive Order on retirement issues from last August • Plan Expenses – Discussing with them on issues relating to plan design and wellness and whether they can be part of advisory fee 12