RETIREMENT ENHANCEMENT AND SAVINGS ACT & THE GOVERNMENT SHUTDOWN
As 2018 drew to a close, there seemed to be a real possibility that meaningful retirement legislation would be signed into law. After the November midterms, the prospects for passage of the Retirement Enhancement and Savings Act (RESA) legislation improved. Yet in late December, the stalemate over funding for a border barrier and the failure to reach a spending agreement eliminated the chances for a continuing resolution and resulted in the government shutdown. Another piece of legislation that will need to be reintroduced is the Receiving Electronic Statements To Improve Retiree Earnings (RETIRE) Act, which was designed to amend the Employee Retirement Income and Security Act (ERISA) and the Internal Revenue Code (Code) to allow plan documents required for participants, beneficiaries, and other individuals to be delivered electronically.
In the 116th Congress, there are a significant number of retirement plan enhancements that are expected to be implemented and/or moved forward this year. The Senate, once again, has reintroduced the RESA Act of 2019. This legislation was previously introduced several times beginning in 2016. Even further, the House is moving forward with its own comprehensive retirement security bill, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The potential for passing the legislation is promising, especially since there are many indications of bipartisan support in both the House and Senate. Both bills have many things in common, signaling that the House and Senate are likely to come to an agreement and send a final package to President Trump for his signature. Some benefits of the new legislation include: 1) authorization of multiple employer plan (MEP) arrangements; 2) monetary incentivization for smaller businesses to adopt new plans and add automatic enrollment features; 3) an allowance for smaller businesses to make a decision whether or not to offer retirement plan benefits up to the due date of tax returns; and 4) an allowance for business owners to switch to a safe harbor in the middle of a plan year, if certain conditions are met.
STUDENT LOAN PAYMENTS
After a Private Letter Ruling in August, the introduction of legislation in December 2018 by Senator Ron Wyden (D-OR) would allow employers to match student loan payments with contributions to participant retirement accounts, for which there has been continued interest. The legislation would allow 401(k), 403(b), and SIMPLE plans to make matching contributions for employees who made qualified student loan payments. The bill includes requirements for matching contributions and provides clarification that matching contributions on student loans would not violate certain nondiscrimination rules.
Even more, recordkeepers are now marketing services to plan sponsors designed to help employees manage their student debt. Some of these services include: an assessment of the impact of student debt, tools and services for employees to evaluate repayment options, and the ability to include an employer contribution tied to loan payments.
PART-TIME EMPLOYEE EXCEPTION FOR 403(b) PLANS
During December, in Notice 2018-95, the Internal Revenue Service (IRS) provided temporary relief and guidance for 403(b) plans for the “once-in-always-in” (OIAI) eligibility rule. It is the IRS’s view is that 403(b) regulations require that employees may be excluded only if they were part-time each and every year. The OIAI rule mandates that once employees become eligible, they must always be eligible, even when they have been reduced to part-time. Historically, plans had interpreted the part-time exclusion to permit a plan to exclude an employee who was previously eligible to participate but has now had a reduction in hours. The Notice provides a “fresh start” for plans that improperly excluded part-time employees from making elective deferrals to the plan. Generally, the relief began January 1, 2019, and for most plans the relief period ends on the last day of the last exclusion year ending before December 31, 2019.
IMPORTANT DISCLOSURES: These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—Arnerich Massena cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.