EXPANDING AND RETAINING ACCESS TO WORKPLACE RETIREMENT PLANS
In August, President Trump issued an executive order (EO) designed to broaden the availability of workplace retirement plans, especially for smaller employers who may be limited by rules and regulations, as well as to potentially limit unnecessary costs and burdens that may hinder the formation of the plans, with the ultimate goal being to strengthen retirement security in America. The EO further mandated that the Secretary of Labor examine the regulations on required minimum distributions from retirement plans as they relate to life expectancy and distribution periods.
In response to the EO, on October 22, 2018, the DOL released proposed rules designed to make it easier for businesses to join Multiple Employer Plans, also called Association Retirement Plans (ARPs). Generally, an ARP must meet the bona fide association requirements, which are similar to Association Health Plans.
ADMINISTRATION OF FORFEITURES AND HARDSHIP DISTRIBUTIONS FOR RETIREMENT PLANS
The Internal Revenue Service (IRS) recently issued their final regulations to allow employers to reduce 100% vested contributions with plan forfeitures. For example, if a plan makes a safe harbor contribution of $100,000 and there are forfeitures in the plan of $30,000, the plan sponsor could reduce the deposit to $70,000 to offset the 100% vested contribution deposits.
Further, for plan years beginning in 2019, the Bipartisan Budget Act updated some of the hardship distribution rules; the changes include no longer requiring a loan before a participant can receive a hardship distribution, eliminating the six-month deferral suspension, and expanding the type of money participants may receive for hardships. Generally, the rules remain the same for participants to prove eligibility for hardship distributions.
RETIREMENT PARITY FOR STUDENT LOAN ACT
In August 2018, the IRS released a Private Letter Ruling (PLR) approving an employer to make 401(k) matching contributions based on an employee making student loan payments. However, this PLR was only applicable to the taxpayer requesting the ruling and did not address certain other tax issues that could impact a similar plan. In December 2018, Senator Ron Wyden (D-OR), Ranking Member of the Senate Finance Committee, introduced legislation that would allow plan sponsors to utilize their plans to provide student loan repayment benefits to employees. Specifically, the Act would permit a worker’s higher education loan repayments to be treated as if they were salary reduction contributions for plan years beginning after 2019. As written, the bill calls for the rate of matching for student loans and salary reduction to be the same. Additionally, the student loans would only be taken into account for workers who have not made the maximum annual contribution to the retirement plan.
WOMEN’S PENSION PROTECTION ACT
In September 2018, Senator Patty Murray (D-WA), Ranking Member of the Senate Health, Education, Labor, and Pensions Committee, and Senator Maria Cantwell (D-WA) introduced legislation designed to help improve retirement outcomes. Specifically, the bill aims to bolster women’s retirement savings security and address the financial disadvantages that disproportionately affect women. This is a follow-up to a bill previously introduced by Murray in 2015 that stalled in Congress. Specifically, the bill is designed to increase financial literacy, expand access to retirement plans, provide protections to safeguard retirement savings, and also to support women in the division of retirement benefits
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.