Fiduciary Rule Effective
The Department of Labor’s (DOL) Fiduciary Rule went into effect on June 9, 2017. However, the DOL published field assistance bulletin 2017-02 in May that stated that, until January 1, 2018, they “will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions, or treat those fiduciaries as being in violation of the fiduciary duty rule and exemptions.”
Overturn of DOL Safe Harbors for State- and City-Run Mandatory IRAs
In May, President Trump signed a joint resolution that overturned the Department of Labor’s (DOL) safe harbor for state-run mandatory payroll deduction IRAs. Without the 2016 DOL safe harbor, which was issued under the Obama Administration, state- or city-run payroll deduction IRAs may be subject to ERISA. Despite this move, Oregon, California, and Illinois continue to work on implementing state statutes that will create state-run mandatory payroll deduction IRAs.
Given this change, there is some real concern that state- and/or city-run IRAs may be considered employee benefit plans under ERISA. Consequently, without the safe harbor, employers may want to consider establishing their own plans in lieu of utilizing state- and city-run IRAs, which are expected to face judicial challenges.
Loan Limits in Retirement Plans
In April, the Internal Revenue Service (IRS) issued retirement plan loan guidance addressing participant loans. According to this guidance, Employee Plans Examinations staff has the option of using two different methods to determine whether the number and amount of new loans violate the maximum loan amount available to participants who have received more than one loan during the preceding year. The method used can affect whether new loans are available to participants, and for how much.
As a reminder, the rules state that a participant may not exceed $50,000 among all outstanding loans; anything in excess will be treated as a taxable distribution with possible early distribution penalties. The limits effectively bar participants from permanently maintaining a loan balance of $50,000. This is an important reminder for plan sponsors and administrators to carefully follow loan rules.
Tax Reform Efforts Continue
At the end of April, Secretary Mnuchin alluded to the Trump Administration’s big tax reform announcement that would be, according to Mnuchin, “the biggest tax cut and the largest tax reform in the history of our country.” Notwithstanding efforts of the Administration and Congressional Republican leaders, there has failed to be a consensus on a tax package that could pass both the House and Senate and be signed into law by President Trump. There remain major impediments on revenue neutrality and/or increasing components that may raise revenues. The debate continues.
Trump’s Proposed Fiscal Year 2018 Budget
In March, President Trump released his proposed budget. This proposal faces significant opposition from both Republicans and Democrats in the House and the Senate. Ultimately, Republicans and Democrats in Congress must approve the budget resolution and the corresponding appropriations bills to accept, reject, and/or modify the Budget Proposal. Congress may have enough leverage to block objectionable cuts and provisions from the final spending measures.
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.