News and Updates from the FuturePlan Team

  


  

FuturePlan Supports Small Businesses

3/30/2020
By FuturePlan

Small businesses are the backbone of the American economy. With these businesses and their workers bearing the brunt of the hardship associated with the coronavirus (COVID-19) pandemic, it’s incumbent on the financial services industry to do whatever we can to support them. Many believe that this support will come mainly through federal relief, and that smart legislation—providing financial stimulus and other appropriate relief—will help right the ship.

But there are three ways that the financial services industry can help, as well.

  1. 1. Do all within our power to serve our clients faithfully. In this tumultuous time, our clients—along with their clients—need us more than ever. Although the vast majority of retirement industry teams are now working remotely, we must ensure that employers neither see nor feel any differences regarding the services we provide. That means continuing to fulfill our duties—such as processing payrolls accurately, responding promptly to employer and employee questions, and providing thoughtful plan design guidance—in spite of technological and social obstacles.
  2. 2. Speak with one voice to Congress and to regulatory officials, who can help employee benefits plans weather this economic storm. Even with major federal legislation recently being signed into law, we continue to advocate for individual and business relief. We can actively support further legislative and regulatory efforts to make plan operations easier for employers and more beneficial for workers. Some of the provisions we think make sense are:
  • Granting employers funding relief. Both defined contribution plans and defined benefit plans would benefit from delayed deadlines and reduced funding obligations.
  • Extending deadlines for reporting and corrections. The federal government should recognize that small businesses may find it especially difficult to meet deadlines for certain required annual reporting. Deadlines should be extended and penalties for late reports should be lessened, especially in light of recent increases under the SECURE Act.
  • Making hardship and coronavirus-related distributions easier for employers to process.If employers allow their participants to distribute their plan assets on account of hardship or coronavirus expenses, they should be able to expedite the payment—and then gather proof of the expenses later.
  • Advocating for financial relief for workers.
    • Relax loan repayments. Employees who struggle to repay plan loans during this crisis should be given some reprieve to avoid a downward financial spiral.
    • Remove the 10% early distribution penalty. This penalty should be eliminated for hardship distributions and for expenses related to the COVID-19 outbreak.
    • Waive 2020 required minimum distributions (RMDs). Without a waiver, individuals would have to take distributions based on valuations that occurred before the markets declined, resulting in disproportionately high RMDs. Individuals who have already taken 2020 RMDs should be allowed to roll over such distributions in the event that a 2020 RMD waiver is enacted.

Already, our efforts have helped several relief provisions—including the 2020 RMD waiver noted above and an extended plan amendment deadline—become part of a bill that was just enacted. The provisions listed above represent just a few of Ascensus’ advocacy efforts that are intended to assist those employers, employees, and service providers adversely affected by the COVID-19 outbreak.

3. Support the long-term success of workplace retirement plans. As we all know, many small business owners have overcome financial and administrative obstacles to offer retirement benefits to employees. Now—of all times—we should help these businesses maintain their plans through this financial downturn. The president has just signed into law a massive relief bill, which includes a number of beneficial retirement plan provisions. But this is just the start of a longer-term effort to guide our clients through the many questions and concerns they will have about implementing all the new rules. We still have a monumental responsibility to push for effective relief from the IRS and other federal agencies that will interpret the new statutes.

Our industry shouldn’t lose sight of the importance of facilitating long-term retirement savings—by serving our constituents faithfully, by pushing for specific federal retirement plan relief, and by giving our clients tools to stay in their plans for the long run.

Our country will eventually emerge from this situation stronger than ever. If historical patterns hold true, financial markets will also rebound. When that happens, businesses that have maintained their plans—and workers who have allowed their retirement savings to go untouched—will be in a position to see that their retirement goals are intact and on the road to recovery.

This is why financial services firms must do their part to reinforce and sustain the employers and workers that have helped keep our economy vital for so long.

Legislative and regulatory information contained in this piece will be refreshed as events continue to unfold. Please check back regularly for updates.

  


  

House Passes Senate’s Coronavirus Response Bill Unchanged, President Trump Signs Into Law

3/27/2020
By ERISA News

The House of Representatives today passed—by an expedited procedure—the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was passed by the Senate late on Wednesday, March 25. This afternoon, President Trump signed the legislation into law.

The CARES Act has many elements intended to aid businesses and workers, and to assist the U.S. healthcare system in dealing with the coronavirus (COVID-19) pandemic. As noted in a prior announcement, it also contains the following key provisions that would affect retirement savings arrangements, health savings accounts (HSAs), Archer medical savings accounts (MSAs), health reimbursement arrangements (HRAs), and health flexible spending arrangements (FSAs).

Retirement Savings Provisions

  • (As originally drafted, this legislation extended the income tax return filing deadline from April 15, 2020, to July 15, 2020. Prior to its enactment, however, the Treasury Department issued guidance extending the deadline and clarified other acts that are extended—including the ability to make IRA, HSA, and certain employer plan contributions—to July 15 for tax year 2019.)
  • Up to $100,000 in coronavirus-related distributions (CRDs) can be withdrawn by an individual from eligible retirement plans. These distributions will be exempt from the 10 percent early distribution penalty tax.
    • A CRD is defined as any distribution made on or after January 1, 2020, and before December 31, 2020, to a qualified individual, defined as
      • an individual (or the spouse or a dependent of that individual) who is diagnosed with COVID-19 or SARS-CoV-2 in an approved test; or
      • an individual who suffers related adverse financial consequences, or suffers from other factors as determined by the Secretary of the Treasury.
    • Plan administrators can rely on plan participants’ certification that they meet these requirements.

    • An eligible retirement plan is defined as a qualified retirement plan (e.g., a 401(k) plan), 403(a) plan, 403(b) plan, governmental 457(b) plan, or an IRA.
    • CRDs will be treated as meeting retirement plan distribution requirements, so long as all distributions from one employer—including members of a controlled group—do not exceed $100,000 to an individual.
    • There will be a three-year repayment period beginning the day after distribution, during which one or more repayments may be made, not to exceed, in aggregate, the amount distributed. Taxpayers can recontribute these amounts to an eligible retirement plan or IRA.
    • CRDs that are recontributed within the three-year period will be treated as having satisfied the general 60-day rollover requirement.
    • CRDs will be taxed ratably over a three-year period, unless an individual elects otherwise.
    • CRDs are not considered statutory “eligible rollover distributions” for purposes of 20 percent mandatory withholding, the notice provided to recipients of distributions eligible for rollover (i.e., “402(f) notice”) and direct rollover requirements (but do remain eligible for rollover).
  • The retirement plan loan maximum for a qualified individual (defined as meeting the COVID-19 or SARs-CoV-2 conditions described above) will increase to the lesser of $100,000, or 100 percent of a participant’s vested balance.
    • Retirement plan loan repayment dates that occur between the date of enactment and December 31, 2020, can be delayed for one year. Due dates of subsequent payments (payments after those that may be delayed one year) and the five-year amortization period will be adjusted accordingly.
  • Plan sponsors will generally be required to amend their retirement plans for these provisions by the last day of the 2022 plan year (government plans will have an additional two years), or such other date as the Secretary of the Treasury may prescribe, with operational compliance during the interim period.
  • Individuals, including beneficiaries, will not be required to take their 2020 required minimum distributions (RMDs) from their defined contribution plans or IRAs. This RMD waiver would also apply to individuals who turned 70½ in 2019 but did not take their RMD before January 1, 2020).
  • The 2020 year will not be counted for purposes of a five-year payout period for a beneficiary. (This provision will not alter a required beginning date for years after 2020.)
  • Single employer defined benefit pension plan minimum required contributions due during 2020 can be delayed to January 1, 2021 (adjusted for interim earnings). This provision will also provide an option to use an alternative funding target percentage.
  • This legislation adds “public health emergency” to those events that allow the Department of Labor to postpone certain deadlines governed by ERISA Section 518.

Health Savings Arrangement-Related Provisions 

  • For plan years before 2022, health insurance plans can pay for telehealth and remote care services without first satisfying HSA-qualifying deductible conditions.
  • A medicine or drug need not be obtained by prescription to be a qualified medical expense for HSA, HRA, MSA, and health FSA purposes. This includes over-the-counter menstrual care products.

Further developments, including any clarifying guidance issued by the IRS or other governing agencies, will be shared on Futureplan.com.

  


  

Senate Approves Massive Coronavirus Response Bill, with Significant Retirement Savings and Health Elements

3/26/2020
By ERISA NEWS

On Wednesday night, shortly before midnight, Eastern Time, the U.S. Senate cleared lingering objections of both Democrat and Republican members and unanimously passed H.R. 748, the Coronavirus Aid, Relief and Economic Security, or CARES Act. The legislation has many elements intended to aid businesses and workers, and assist the U.S. health care system in working through the coronavirus (COVID-19) pandemic. It also contains multiple provisions that would affect retirement savings arrangements, health savings accounts (HSAs), Archer medical savings accounts (MSAs), HRAs, and flexible savings accounts (FSAs).

The next move is up to the U.S. House of Representatives, where a strategy known as “unanimous consent” could speed up passage of the legislation there, resulting in quicker delivery to President Trump for his signature. If there are objections to that strategy by House members, that body—currently in recess—may have to be recalled to the Capitol for a vote. Following are key provisions that would impact tax-favored retirement and health savings arrangements.

Retirement Savings Provisions

  • This legislation would extend the income tax return filing deadline from April 15, 2020, to July 15, 2020. (The Treasury Department has already extended the deadline as described above and clarified other acts that are extended as a result—including the ability to make IRA, HSA, and certain employer plan contributions by July 15 for tax year 2019.)
  • Up to $100,000 in coronavirus-related distributions (CRDs) could be withdrawn by an individual from eligible retirement plans. These distributions would be exempt from the 10 percent early distribution penalty tax.
    • A CRD is defined as any distribution made on or after January 1, 2020, and before December 31, 2020, to a qualified individual, defined as
      • an individual (or the spouse or a dependent of that individual) who is diagnosed with COVID-19 or SARS-CoV-2 in an approved test; or
      • an individual who suffers related adverse financial consequences, or suffers from other factors as determined by the Secretary of the Treasury.
  • Plan administrators could rely on plan participants’ certification that they meet these requirements.
    • An eligible retirement plan is defined as a qualified retirement plan (e.g., a 401(k) plan), 403(a) plan, 403(b) plan, governmental 457(b) plan, or an IRA.
    • CRDs would be treated as meeting retirement plan distribution requirements, so long as all distributions from one employer—including members of a controlled group—do not exceed $100,000 to an individual.
    • There would be a three-year repayment period beginning the day after distribution, during which one or more repayments may be made, not to exceed, in aggregate, the amount distributed. Taxpayers could recontribute these amounts to an eligible retirement plan or IRA.
    • CRDs that are recontributed within the three-year period will be treated as having satisfied the general 60-day rollover requirement.
    • CRDs would be taxed ratably over a three-year period, unless an individual elects otherwise.
    • CRDs are not considered statutory “eligible rollover distributions” for purposes of 20 percent mandatory withholding, the notice provided to recipients of distributions eligible for rollover (i.e., “402(f)” notice) and direct rollover requirements (but do remain eligible for rollover).
  • The retirement plan loan maximum for a qualified individual (defined as meeting the COVID-19 or SARs-CoV-2 conditions described above) would increase to the lesser of $100,000, or 100 percent of a participant’s vested balance.
    • Retirement plan loan repayment dates that occur between the date of enactment and December 31, 2020, could be delayed for one year. Due dates of subsequent payments (payments after those that may be delayed one year) and the five-year amortization period would be adjusted accordingly.
  • Plan sponsors would generally be required to amend their retirement plans for these provisions by the last day of the 2022 plan year (government plans would have an additional two years), or such other date as the Secretary of the Treasury may prescribe, with operational compliance during the interim period.
  • Individuals would not be required to take their 2020 required minimum distributions (RMDs) from their defined contribution plans or IRAs. This RMD waiver would also apply to individuals who turned 70½ in 2019 but did not take their RMD before January 1, 2020).
  • The 2020 year would not be counted for purposes of a five-year payout period for a nonperson beneficiary. (This provision would not alter a required beginning date for years after 2020.)
  • Single employer defined benefit pension plan minimum required contributions due during 2020 could be delayed to January 1, 2021 (adjusted for interim earnings). This provision would also provide an option to use an alternative funding target percentage.
  • This legislation would add “public health emergency” to those events that would allow the DOL to postpone certain deadlines governed by ERISA Section 518.

Health Savings Arrangement-Related Provisions 

  • For plan years before 2022, health insurance plans could pay for telehealth and remote care services without first satisfying HSA-qualifying deductible conditions.
  • Over-the-counter menstrual care products would be considered qualified medical expenses for HSA, HRA, Archer MSA, and health flexible spending account purposes.

Further progress of this legislation will be monitored and developments shared on ascensus.com

  


  

FuturePlan is excited to present the SECURE Act Video Series by our industry-leading team of ERISA experts. This helpful new series provides insights on the retirement-related SECURE Act provisions included in the Further Consolidated Appropriations Act, 2020.

FuturePlan SECURE Act Video Series, Part 10: Qualified Birth or Adoption Distributions

3/26/2020

FuturePlan SECURE Act Video Series, Part 9: Beneficiary Option Changes

3/19/2020

FuturePlan SECURE Act Video Series, Part 8: New Plan Adoption Deadline

3/12/2020

FuturePlan SECURE Act Video Series, Part 7: New 529 Plan Eligible Expenses

3/9/2020

FuturePlan SECURE Act Video Series, Part 6: Increased Penalties for Plan Reporting Failures

2/27/2020

FuturePlan SECURE Act Video Series, Part 5: Employer Plan Tax Credits

2/20/2020

FuturePlan SECURE Act Video Series, Part 4: Qualified Charitable Distributions

2/6/2020

FuturePlan SECURE Act Video Series, Part 3: Safe Harbor Plans

1/30/2020

FuturePlan SECURE Act Video Series, Part 2: Traditional IRA Contribution Eligibility

1/23/2020

FuturePlan SECURE Act Video Series, Part 1: Required Minimum Distributions

1/17/2020

Washington Pulse: SECURE Act: The Wait is Finally Over

12/30/2019
By ERISA News

For the past three years, Congress has attempted to pass major retirement reform legislation. It has finally succeeded with the year-end passage of two spending packages meant to avert a government shutdown. One of the packages, the Further Consolidated Appropriations Act, 2020 (FCAA), includes multiple bills—including the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which contains several major retirement-related provisions. These provisions are nearly identical to those included in an earlier version of the SECURE Act that was passed by the U.S. House of Representatives in May 2019. At the time of this publication, the President had not yet signed these bills into law. But it is widely anticipated that he will.

The SECURE Act provides the most comprehensive retirement reform package in over a decade. The primary goals of the SECURE Act are to expand retirement savings, improve plan administration, simplify existing rules, and preserve retirement income. The provisions summarized below will certainly give rise to questions in the coming days. Our aim is to provide an easy reference to the important retirement plan changes, while understanding that more federal guidance will be needed to resolve certain matters.

The FCAA also includes bills that provide disaster relief (discussed later) and new health and welfare provisions. The most significant health and welfare measure repeals the controversial “Cadillac Tax.” The Affordable Care Act had created a 40 percent excise tax on the most expensive employer-sponsored health insurance plans when benefits exceeded a certain threshold. This tax was supposed to become effective in 2018, but was previously delayed until 2022.

New Incentives to Establish or Enhance Employer Plans

The following SECURE Act provisions create new incentives and modify existing incentives for employers to establish retirement plans. They also broaden the time frame for employers to establish plans.

  • Multiple employer plans (MEPs). Employers can more easily participate in a MEP or a new variant, a “pooled employer plan,” or PEP. Both have basic features in common, the latter to be administered by a pooled plan provider. (Effective for 2021 and later plan years.)
  • Multiple participating businesses with a common interest would generally be part of a MEP.
  • Multiple participating businesses with no common interest other than plan sponsorship would generally be part of a PEP.
  • Smaller MEPs and PEPs may be able to file a simplified short Form 5500-SF tax return for the plan.
  • Noncompliance by one participating employer will not disqualify the entire MEP/PEP arrangement, thus eliminating the “one bad apple” rule.
  • Deadline to establish a plan. Employers may establish a qualified plan—such as a profit sharing or pension plan—as late as their business tax filing deadline, including extensions. (Under previous rules, employers had until the last day of their business year.) This extension will not apply to certain plan provisions, such as elective deferrals. (Effective for 2020 and later taxable years.)
  • Small employer plan startup credit. The small employer retirement plan startup tax credit increases from $500 to a maximum of $5,000 per year, available to cover startup costs for the first three years that the plan is in effect. (Effective for 2020 and later taxable years.)
  • Automatic enrollment credit. The SECURE Act provides a new tax credit to employers that include an automatic enrollment feature in their new or existing small 401(k) plans (100 or fewer employees) or SIMPLE IRA plans. The maximum annual tax credit is $500 for each of the first three years that the plan is maintained. (Effective for 2020 and later taxable years.)
  • Election of 401(k) nonelective safe harbor design. Employers that make nonelective safe harbor plan contributions (versus a matching contribution) get two benefits: 1) they now escape the notice requirement, and 2) they have more time to amend their plans to implement this nonelective 401(k) safe harbor plan feature. Specifically, they may amend up to 30 days before the end of a plan year if they make a three percent contribution. But they may generally amend by the close of the following plan year if the plan is also amended to require a four percent nonelective safe harbor contribution. (Effective for 2020 and later plan years.)
  • Annuity selection safe harbor. The SECURE Act creates a new safe harbor for a plan fiduciary to meet ERISA’s “prudent man rule” when selecting an insurer and an annuity contract in order to offer lifetime income options under a plan. (Effective on date of enactment.)

New Ways to Save More in Employer Plans

The next set of provisions lets employers automatically increase employees’ deferral contributions to a higher percentage, requires employers to give participants a future benefits projection, and promotes plan entry for certain part-time employees.

  • Higher cap on deferrals in safe harbor 401(k) plans. Some 401(k) plans meet nondiscrimination requirements through automatic enrollment and automatic deferral increases. These qualified automatic contribution arrangements (QACAs) will now have a maximum 15 percent deferral rate instead of 10 percent. (Effective for 2020 and later plan years.)
  • Lifetime income disclosure. Defined contribution plans must provide, at least annually, a projected lifetime income stream that a participant’s accrued benefit could generate. This disclosure does not create employer liability for the amounts projected. (Effective for benefit statements provided more than 12 months after the DOL issues guidance, including the interest assumptions to be used and a model disclosure. The bill prescribes that this guidance be completed within one year of the date of enactment.)
  • Participation by less than full-time employees. Employees who have three consecutive 12-month periods of 500 hours of service and who satisfy the plan’s minimum age requirement must be allowed to make elective deferrals in an employer’s 401(k) plan. The current, more restrictive, eligibility rules could continue to be applied to other contribution sources (e.g., matching contributions) and to ADP/ACP safe harbor plans. Employers may also exclude such part-time employees from coverage, nondiscrimination, and top-heavy test rules. (Effective for 2021 and later plan years, but no 12-month period that begins before January 1, 2021, shall be taken into account.)

More Targeted Provisions Affecting Employer Plans

The SECURE Act contains a number of additional, more targeted provisions that apply to employer plans.

  • Custodial accounts of terminating 403(b) plans. Plan administrators or custodians of a 403(b) custodial account may distribute the account “in kind” to a participant or beneficiary when the employer is terminating the 403(b) plan. (Retroactive; effective for 2009 and later taxable years.)
  • Lifetime income portability. Participants in a qualified plan, 403(b) plan, or governmental 457(b) plan may roll over lifetime income investments to an IRA or another retirement plan without a traditional distribution triggering event if their plan no longer permits such investments. (Effective for 2020 and later plan years.)
  • Higher penalties for plan reporting failures. Retirement plan information reporting failures will result in the following increased penalties. (Effective for filings and notices required January 1, 2020, and thereafter.)
    • Form 5500, $250 per day, up to a maximum of $150,000
    • Form 8955-SSA (deferred benefit reporting), $10 per day, up to a maximum of $50,000 for failing to file, $10 per day, up to a maximum of $10,000 for failing to file a notification of change
    • Withholding notices, $100 per failure, up to a maximum of $50,000 for all such failures during any calendar year
  • Credit card loan prohibition. Retirement plan loans enabled through a credit card (or a similar program) will be treated as distributed from the plan and subject to taxation. (Applies to loans made after the date of enactment.)
  • Shared Form 5500 filing. Employers sponsoring defined contribution plans that have the same trustee, administrator, fiduciaries, plan year, and investment options may file a common Form 5500. (Effective for 2022 and later plan years.)
  • Nondiscrimination relief for closed pension plans. Defined benefit pension plans that are closed to new participants will get nondiscrimination relief that protects benefits for older, longer serving participants. (Effective upon enactment, or—if elected—for 2014 and later plan years).
  • Community newspaper pension funding relief. Sponsors of certain plans maintained for community newspapers may calculate defined benefit plan contributions with interest rates and amortization periods that reduce funding requirements. (Effective for plan years ending after December 31, 2017.)
  • Church retirement plan rules. New rules clarify which employees may participate in retirement plans sponsored by church-controlled organizations. (Effective for past, present, and future plan years.)
  • Pension plans of cooperatives and charities. Certain cooperatives and charities may reduce their Pension Benefit Guaranty Corporation (PBGC) insurance premiums for defined benefit plans. (Effective for 2019 and later plan years).
  • Lower minimum age for in-service distributions. This provision is not part of the SECURE Act, but is found in Division M—the Bipartisan American Miners Act, which is part of FCAA. This provision allows in-service distributions at age 59½ (instead of age 62 under current law) to participants in governmental 457(b) plans and certain pension plans. (Effective for 2020 and later plan years.)

New Provisions Affecting Employer Plans and IRAs

The following SECURE Act provisions affect both employer plans and IRAs.

  • More rapid payouts to nonspouse (and other) beneficiaries. Most nonspouse beneficiaries of IRAs, qualified defined contribution plans, 403(b) plans, and governmental 457(b) plans will generally be required to distribute inherited amounts within 10 years. (Effective for plan participant/IRA owner deaths in 2020 or later years; 2022 or later years for governmental plans; special delay to accommodate contracts of certain collectively bargained plans.) Exceptions include those who, at the time of the account owner’s death, are
  • disabled individuals,
  • certain chronically ill individuals,
  • beneficiaries whose age is within 10 years of the decedent’s age,
  • minors (they would begin a 10-year payout period upon reaching the age of majority), and
  • recipients of certain annuitized payments begun before enactment of the SECURE Act.
  • Delayed age for beginning RMDs. The age when required minimum distributions (RMDs) from Traditional IRAs, qualified plans, 403(b) plans, and governmental 457(b) plans must generally begin is increased from age 70½ to age 72. (Effective for distributions required in 2020 and later years, for those who reach age 70½ in 2020 or a later year.)
  • Birth/adoption excise tax exception. The birth of a child or adoption of a child (or individual who is incapable of self-support) qualifies both as a plan distribution event and as an amount that is exempt from the 10 percent early distribution penalty tax (if applicable) for distributions of up to $5,000 in aggregate from IRAs and defined contribution qualified plans, 403(b) plans, and governmental 457(b) plans. These amounts may be repaid. (Effective for distributions in 2020 and later years.)
  • Difficulty of care” payments treated as eligible compensation for retirement plan funding. Because many home healthcare workers receive payment that is not taxable income, they haven’t been able to contribute to a retirement plan. Now such “difficulty of care” payments will qualify as eligible compensation for IRA and other plan contributions. (Effective upon enactment for IRAs, and for 2016 and later plans years for employer plans.)

More Flexibility for IRA Contributions

The following provisions specifically affect IRAs.

  • Traditional IRA contributions at any age. Taxpayers with earned income can make Traditional IRA contributions at any age, not just for years before reaching age 70½, as under current law. (Effective for 2020 and later taxable years.)
  • Graduate student IRA contributions. Certain stipend, fellowship, and similar payments to graduate and postdoctoral students will be treated as earned income for IRA contribution purposes. (Effective for 2020 and later taxable years.)

New Eligible Expenses for 529 Plans

The SECURE Act also broadens the definition of eligible expenses for qualified tuition or “529” plans. Individuals may now take a qualified, tax-free 529 plan distribution to pay for registered apprenticeships. They may also distribute up to $10,000 in order to make repayments of student loans for a 529 plan beneficiary—or a beneficiary’s sibling. (Effective for distributions in 2019 and later years.)

Disaster Relief Provisions

To provide relief for certain natural disasters that occurred during the last couple of years, the FCAA contains a bill entitled the Taxpayer Certainty and Disaster Tax Relief Act of 2019. Among other things, this bill provides disaster relief to individuals in presidentially declared disaster areas who have taken IRA and retirement plan distributions between January 1, 2018, and 180 days after enactment of this legislation. (Applicable to plans that are amended on or before the last day of the first plan year beginning on or after January 1, 2020, or later, if the IRS allows.)

  • Qualified disaster distributions. Qualifying distributions of up to $100,000 from employer-sponsored retirement plans and IRAs are exempt from the 10 percent early distribution penalty tax and the normal withholding requirements. Individuals affected by more than one disaster may distribute up to $100,000 per disaster.
  • Repayment options. Individuals may repay qualifying distributions within a three-year period. Distributions not repaid generally will be taxed ratably over a three-year period, unless individuals elect otherwise. Individuals may also repay distributions taken for cancelled home purchases.
  • Relaxed loan requirements. Employers may allow participants to request a plan loan of up to $100,000. Participants may delay loan repayments for up to one year.

Effective Dates and Amendment Deadlines

Some effective dates are mere days away—January 1, 2020. These dates were retained from the May 2019 version of the legislation. But the final version of FCAA contains delayed amendment deadlines for employer-sponsored retirement plans. This will allow employers to implement changes immediately, while generally having until the end of their 2022 plan year (2024 for governmental and collectively-bargained plans) to amend for the changes.

As with any major piece of legislation, questions will arise as provisions are analyzed. We expect the IRS and Department of Labor to address these concerns in the coming months. Ascensus will continue to assess the effect of this legislation and any related guidance. Visit Ascensus.com for future updates.

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