Regulatory Updates

IRS Posts Small Business Retirement Plan Publication

The IRS has posted the 2020 tax year version of Publication 560Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). The publication is subtitled “For use in preparing 2020 Returns.” It is also useful to employers that are considering establishing a retirement plan, as it describes operational requirements, contribution opportunities, etc., of the different plan types. 
 
In addition to noting the contribution limits for both 2020 and 2021, the updated Publication 560 describes statutory changes made by the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 allowing coronavirus-related distributions to qualified individuals made on or after January 1, 2020, and before December 31, 2020. The updated publication also continues to highlight changes made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act, part of the Further Consolidated Appropriations Act that was signed into law in December 2019. These items include the following. 

  • Qualified birth or adoption distributions up to $5,000 without being subject to the 10 percent early distribution penalty tax (available for 2020 and later tax years) 
  • Permitting Traditional IRA contributions at any age if standard eligibility conditions are met 
  • Changing the age when required minimum distributions must begin from age 70½ to age 72 (applies to those reaching age 70½ in 2020 or a later year) 
  • Allowing employers to claim a tax credit for including an automatic enrollment feature in their retirement plans (available for 2020 and later tax years) 
  • Increasing the maximum annual small plan start-up credit from $500 to $5,000 (effective for 2020 and later tax years) 
  • Raising from 10 percent to 15 percent the cap on automatically-increased salary deferrals of employees who do not make affirmative elections, in certain automatic enrollment retirement plans