The ASPPA 4th Quarter Washington Update provided an overview of new rules with which one must comply, as well as proposed regulations and rules and possible obligations of which a plan and those who serve it should be aware and mindful.
American Retirement Association Director of Technical Education Robert Kaplan presented the update, highlighting developments that are of both immediate and potential concern and relevance to retirement plans, those who offer and administer them, and participants.
2020 IRS Limits
Kaplan provides a look at the 2020 cost-of-living adjustments and benefit threshholds most relevant to retirement plans, such as those set under Internal Revenue Code Section 402(g) and for catch-up contributions, defined contribution annual additions, SIMPLE plans, key employees, highly compensated employees and more. “You want to communicate some of these to your clients you work with,” he said, “particularly deferral elections, so they can best maximize their benefits in 2020.”
Final Hardship Rules
In the wake of the IRS’ release of the final hardship rules in September, said Kaplan, “the biggest things we have to deal with are the systems and communications to participants.” He indicated that “knowing that the new sources [of funds] that are available are optional” is of key importance, as is understanding what provisions are not optional, such as the elimination of the 6-month suspension and the rules concerning new employees.
RMD Regulations
Kaplan addressed rules that are proposed but not yet final, including the rules proposed in November concerning required minimum distributions (RMDs). These, he said, “reflect longer life expectancies, meaning that RMDs will be less.” He outlined their provisions and noted that they have a tentative effective date for distribution years on or after Jan. 1, 2021. But he included a caveat, saying, “These are only proposed requirements at this time — things can change.”
DOL Enforcement
Kaplan also addressed Department of Labor (DOL) actions. He noted that the DOL recovered more than $2 billion in fiscal year 2019, with $1.5 billion of the coming from the defined benefit missing participant program, an effort he said was intended “to make sure they get their money,” and adding, “I don’t think the DOL is going away on this one.”
E-Delivery Regulations
Kaplan highlighted the proposed regulations concerning electronic disclosure that the DOL issued on Oct. 22. The current rules are retained, but there is a new safe harbor for retirement plans, he said. Their provisions include allowing a plan administrator to post disclosures to a designated website and requiring that participants and beneficiaries provide electronic addresses, But, Kaplan noted, the proposed regulations do not completely eliminate the use of paper; initial notices must be on paper, and participants have the option of continuing to receive disclosures on paper.
The proposed regulations also allow consolidation of notices, which he said shows that “the DOL recognizes that you can consolidate notices,” which called “a good thing.” Still, the DOL would not allow all forms of disclosure to be sent in consolidated notices.
Capitol Hill Update
Retirement plans have not escaped the attention of Capitol Hill, and Kaplan highlighted several legislative proposals. Among them are S. 2962, the Higher Education Loan Repayment and Enhanced Retirement Act, a bill introduced by Sen. Rand Paul (R-KY) that would allow annual and tax-free withdrawals of up to $5,250 from 401(k)s, 403(b)s, 457s or IRAs if the money would be used to pay for college or to satisfy college debt. Kaplan stressed that “this is only a proposal” and that it is “in the very initial phases.” He added that
Sen. Pat Toomey (R-PA) has announced that he plans to introduce a similar bill that would allow withdrawals from 401(k)s, 403(b)s, 457(b)s or IRAs if the money will be used to pay for long-term care insurance.
And Kaplan noted that several candidates for president in 2020 have proposed a financial transactions tax. “The key here is that would include retirement plans and be a tax on retirement plan transactions,” he said, but adding that “right now, there is nothing for you to do than be aware of it.”
Available on Demand
The ASPPA 4th Quarter Washington Update is now available on demand. For more information, click here.
- Log in to post comments