Some SECURE Act Basics

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  What Does the SECURE Act Stand For?

  The acronym stands for Setting Every Community Up for Retirement Enhancement Act.

  The Act contains an array of changes to all types of qualified and individual retirement plans. We already know the impact – both positive and negative, but on balance, positive – of many of these changes. And there are some provisions that the IRS or DOL still have to provide guidance on.

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  When Does the SECURE Act Take Effect?

  Most of the law’s provisions became effective January 1, 2020. Two notable exceptions are the provision for covering long-term part-time employees in retirement plans and the provisions for the new Pooled Employer Plans (PEPs), as detailed below.

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  Is the SECURE Act a Good Thing?

  Overall, the SECURE Act is a positive for employers who sponsor or want to sponsor a retirement plan.

  Employers and the retirement plans they sponsor will want to become familiar with the Act’s main provisions that we’ve outlined below – and advisors will want to understand them, as well. We’ve also included some changes that will impact individuals, too – and we’ve highlighted with ⚠️️ ️Caution the potential pitfalls that everyone will want to avoid.

  TRA is your expert partner in understanding the SECURE Act changes – and in helping you leverage them to improve retirement plan outcomes.

The Key Details

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  How the SECURE Act Provides Incentives & Benefits for Plan Sponsors

  For any employer who thought offering a retirement plan was beyond their reach, there’s no longer an excuse. The SECURE Act not only creates new incentives to start a plan – it also modifies existing incentives to make establishing a plan more attractive. In addition, some of the SECURE Act’s provisions also offer benefits to existing plans.

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    Increased Tax Credit for Starting a Plan

    • A newly created 401(k) plan with 20 or more Non-Highly Compensated Employees (NHCEs), can claim a tax credit of $5,000 per year for three years to cover 50% of implementation and administrative costs:
      • For the first credit year (year when the plan is established) and for each of the two taxable years immediately following the first credit year, the tax credit available is the greater of $500, or the lesser of $250 for each NHCE who is eligible to participate in the Plan and $5,000.
      • This provision is effective for tax years beginning after December 31, 2019.
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    Automatic Enrollment: Higher Cap & New Tax Credit

    • The cap in automatic enrollment in employer-sponsored plans is now 15% of pay, up from 10%.
    • Starting in 2020, smaller plans who add automatic enrollment may be eligible to claim a $500 tax credit per year for up to three years (the year the plan implements auto enroll, plus two years thereafter).
    • New plans can claim both the tax credit for starting a plan as well as the tax credit for automatic enrollment.
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    More Time to Adopt a New Plan

    • Effective for plan years beginning after December 31, 2019, an employer can adopt a new plan by the due date of the employer’s tax return, including extensions.
    • This means an employer is now able to adopt a plan by the due date of the tax return on which the employer wishes to claim a tax-deductible discretionary contribution.
    • A salary deferral provision must be in place before the plan accepts elective deferrals. If an employer adopts a 401(k) plan after the end of their tax year, they cannot take any 401(k) salary deferrals for that year.
    • Best practice is always to adopt a plan before the end of the tax year. That gives you the biggest window of opportunity to maximize all types of tax-deductible contributions.
    • ⚠️️ Caution: Normal Form 5500 filing deadlines and minimum funding deadlines still apply, regardless of when the plan is adopted.
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    Fewer Safe Harbor Employee Notice Requirements

    • Effective for plan years beginning after December 31, 2019, the participant Safe Harbor notice is only required for plans using Safe Harbor 401(k) Matching to meet the Average Deferral Percentage test.
    • ⚠️️ Cautions:
      • Before you eliminate this participant communication, check to see if your plan uses the Qualified Automatic Contribution Arrangement match or contains any other match provisions intended to meet the Average Contribution percentage test. If so, you’ve still got to provide the participant Safe Harbor notice.
      • We’re awaiting further guidance to clarify all the provisions to which the Safe Harbor notice elimination applies. We’ll update you when we receive this guidance.
      • For changes made mid-year, the SECURE Act did not change the requirements for providing a revised Safe Harbor Notice.
      • If your plan uses the “might/maybe” Safe Harbor, you may still be required to provide the notice in order to be compliant with these rules. You may want to consider eliminating this provision and instead use the new flexibility offered under the SECURE Act’s new provision for Safe Harbor Nonelective Contributions.
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    Safe Harbor Employer Non-Match Contributions: More Flexibility

    • Effective for plan years beginning December 31, 2019, a plan can amend its Safe Harbor nonelective provision (both the regular and Qualified Automatic Contribution Arrangement), at any time up to 30 days prior to the end of the plan year for which it is effective.
    • A plan may be amended to add the Safe Harbor nonelective contribution after the 30 days prior to the end of the plan year but before the deadline for refunding Average Deferral Percentage test refunds (generally before the end of the plan year following the year of the test failure).
    • ⚠️️ Cautions:
      • If the plan already includes a Safe Harbor contribution or Qualified Automatic Contribution Arrangement to meet the Average Deferral Percentage test for the plan year, you cannot amend the plan to include a Safe Harbor nonelective contribution that year.
      • An earlier amendment deadline may apply given the employer tax year for which the nonelective contribution will be deducted. However, the cost of the Safe Harbor nonelective contribution that must be contributed is increased to 4% of compensation from the traditional 3%.
      • This change does not apply to 403(b) or 457(b) Plans.
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    Introducing the Pooled Employer Plan (PEP)

    • PEPs are a type of open Multiple Employer Plan (MEP).
    • PEPs will operate under the established guidelines for MEPs, with the following exceptions:
    • No business nexus (commonality) required.
    • Must be sponsored by a Pooled Plan Provider (PPP).
    • No audit required if a PEP meets two conditions:
      1. No single adopter has more than 100 eligible participants.
      2. The total number of eligible participants across all adopting employers is not more than 1,000.
    • Each adopting employer will retain fiduciary liability for the selection and monitoring of the PPP.
    • PEPs are effective for plans beginning January 1, 2021.
    • PEPs will allow unrelated employers to “pool” together to create a single plan under ERISA, provided the plan is:

    1. Administered centrally with a single PPP, as well as any other service-provider fiduciaries across all adopting employers of the PEP. (All PEP plans will be required to have a designated PPP as the named fiduciary of the plan.)
    2. Provide for the same investment options for all participants across all adopting employers
    3. Share the same plan year among all adopting plans.

    • The PPP may choose to file all adopting employer plans as a single ERISA plan on one Form 5500 or file individual 5500 forms for each adopting employer.
    • The PPP also must designate one or more trustees for safekeeping of plan assets as well as setting procedures and guidelines to ensure timeliness remittance of deferrals, loan repayments, distributions, etc.
    • ⚠️ ️Caution: PEPs must be defined contribution (DC) plans – in other words, there are no 403(b) PEPs or Defined Benefit PEPs allowed.
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    Changes to Multiple Employer Plans (MEPs)

    • Under the SECURE Act, a MEP cannot lose its tax-advantaged status as a result of non-compliance or a disqualifying event of one of the adopting employers, as had previously been the case. This is commonly known as the elimination of the “one bad apple” rule.
    • Tax credits for plans effective after December 31, 2019 will also apply to MEPs and to Pooled Employer Plans (PEPs) established after this date.
    • ⚠️ Caution: If you currently have an Open MEP and want to appoint a Pooled Plan Provider (PPP) as Trustee so that you can convert it to a PEP, wait until the IRS issues further guidance. We’ll keep you informed when we know the way to do this to ensure your plan stays in compliance.
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  How the SECURE Act Expands Plan Coverage and Savings Flexibility

  Also among the SECURE Act’s most important provisions are those that make retirement plans available to more employees – and make saving for retirement more flexible for many Americans.

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    Mandatory Coverage for Long-Term Part-Time Employees

    • Beginning in 2021, employers will need to track the hours worked for their long-term part-time employees who previously were excluded from participation in their plans.
    • The SECURE Act requires plans to make salary reduction contributions for employees who are at least 21 years of age and who have completed at least 500 hours of service in three consecutive 12-month periods of employment.
    • ⚠️ Caution: These new rules do not apply to collectively bargained plans or 403(b)s.
    • Employers may ignore all periods of service for long-term part-time types of employees prior to January 1, 2021.
    • Based on age and service requirement, employees currently excluded from a plan will not be covered until 2024.
    • Long-term part-time employees who become plan participants can be excluded from safe-harbor contributions, nondiscrimination testing, and top-heavy requirements.
    • If long-term part-time employees are eligible for employer contributions — such as a match — vesting years of service must be based on 500 hours of service for any vesting computation period.
    • If a long-term part-time employee meets the normal age and service requirements and is not part of an excluded class of employees, they must be treated like any other eligible employee and be permitted to participate in their employer’s plan.
      • ⚠️ Caution: We await further guidance regarding how to handle vesting for such employees. We’ll keep you posted as we learn more.
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    Required Minimum Distributions Start Later

    • For those who reach age 70 ½ after December 31, 2019, the required beginning date for receiving Required Minimum Distributions (RMDs) from a qualified retirement plan or Individual Retirement Plan (IRA) is extended to not later than the April 1 following the attainment of age 72.
    • This new RMD rule is applicable to individuals born after June 30, 1949.
    • ⚠️ Caution: Individuals who began receiving RMDs prior to December 31, 2019 are not covered by this change.
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    Traditional IRAs: No More Age Restrictions on Contributions

    • Over age 70 ½? Starting in 2020, you (and everyone) can make non-Roth deductible IRA contributions.
    • ⚠️ Caution: IRA deductions made after age 70 ½ reduce IRA charitable distribution exclusions.
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    New Rules for Safe Harbor Qualified Automatic Contribution Arrangement (QACA) Plans

    • The SECURE Act increased the 10% cap on the QAC Maximum Automatic Deferral to 15%.
    • This increase doesn’t apply to the initial period (first year of automatic enrollment) and doesn’t change employer contributions under the QAC Provision.
    • ⚠️ Caution: The plan document must be amended to increase this limit.
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    Lifetime Income Investment Flexibility

    • New IRS Code Section 401(a)(38) clarifies that if a lifetime income investment is no longer authorized to be held as an investment potion under a Defined Contribution plan, a 403(b) plan, or 457(b) plan, the plan may allow a qualified distribution of the lifetime income investment.
    • Participants must:
      • Make these elections within 90 days after the investments are dropped from the plan.
      • Roll over the distributions to IRAs or other rollover vehicles by a trustee-to-trustee transfer.
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    Guaranteed Income Provider Selection: Fiduciary Safe Harbor

    • When selecting a guaranteed investment income contract (fixed-term, life, or joint lives annuity contract), a fiduciary will be deemed to have met their fiduciary duty if they:
      • Engage in an objective search for insurers;
      • Conclude the insurer can fulfill the contract; and,
      • Conclude that the annuity cost is reasonable.
    • This activity can be done periodically – annually may be sufficient — and does not need to be done with each contract placed with the reviewed insurer.
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  Other Important SECURE Act & FCAA Changes

  Don’t overlook these SECURE Act/FCAA provisions that could also impact you or your sponsored plan. Advisors may want to pay special attention to those provisions that may impact their individual as well as retirement plan clients.

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    402(f) Special Tax Notice: Requirements & Changes

    • To help participants understand their rollover options, plans must provide the 402(f) Notice — referred to as the Special Tax Notice or Rollover Notice — to them within a reasonable amount of time before making an eligible rollover distribution.
    • The SECURE Act made multiple changes to distributions rules from qualified plans, including 403(b) and governmental 457(b) plans.
    • Some of the changes are immediately effective for participants requiring updates to the 402(f) Notice used.
    • ⚠️ Caution: Plan sponsors also need to update their plans’ Distribution Election Forms. Contact your TRA Regional Sales Consultant to learn what actions plan sponsors need to take.
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    Early Withdrawal Rules Expanded for Birth or Adoption

    • A premature retirement distribution will not be subject to the 10% penalty if the distribution is for the birth of adoption of a child (or individual who is incapable of self-support).
    • Such distributions cannot exceed $5,000.
    • ⚠️ Caution: These distributions are subject to income tax.
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    New Qualified Disaster Distributions and Loans

    • Beyond the SECURE Act, the FCAA permits premature retirement distributions to cover disasters that occurred prior to December 20, 2019 and are declared major disasters during the period beginning January 1, 2018 and ending February 18, 2020.
    • Premature retirement distributions for up to $100,000 (cumulative limit) for Qualified Disaster Distributions are exempt from mandatory withholding and the 10% penalty.
    • Qualified Disaster Distributions are subject to income tax but are treated as distributed evenly over a three-year period (unless the taxpayer elects to report full amount in year of distribution).
    • Qualified Disaster Distributions can be repaid within three years of receipt.
    • Pre-retirement distributions intended for the purchase of a primary residence that were cancelled because of an eligible disaster can now be paid back.
    • Plan participants can take up to a $100,00 loan for disaster recovery (up from $50,000) and can delay repayments to their plan for up to one year.
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    403(b) Custodial Account: New In-Kind Distribution Rules

    • A 403(b) plan can now distribute annuity contracts to a participant or beneficiary in-kind and the custodian holding the annuity contract will continue to treat it on a tax-deferred basis as a 403(b)(7) custodial account.
    • This is similar to the treatment of fully paid annuity contracts under Revenue Ruling 2011-7 until such amounts are actually paid to the participant or beneficiary.
    • ⚠️ Caution: This provision does not apply to custodial accounts with mutual funds. We’re awaiting further guidance from the IRS on this topic and will update you when we know more.
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    No More “Stretch IRAs”

    • If an original IRA owner passed away after December 31, 2019, more beneficiaries will likely have to take money out of the plan than was permitted under the prior “stretch IRA.”
    • Generally, IRA beneficiaries will now be required to take payments of the entire plan within ten years. (There are no Required Minimum Distributions, but beneficiaries must have completed all withdrawals from the plan by the end of ten years.)
      • Exceptions to this new rule include assets left to a surviving spouse, a minor child, a disabled or chronically ill individual, and beneficiaries who are less than ten years younger than the decedent.
    • The SECURE Act also extends the five-year post death distribution rule to ten years.
    • ⚠️ Cautions:
      • Inherited an IRA from an original IRA owner who passed away prior to January 1, 2020? Then you need not make any changes to your current distribution schedule.
      • If a “stretch IRA” is part of your estate plan, you should contact your personal tax professional to determine your best course of action under this new provision.
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    No More “Credit Card” Loans from Plans

    • As of December 20, 2019, plans that permitted loans through use of a credit card under IRS Code Section 72(p) are no longer permitted to offer this style of taking a loan.
    • ⚠️ Caution: Any future purchase made with a credit card linked to a retirement plan will be treated as a taxable distribution and could trigger plan qualification issues.
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    529 Plan Qualified Expenses Expanded to Include Student Loans and Apprenticeships

    • Effective January 1, 2019, up to $10,000 (cumulative limit) annually of 529 plan funds can be used to pay expenses of student loans or apprenticeships.
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    Big Increase in Penalties for Failing to File Form 5500 and Form 8955SSA

    • ⚠️ Caution: Effective for filings due after December 31, 2019, the SECURE Act substantially increases penalties for failing to file Form 5500 and Form 8955-SSA (among others) on a timely basis. In addition, any DOL late filing penalties still apply.
      • For example, a late filing of Form 5500 is now $250 per day, with a maximum of $150,000 per plan (per plan year missed).
      • Previously, a plan that filed late paid only $25 per day in penalties, up to a maximum penalty of $15,000.
      • And the DOL can still impose a penalty of $2330 per day for a late Form 5500 filing.
    • Here’s an article that details the penalties for late filing of these and other forms – and how to avoid them or at least mitigate their impact.
      • TRA’s 3(16) Plan Administration Relief Services (PARS) minimize the chance that you will miss plan filing deadlines. These 3(16) Delegated Fiduciary Services specifically include preparing, signing and timely filing of the Form 5500 and Form 8955-SSA on behalf of plan sponsors, among other features that simplify plan sponsor administration.
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    Easing of Defined Benefit Nondiscrimination Rules

    • The SECURE Act provides nondiscrimination testing relief for Defined Benefit (DB) plans that are “soft frozen” prior to April 5, 2017 that allow matching contributions to be used in the nondiscrimination testing.
    • Previously, DB plans which no longer allow new employees to become participants (i.e., “soft frozen” plans) could eventually fail IRS nondiscrimination rules.
      • The failure could require that the employer had to make a “gateway” contribution, which can be as much as 7 ½ % of payroll.
    • Generally, employers who “soft froze” their plans replaced the benefit with an employer contribution to a Defined Contribution (401(k)) plan.
      • The employer contribution (match or otherwise) can now be used in the testing, which will prevent the “gateway” contribution and decrease the possibility that plans will end benefit accrual to all participants through a “total freeze” or termination.
    • The change is designed to protect older, long-service participants in DB plans.
    • The change is effective retroactively, so past years will also be covered.
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    Lower In-Service Distribution Age for Pension & Government Plans

    • The SECURE Act lowers the age for in-service distributions under a pension plan or governmental 457(b) plan to age 59 ½.
      • Previously, the minimum age for in-service distributions from pension plans was 62 and was 70 ½  for 457(b) plans).
      • ⚠️ Caution: This is not applicable to 401(k) or 403(b) plans.
    • Effective for plan years beginning after December 31, 2019.
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    Kiddie Tax

    • Beginning in 2020, children with significant income are no longer subject to trust tax rates, but subject to the incremental tax rate of their parents.
    • Taxpayers can elect to apply this new rule for the 2019 tax year — and may choose to apply the rule for the 2018 tax year through an amended return.
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    Benefit Statement Disclosures Must Estimate Lifetime Income Streams

    • Under this provision, a defined contribution plan participant benefit statement must contain an estimate of the lifetime monthly income stream that could be obtained based on the participant’s benefit under the plan.
    • This disclosure will be required on an annual basis.
    • The DOL originally proposed this requirement in 2013 but is was not finalized until the SECURE Act.
    • ⚠️ Caution: This provision will be effective once the DOL provides more guidance. We’ll update you when we have more details.
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  Actions for Plan Sponsors

  Plan Sponsors must operate their plans in accordance with the law, of course — and if they adopt amendments as a result of the SECURE Act, they are responsible for making the corresponding changes to their plan documents.

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    Plan Amendments Are Your Responsibility

    • ⚠️ Caution: You must amend your written plan document with all applicable changes related to the SECURE Act by no later than the last day of the first plan year following the changes, beginning on or after December 31, 2022.
    • For terminating plans, this deadline is presumed to be the plan’s termination date.
    • This applies to 401(k), 403(b) and 457(b) plans.
    • The amendment deadline is extended by two years for governmental plans and certain union plans.
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    How TRA Can Help

    • Contact TRA for more direction on what action is needed to amend plan documents — and when you’ll need to do so.
    • Now, more than ever, hiring TRA as a Delegated 3(16) Plan Administrator makes sense. Our Plan Administration Relief Services (PARS) include amending plan documents as needed. In other words, we do the work – and you don’t have to!

     

SECURE 2.0 Resources for Plan Sponsors and Advisors - 403(b) Plans

• (SECURE 2.0) made sweeping changes to laws affecting retirement plans. This reference chart provides a brief description of some of the changes that affect 403(b) plans.

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    Effective Immediately

    Effective Immediately

    Required Minimum Distributions (RMDs) (Mandatory)	The penalty for failing to take an RMD decreased to 25% of the RMD amount, from 50% currently, and 10% if corrected in a timely manner. The age to start taking RMDs increased to age 73 in 2023 and will increase to 75 in 2033.
    Self-certification for hardship withdrawals (Optional) Permitted	Participants can self-certify the existence of a financial need. For example, they no longer need to present medical bills to prove medical expenses.
    Increased tax credits for plan start-up expenses (Optional) Not Permitted	Employers with 50 or fewer employees receive a tax credit increase from 50% to 100% for eligible start-up costs. The 50% credit remains the same for Employers with between 51 and 100 employees. The credit is subject to a dollar cap. The minimum credit is $500, and the maximum is $250 times the number of eligible non-highly compensated employees, with a maximum credit of $5,000.
    Additional tax credit for percentage of plan contributions (Optional) Not Permitted	Employers with up to 50 employees: additional tax credit of 100% of employer contributions up to $1,000 per participant for the first two years. The cap decreases by 25% in years 3, 4, and 5. Employers with 51 to 100 employees: the credit decreases by 2% for every employee over the 50-employee threshold. *Credit is not available with respect to those employees earning over $100,000 (indexed) with deferrals or if there are defined benefit plan contributions
    De minimis financial incentives to encourage enrollment (Optional) Permitted	Employers can now entice employees to start making 401(k) deferrals by offering “de minimis” financial incentives. A de minimis financial incentive may not exceed $250 in value. The cost of incentives cannot be paid for with plan assets, is includible in the employee’s gross income and wages, and is subject to applicable withholding and reporting requirements for employment tax purposes.
    Roth treatment for employer-matching and nonelective contributions (Optional) Not Permitted	Employers can permit employees to designate employer matching or nonelective contributions as Roth contributions. Student loan matching contributions may also be designated as Roth contributions. Matching and nonelective contributions designated as Roth contributions are not excludable from the employee’s income and must be 100% vested when made.
    Special distribution/loan provision for federally declared disasters (Optional) Permitted	Established permanent rules for natural disasters, permitting up to $22,000 in “qualified disaster recovery distributions” that are not subject to the 10% tax on early distributions. Qualified disaster recovery distributions are eligible to be taken into income over three years and can be repaid to the plan. In addition, for individuals who experience a qualified disaster, the maximum plan loan limit can be increased up to $100,000 (or 100% of the participant’s account balance, if less), and a one-year extension of any loan repayment period can be provided.
    Recovery of Overpayments of Benefits (Optional) Permitted	SECURE 2.0 amends ERISA to permit both pension plans and individual account plans to recover benefit overpayments, and the requirements are different. SECURE 2.0 provides new guidance to fiduciaries and plan sponsors on recovery of overpayments, and when overpayments can be permitted to exist as long as the employer makes corrective contributions or has forfeitures to make up the funds lost to the plan. There are restrictions on how the overpayments would be corrected and when they must be corrected.
    Repayment of Birth or Adoption Distributions (Mandatory)	Effective for birth or adoption distribution after December 29, 2022, such distributions must be repaid within three years from the date of the distribution. For birth or adoption distributions that occurred prior to the December 29, 2022, the distribution, or the elected withdrawal, must be repaid before January 1, 2026.
    EPCRS Changes (Mandatory)	EPCRS, an Internal Revenue Service (IRS) program that provides rules for correcting retirement plan errors, to among other things, has been significantly expanded. The changes include an increased availability of self-correction of retirement plan errors and provide for expanded options for correcting plan loan issues.
    Additional Investment Options: Common Investment Trusts (CIT) (Optional) Permitted	A CIT is a tax-exempt pooled investment vehicle that holds assets attributable to certain types of employer-sponsored retirement plans. Current securities laws prevent CITs from holding 403(b) plan assets. However, SECURE 2.0 expanded 403(b) plan investment options to include CITs. We expect the securities laws to be fixed with later legislation to align with SECURE 2.0.

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    Effective 2024

    Effective 2024

    Required Minimum Distributions (RMDs) (Mandatory)	RMDs will no longer be required from Roth accounts in Employer retirement plans. This means Roth balances will no longer be included in the RMD calculation.
    Increased dollar limit for Mandatory Cash-Outs for terminated participants (Optional) Increased if plan’s current limit is $5,000	$5,000 maximum limitation will be increased to $7,000
    Matching student loan payments (Optional) Not Permitted	Employers will be able to “match” employee student loan payments with matching payments to a retirement account, giving workers an extra incentive to save while paying off educational loans.
    Emergency savings (PLESA) (Optional) Not Permitted	Employers will be able to offer the emergency savings account to their 401(k) plan. Employees could access the account at least once a month to cover unforeseen expenses, without incurring any taxes or penalties. These are only available for non-highly compensated employees (NHCEs) and must be made as PLESA Roth. NHCEs can be automatically enrolled at 3% or less and can contribute until the account reaches a balance of $2,500. If the plan provides for matching contributions, these emergency savings contributions would be eligible for a match as well.
    Allowing $1,000 emergency withdrawal penalty free (Optional) Not Permitted	Certain withdrawals from 401(k) and 403(b) plans for emergency expenses will not be subject to the 10% tax on early distributions. Only one emergency expense withdrawal of up to a maximum of $1,000 is permissible each year. The participant must be allowed to repay the withdrawal within the following three years. Additional emergency expense withdrawals within the three-year period are limited if repayment has not been made or additional contributions have not been made equal to or exceeding the repayment amount.
    Hardship Source Expansion Withdrawal Availability (Optional) Permitted	SECURE 2.0 brings 403(b) hardship regulations in line with 401(k) hardship requirements. 403(b) plans can now allow hardship withdrawals of earnings attributable to the employee’s elective deferrals as well as distributions from qualified non-elective and matching contributions sources.
    Domestic Abuse Distributions (Optional) Not Permitted	A distribution may be made to a participant that self-certifies that they are a victim of domestic abuse. These distributions are exempt from the additional 10% tax on early distributions and can be repaid for up to 3 years following the distribution. There are restrictions related to these types of distributions, such as the amount and sources available.
    Surviving Spouse Election Regarding RMDs (Optional) Permitted	This provision allows a surviving spouse who is the participant’s sole beneficiary for required minimum distribution (RMD) purposes, to elect to use the uniform lifetime table for the applicable distribution calendar years after the calendar year of the participant’s death Additional guidance is needed if this election can only be made by the participant or if the spouse will be able to make this election.

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    Effective 2025

    Effective 2025

    Long-Term Part-Time (LTPT) Employees (Mandatory for ERISA plans only)	The long-term, part-time (LTPT) employee rules apply if the 403(b) plan excludes employees who normally work less than 20 hours per week (or designates hours less than 20) from making elective deferral contributions. There are two other exclusions permitted in 403(b) plans that may also subject the plan to the LTPT employee rule: 1) student employees working for a school, college, or university; and 2) employees whose contribution would be $200 or less. Until guidance is received, it is not clear whether continuing these two exclusions will cause the plan to be subject to the LTPT rules. An employee would be considered an LTPT employee if they reached age 21 and worked at least 500 hours in two consecutive years.
    Higher Catch-Up Contributions (Optional) Undetermined	For 401(k), 403(b), and governmental plans, individuals ages 60 through 63 years old will be able to make catch-up contributions up to $10,000 (indexed). The catch-up limit for people age 50 and older in 2023 is $7,500; this remained the same for 2024.The prior LTPT requirements of three consecutive years has been reduced to require only two consecutive years in which at least 500 hours are worked, effective for plan years beginning after December 31, 2024.
    Automatic Enrollment Requirement (Mandatory)	All 401(k) and 403(b) plans newly established on or after December 29, 2022 will be required to have an Eligible Automatic Contribution Arrangement (EACA) feature. This includes automatic enrollment at a default rate of between 3% and 10% with a 90-day withdrawal option and automatic escalation of 1% per year up to a maximum of at least 10%, but no more than 15%. This new provision will not apply to governmental plans, church plans, small employers with 10 or fewer employees, SIMPLE plans, or new employers that existed for less than three years.

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    Effective 2026

    Effective 2026

    After-tax Roth Treatment for Catch-up Contributions (Mandatory)

    Participants who earned over $145,000 (indexed) in the prior year can only make Catch-up Contributions as after-tax Roth.

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    Effective 2027

    Effective 2027

    Qualified Long-term Care Distributions (Optional) Undetermined

    This provision permits retirement plans to provide for distributions for the payment of premiums for certain specified Qualified Long-Term Care Distributions. Such distributions are exempt from the additional 10% tax on early distributions.

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    Other provisions that do not have a specific effective date:

    Lost and Found: By December 29, 2024, the Secretary of Labor is to establish a searchable database for retirement savings lost and found for participants and beneficiaries to use to locate the administrators of plans, and to assist individuals in locating those plans. This allows Secretary of Labor to update that database with information on plan mergers, consolidations, bankruptcy, termination or to change the plan or change to the plan name. Searches of the database to locate new retirement benefits found, and it is established under ERISA for ERISA plans. The database will require a recording of the name of the plans and changes in the names of plans. Administrators must provide information on when participants’ benefits transfer to an annuity or when they were reported on the Form SSA and provide such information to the Department of Labor.

• Click Here To Download The Charts Above

For Employees: Enhancing Savings & Financial Security

• Here are some of the key provisions affecting defined contribution plans that are under consideration to include in the final legislation. Refer to these icons to see which provisions are included in some form in the current versions of each bill under consideration in Congress.

  Securing a Strong Retirement Act (SSRA)

   Enhancing American Retirement Now Act (EARN)

  Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act (RISE & SHINE)

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    Increased automatic enrollment

    

    

    

     

     

    • Each bill under consideration in Congress proposes increasing automatic enrollment in different ways; for example, through:
      • Mandatory auto enrollment for all plans.
      • Tax credits to incentivize employers to offer auto enrollment.
      • Re-enrolling participants every three years for plans that adopt auto enrollment in the future.
    • Given the importance of closing the retirement savings coverage gap, some form of auto enrollment seems likely in the final legislation – but it’s not certain which version will be the preferred one.
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    More employees to qualify for the Saver's Credit

    

    

     

     

    • For employees below an income threshold, there is a proposed across-the-board increase in the Saver’s Credit to 50% of contributions.
    • The EARN bill proposes to make the Saver’s Credit refundable, and paid into an IRA or retirement plan (not taken as cash or to offset taxes due).
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    Emergency savings accounts

    

     

     

    • This proposal would give employers the option to add emergency savings accounts to their plans to give employees penalty-free access to emergency funds.
    • Employee contributions would be after tax (but not Roth) and available for matching by employers.
    • Employers would choose the account limit for their plans – up to $2,500 per employee – and whether to use auto enroll of up to 3%.
    • Accounts would have to be held as cash or in interest-bearing deposit accounts or invested in capital-preservation vehicles such as money market funds.
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    Emergency withdrawals

    

     

     

    • This proposal would add to current hardship withdrawal allowances by permitting in-service, penalty-free plan withdrawals up to $1,000 for certain unforeseen or immediate emergency expenses.
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    Automatic IRA portability

    

     

     

    • This provision would permit certain small retirement plan account balances for terminated employees to be automatically enrolled into a default IRA. Plans would have the option to automatically transfer default IRA assets into a participant’s current employer-sponsored plan.
    • Plan sponsors with 100 or fewer employees who adopt automatic IRA portability would be provided a $500 tax credit.
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    Boosting catch-up contribution limits

    

    

     

     

    • Depending upon the bill, this provision would allow participants aged 60 – 64 to contribute an additional $10,000 a year to their retirement plans ($5,000 for SIMPLE IRAs.)
    • Important note: both the SSRA and EARN bills propose that catch-up contributions be required Roth contributions, even if an employee’s regular contributions are pre-tax.
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    Relaxed Required Minimum Distribution rules

    

    

     

     

    • This provision would increase (in stages) the age at which Required Minimum Distributions (RMDs) must begin, up from age 72 to 75.
    • Also proposed is lowering the penalty for not taking an RMD from 50% of the required amount not taken, down to 25%.
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    Greater eligibility for part-time employees

    

    

    

     

     

    • This provision would make employer-sponsored retirement plans available to more part-time employees by lowering the number of consecutive years in which they need at least 500 hours of service from 3 years to 2 years.
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    Employer match for student loan payments

    

    

     

     

    • With this provision, employers would have the option to make matching contributions to employees’ qualified student loan payments.

SECURE Act Webinar Series

• Our webinar series spotlights the key provisions of the SECURE Act for advisors and plan sponsors. In just an hour TRA experts provide the information you need for SECURE Act success!

  Plan on joining us for the next webinar. And if you’re not able to attend – or would like a refresher – tune into a recorded session.

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    SECURE 2.0: Long-Term Part-Time Regulations - 1/31/24

    The Long-Term Part-Time Employee (LTPTE) rules can create significant compliance challenges for plan sponsors and service providers who are unaware of scope and implications of these requirements. This presentation highlights the nuances of these rules and how they impact eligibility, vesting, compliance testing, audits and Form 5500 filings. Multiple examples illustrate the day-to-day impact of these rules and how plan design considerations can mitigate their overall impact.

    Learning Objectives:

    • Understand the changes in the LTPTE rules from 2024 to 2025
    • Apply eligibility and vesting rules appropriately
    • Comprehend the impact of LTPTEs on plan testing
    • Know when documents are required to be amended

    There is also a segment at the end with questions & answers. Watch today!

    Watch Today

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    SECURE 2.0 - Reshaping the Retirement Landscape - 1/24/24

    The long-awaited and much anticipated “SECURE 2.0” is here. This bill makes significant changes to most aspects of the retirement environment including expanded contribution limits and credits, enhancements of SIMPLE IRA arrangements, emergency saving account options in 401(k), and matching of certain student loan payments. In addition, we cover changes to excesses, corrections, RMD and rollover rules. Lastly, the timing, amendment, and effective dates of key provisions are discussed.

    Learning Objectives:

    • Understand the new 401(k) features including emergency savings accounts, student loan payments, starter 401(k)s, required auto-enrollment features and increased credits and limitation

    • Identify enhanced SIMPLE-IRA features, modifications to 457(b) eligibility requirements and ability to treat employer contributions as Roth amounts
    • Recognize expanded rollover options, additional distribution penalty exemptions, RMD changes
    • Summarize changes to MEP/PEP and Group of Plans rules
    • Consider the timing and effective dates of the provisions and requirement amendments

    There is also a segment at the end with questions & answers. Watch today!

    Watch Today

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    SECURE Act 2.0 - Reshaping the Retirement Landscape - 1/25/23

    The long-awaited and much anticipated “SECURE 2.0” is here. Join TRA and Retirement Learning Center as we provide an overview of the many aspects of the new retirement-related legislation know as SECURE 2.0. This bill makes significant changes to most aspects of the retirement environment including expanded contribution limits and credits, enhancements of SIMPLE IRA arrangements, emergency saving account options in 401(k), and matching of certain student loan payments. In addition, we’ll cover changes to excesses, corrections, RMD and rollover rules. Lastly, the timing, amendment and effective dates of key provisions will be discussed.

    Learning Objectives

    • Understand the new 401(k) features including emergency savings accounts, student loan payments, starter 401(k)s, required auto-enrollment features and increased credits and limitation
    • Identify enhanced SIMPLE-IRA features, modifications to 457(b) eligibility requirements and ability to treat employer contributions as Roth amounts
    • Recognize expanded rollover options, additional distribution penalty exemptions, RMD changes
    • Summarize changes to MEP/PEP and Group of Plans rules
    • Consider the timing and effective dates of the provisions and requirement amendments

    
    Click here to review a summary of SECURE Act 2.0

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    What’s Next with SECURE Act 2.0? - 10/26/22

    Congress is considering multiple proposals that have the potential to dramatically reshape the retirement marketplace. Among the proposals, House Resolution (HR) 2954 “Securing a Strong Retirement Act of 2021” (SSRA), and the Senate’s (S) 1770 “Retirement Security and Savings Act” (RSSA)—two overlapping bills with strong bipartisan support—are most likely to be combined into expansive retirement reform referred to as, “SECURE 2.0.” Key objectives of the bills include expanding employee coverage by workplace retirement plans, increasing retirement savings, and preserving retiree income. Among the proposed provisions are enhancing automatic enrollment, increasing tax-credits for plan start-ups, and raising the age for mandatory distributions.

    Learning Objectives:

    • Understand key provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 (i.e., SECURE Act 1.0).
    • Summarize elements of SECURE 1.0 such as Pooled Employer Plans, Group of Plans, changes to part-time employee coverage, plan set-up deadlines, and lifetime income illustrations and the deadline to provide them.
    • Recognize key provisions in the combined legislation known as “SECURE Act 2.0”
    • Identify other retirement reform proposals
    • Consider practical and tactical actions for plans sponsors and investors considering the new proposals.

    Watch Today

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    From MEPs to PEPs & More: What Advisors Need to Know - March 25, 2020

    On Wednesday March 25, 2020, Trey Galuppi, TRA’s MEP Specialist and John Markley, TRA’s Industry Relations Director, addressed the SECURE Act’s impact on existing retirement plan platforms, defined new opportunities the legislation creates – and demonstrated how TRA can help you craft the plans that best meet your clients’ needs.

    They focused on some of the most significant changes in the SECURE Act relating to Multiple Employer Plans (MEPs) and the new Pooled Employer Plans (PEPs). If you want to help your plan sponsor clients optimize the SECURE Act’s provisions, this is a webinar you won’t want to miss.

    Our focus is on helping advisors determine which plan platform is right for which clients.

    Click here to download the presentation

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    Bringing the SECURE Act into Focus for 2020 - January 23, 2020

    On January 23, 2020, John Markley and Lisa Showalter brought the SECURE Act into focus. You can listen/view the recorded presentation below.

    A visionary in the retirement plan industry, John founded Markley Actuarial over 30 years ago. Since 2018, Markley Actuarial has been a division of TRA. John serves as a consultant to large plans, municipal plans, and plans with employee contributions.

    A past President of ASPPA’s College of Pension Actuaries, John is currently a member of the Government Affairs Committee of ASPPA.

    Lisa also joined TRA from Markley Actuarial in 2018. As a technical and consulting resource for TRA’s Sales Team, she works with plan sponsors and industry partners to provide customized plans tailored to clients’ needs. She is Certified Pension Consultant and a member of Women in Pensions Network.

    
    Click here to download the presentation