SECURE Act: What employers need to know for retirement plans

Thompson Coburn LLP
Contact

Thompson Coburn LLP

On December 20, 2019, the Setting Every Community Up for Retirement Enhancement Act (the “SECURE Act”), became law. It passed the House with bipartisan support in May 2019, and passed in the Senate as part of the Further Consolidated Appropriations Act, 2020. The SECURE Act implements key retirement legislation reform for plan sponsors and individuals. As many of these changes must be implemented in 2020, we provide a summary of the Act below, with a highlight of the major changes for plan sponsors.

Major reform for retirement plans

Required beginning date

Effective for individuals who turn 70½ after December 31, 2019, the SECURE Act increases the age at which individuals must begin taking distributions from their retirement accounts from 70½ to 72.

Post-death required minimum distributions rules for defined contribution plans (401(k) profit sharing, money purchase pension) and IRAs

The SECURE Act changes the post-death RMD rules for non-defined benefit plans to require that all distributions after death be made by the end of the 10th calendar year following the year of participant’s death, unless the designated beneficiary is an "eligible beneficiary."

An eligible beneficiary is any beneficiary who, as of the date of participant’s death is:

  1. A surviving spouse of the participant;
  2. A child of the participant who has not reached the age of majority;
  3. Chronically ill; or
  4. Any other individual who is not more than 10 years younger than the participant.

This is effective for distributions due to a participant's death that occurred after December 31, 2019.

Automatic enrollment QACA safe harbor

Prior to the SECURE Act, the automatic enrollment safe harbor cap was 10% of an employee’s pay. Effective for plan years beginning after December 31, 2019, the SECURE Act increases this cap to 15% in the year following an employee’s deemed election.

Nonelective 401(k) safe harbor changes – traditional and QACA

The SECURE Act changes the following rules:

  1. Eliminates the safe harbor notice requirement;
  2. Permits a plan to be amended to become a nonelective safe harbor 401(k) plan until 30 days prior to the close of the plan year; and
  3. Permits a plan to become a nonelective safe harbor 401(k) plan after the 30th day before the close of the plan year if the plan is amended to provide for a nonelective contribution of at least 4% of compensation for all eligible employees and the amendment is adopted by the last day for distributing excess contributions for the plan year (generally by the close of the following plan year).

Note that safe harbor notices are still required for matching contribution 401(k) safe harbor plans.

Long-term part-time employees

The SECURE Act requires 401(k) plans (other than collectively bargained plans) to permit long-term, part-time employees who worked at least 500 hours in three consecutive 12-month periods to make salary deferral contributions. Employers are not required to make matching contributions or nonelective contributions on behalf of such employees and may continue to impose an age 21 eligibility requirement. For vesting purposes, a year of service is a 12-month period during which the part-time employee earned at least 500 hours of service. These part-time employees are excluded from nondiscrimination and top-heavy testing. This change is effective for plan years beginning after December 31, 2020. For purposes of determining the three consecutive 12-month periods, periods prior to January 1, 2021, do not need to be taken into account.

Child birth or adoption withdrawals

The SECURE Act permits participants to make penalty-free withdrawals of up to $5,000 per birth or adoption from their retirement plans within one year of the child’s birth or adoption, effective for distributions after December 31, 2019. Subject to certain requirements, these distributions can be recontributed to an applicable retirement plan to which rollovers can be made.

Reduced minimum age for in-service distributions

Effective for plan years beginning after December 31, 2019, the SECURE Act allows in-service distributions under a pension plan or governmental section 457(b) plan at age 59½ instead of 62 for pension plans or age 70½ for a governmental section 457(b) plan.

Multiple employer plans

The SECURE Act not only expands the accessibility of multiple employer plans but also protects participating employers from the “one bad apple” rule. Under the Act, a “covered” multiple employer plan is protected from disqualification if one or more of the participating employers fails to qualify. Importantly, a “covered” multiple employer plan is a plan that (a) is maintained by employers that have a common interest (other than the plan itself), or (b) has a pooled plan provider. While the Act sets forth certain requirements for a pooled plan provider, this option allows employers that otherwise do not share any common interest to form a multiple employer plan.

Additional reforms for retirement plans

Limits on loans

Effective for loans after the date of enactment, the SECURE Act prohibits qualified employer plans from making loans through credit cards or similar arrangements.

Lifetime income provisions

The SECURE Act requires benefit statements provided to defined contribution plan participants to include an estimate of the amount of monthly income the participant's balance could produce in retirement if benefits were received in a qualified joint and survivor annuity and a single life annuity at least once per 12-month period. The SECURE Act directs the DOL to issue model lifetime income disclosures and prescribe assumptions that may be used. This is effective for benefit statements furnished more than 12 months after the later of the DOL's publication of an interim final rule or model disclosures and assumptions.

Upon enactment, the SECURE Act also creates a new fiduciary safe harbor for employers that opt to include a lifetime income investment option in their defined contribution plan. It also permits participants to make direct trustee-to-trustee transfers (or annuity contract transfers) to an eligible employer plan or IRA of lifetime income investments that are no longer authorized to be held in a qualified defined contribution plan, a 403(b) plan, or a 457(b) plan, without regard to any plan restrictions on in-service distributions, effective for plan years beginning after December 31, 2019.

Plan reporting

Effective for returns due after December 31, 2019, the SECURE Act increases the penalties for failure to file retirement plan returns, including:

  • $250 per day for failure to file Form 5500 (not to exceed $50,000);
  • $10 per day for failure to file a registration statement (not to exceed $10,000);
  • $10 per day for failure to file a notification of change (not to exceed $10,000); and
  • $100 per failure for failure to provide a required withholding notice (not to exceed $50,000 for all such failures per calendar year).

Penalties are increased for failure to file to the lesser of $435 or 100% of the amount of tax due.

Effective for plan years after December 31, 2021, The SECURE Act directs the IRS and DOL to work together to modify Form 5500 so that all members of a group of plans may file a consolidated Form 5500. A group of plans would be eligible if all plans in the group (a) are defined contribution plans, (b) have the same trustee, named fiduciary and administrator, (c) use the same plan year, and (d) provide the same investments or investment options to participants and beneficiaries.

Defined benefit plans

Provides nondiscrimination, minimum coverage and Code § 401(a)(26) relief for closed or frozen defined benefit plans to permit existing participants to continue accruing benefits.

Plan adoption date

Effective for plans adopted for taxable year beginning after December 31, 2019, an employer can adopt a qualified retirement plan after the close of the taxable year, provided it is adopted by the filing deadline for the employer's tax return for the taxable year.

Provisions affecting tax-exempt employers

Effective for years on, before or after the date of enactment, certain employees of a nonqualified, church-controlled organization may be covered under a Code section 403(b) plan that consists of retirement income accounts.

The Secretary of Treasury will issue guidance that provides that if an employer terminates a 403(b) custodial account, the account can be distributed in-kind to a participant or beneficiary. The individual custodial account will be maintained on a tax-deferred basis as a 403(b) custodial account until paid out. This guidance is to be retroactively effective for tax years beginning after 2008.

Effective December 31, 2019 and for one year thereafter, the SECURE Act reinstates the exclusions for qualified State or local tax benefits and qualified reimbursement payments available to qualified volunteer emergency response volunteers and raises the exclusion for qualified reimbursement payments to $50 per month of service.

The SECURE Act also repeals the provision in the 2017 Tax Cuts and Jobs Act that imposed the unrelated business income tax on the value of qualified parking and transportation fringe benefits provided to employees. The repeal is retroactive to the 2017 law's date of enactment.

Additional reform for small employers and individuals

The SECURE Act increases the credit limit for small employer pension plan startup costs to the following: the greater of (1) $500, or (2) the lesser of (a) $250 multiplied by the number of non-highly compensated eligible employees or (b) $5,000. It also treats stipends and non-tuition fellowships for graduate and postdoctoral students that are includible in income as compensation for IRA purposes. Finally, it repeals the prohibition on contributions (and deductions) to a traditional IRA for individuals who have attained age 70½ by the end of the year, effective for contributions made for taxable years beginning after December 31, 2019.

Health and welfare changes: Repeal of Affordable Care Act (ACA) health taxes

Effective December 31, 2019, the SECURE Act repealed the Cadillac tax – the excise tax on high-cost employer-sponsored health coverage enacted as part of the ACA – and the medical device tax, the 2.3% excise tax on medical devices enacted as part of the ACA. It also repeals the health insurance provider tax, the excise tax on insurers of fully insured plan enacted as part of the ACA, effective for calendar years after December 31, 2020.

Plan administration

While some of the above changes have mandatory effective dates by which plans must operationally comply, plan sponsors have until the end of the 2022 plan year to adopt an amendment (governmental employers have until the end of the 2024 plan year) reflecting the changes. Some plan sponsors may wish to wait for additional guidance from the IRS before amending their plans to align with the SECURE Act, while others may wish to amend their plans as soon as possible.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Thompson Coburn LLP | Attorney Advertising

Written by:

Thompson Coburn LLP
Contact
more
less

Thompson Coburn LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.