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IRS Explains Certain Plans Retroactively Adopted After the End of Plan Year Are Not Required to File a Form 5500 for 2020

The IRS recently explained in an announcement that certain retirement plans adopted after the close of the employer’s taxable year will not be required to file a Form 5500 for 2020. Specifically, under the SECURE Act, an employer may adopt a retirement plan after the close of the employer’s taxable year (by the due date, including extensions, for filing its tax return for the taxable year) and elect to treat the plan as having been adopted as of the last day of the taxable year. This provision of the SECURE Act only applies to plans adopted for taxable years beginning after December 31, 2019. In its announcement, the IRS explained that if an employer adopted a plan during the employer’s 2021 taxable year, by the specified deadline, and elected to treat the plan as having been adopted as of the last day of the employer’s 2020 taxable year, then the… Continue Reading

IRS Publishes Updated Operational Compliance Checklist

The IRS recently updated its Operational Compliance Checklist (the ?Ç£Checklist?Ç¥) to include qualification requirements that will become effective during the 2021 and 2022 calendar years. Examples of items added to the Checklist for 2021 and 2022 include, among other things: Final regulations relating to updated life expectancy and distribution tables used for determining minimum required distributions; The SECURE Act requirement that qualified cash or deferred arrangements must allow long-term employees (i.e., employees who work at least 500 but less than 1,000 hours per year for three consecutive 12-month periods beginning on or after January 1, 2021) to participate; and Temporary relief from the physical presence requirement for spousal consents under qualified retirement plans. The Checklist is only available online and is updated periodically to reflect new legislation and IRS guidance. The Checklist does not, however, include routine, periodic changes, such as cost-of-living increases, spot segment rates, and applicable mortality tables,… Continue Reading

Required Minimum Distributions: A Tragedy in Three Acts

The SECURE Act and CARES Act made significant changes to required minimum distributions (?Ç£RMDs?Ç¥). What should you be doing to ensure your retirement plans are administered correctly? The first step is to understand your options. SECURE Act Shifts the Start Before the SECURE Act, RMDs had to begin by April 1st of the calendar year following the later of (i) the calendar year during which the participant retires or (ii) the calendar year in which the participant turns age 70??.?á Following the passage of the SECURE Act, the age cutoff in that rule changed from age 70?? to age 72, but only for individuals who turned age 70?? on or after January 1, 2020 (i.e., individuals born on or after July 1, 1949). In short, those terminated vested participants born before July 1, 1949 had to start their RMDs by April 1 of the year after turning 70??, while those… Continue Reading

IRS Issues Safe Harbor Plan Guidance on Sections 102 and 103 of the SECURE Act

The IRS recently issued Notice 2020-86 (the ?Ç£Notice?Ç¥), which provides guidance through a series of questions and answers with respect to Sections 102 and 103 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (the ?Ç£SECURE Act?Ç¥). Section 102 of the SECURE Act increases the maximum automatic elective deferral percentage for automatic enrollment safe harbor plans from 10% to 15% (provided, however, that the maximum automatic deferral rate remains 10% during the initial period of automatic elective contributions).  Notably, the Notice clarifies that a QACA safe harbor 401(k) plan is not required to increase the maximum percentage, so long as the percentage is (i) applied uniformly, (ii) does not exceed 15% (or 10% during the initial period of automatic elective contributions), and (iii) satisfies certain other minimum percentage requirements as described in Code Section 401(k)(13)(C)(iii).  The Notice also clarifies that, if a plan incorporates the maximum qualified… Continue Reading

The DOL Issues Guidance Regarding Lifetime Income Illustrations

The DOL recently issued an interim final rule (?Ç£IFR?Ç¥) pursuant to the Setting Every Community Up for Retirement Enhancement Act of 2019 (the ?Ç£SECURE Act?Ç¥) regarding the information that must be provided on pension benefit statements. ERISA requires plan administrators of defined contribution plans to provide periodic pension benefit statements to participants and certain beneficiaries. The SECURE Act requires plan administrators to provide annual statements illustrating participants?ÇÖ accrued benefits as two lifetime income stream illustrations: (i) a single life annuity, and (ii) a qualified joint and survivor annuity. The IFR describes certain required assumptions plan administrators must use when converting a participant?ÇÖs accrued benefit into lifetime income streams. The lifetime income stream illustrations must be accompanied by clear and understandable explanations of the assumptions underlying the illustrations. To assist plan administrators, the IFR provides model language that may be used to satisfy this explanation requirement. The IFR is effective September… Continue Reading

IRS Issues Guidance on Certain Changes Made Under the Secure Act and the Miners Act

The IRS recently issued Notice 2020-68 (the ?Ç£Notice?Ç¥), which contains several sets of questions and answers that provide helpful guidance regarding various provisions in the Setting Every Community Up for Retirement Enhancement Act of 2019 (the ?Ç£SECURE Act?Ç¥) and Section 104 of the Bipartisan American Miners Act of 2019 (the ?Ç£Miners Act?Ç¥). Specifically, the Notice addresses certain issues concerning the following provisions of the SECURE Act: The small employer automatic enrollment credit; The repeal of the maximum age for traditional IRA contributions; Participation of long-term, part-time employees in 401(k) plans; Qualified birth or adoption distributions; and Permitting excluded ?Ç£difficulty of care payments?Ç¥ to be taken into account as compensation for purposes of determining certain retirement contribution limits. The Notice also provides guidance with respect to the reduction in minimum age for in-service distributions as provided in the Miners Act. In addition, the Notice sets forth the deadlines to amend retirement… Continue Reading

Changes to Safe Harbor Notices for Recipients of Eligible Rollover Distributions

The IRS recently issued Notice 2020-62 (the ?Ç£Notice?Ç¥), which modifies the two safe harbor explanations set forth in Notice 2018-74 that plan administrators may use to satisfy the requirements under Code Section 402(f) that plans provide certain information regarding eligible rollover distributions to participants, beneficiaries, and alternate payees who are receiving distributions. The modifications to these explanations reflect recent legislative changes, including those made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and include a new exception to the 10% additional tax for qualified birth or adoption distributions and the increase in age for required minimum distributions to age 72 for employees born after June 30, 1949. The Notice also includes an updated (i) model safe harbor notice for distributions that are not from a designated Roth account and (ii) model safe harbor notice for distributions that are from a designated Roth account. Plan… Continue Reading

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