Employee Benefit Plan Update
Several recent regulatory updates impacting employee benefit plans are discussed below. Employers should contact their third-party administrator and/or plan advisor to discuss the impact that these changes will have on their current plan design and to ensure that all required amendments to plan documents are adopted in a timely fashion.
The Secure Act
The Secure Act (The Setting Every Community Up for Retirement Enhancement Act of 2019) is legislation that reflects policy changes to defined contribution plans (such as 401(k)s), defined benefit pension plans, individual retirement accounts (IRAs), and 529 college savings accounts.) Most provisions in the law went into effect on January 1, 2020. Some of the key changes include:
1. Raising the age for required minimum distributions (RMD) to 72 (effective for payouts for those reaching age 70 ½ after 12/31/19)
2. A Repeal of the maximum age for traditional IRA contributions, which is currently 70½ (beginning with tax year 2020 contributions)
3. Allowing long-term, part-time workers to participate in 401(k) plans. The law requires employers maintaining a 401(k) plan to offer one to any employee who works 500 hours over 3 consecutive years (effective for Plan Years Beginning 1/1/21). However, part-time service before 2021 need not be tracked or recognized.
If your organization administers a 403(b) Plan, you have until March 31, 2020 to update the Plan documents for all current laws. Revenue Procedure 2019-39 sets up a remedial amendment period for individually designed plans after March 31, 2020.
Plan Amendment Deadlines Set for New Hardship Rules
The IRS has issued the annual required amendment list for individually designed qualified plans and 403(b) Plans in Notice 2019-64. Organizations that administer 401(k) and 403(b) Plans have until December 31, 2021 to adopt amendments to meet the requirements of the final hardship regulations. Rev. Proc. 2020-9 extends the deadline for adopters of pre-approved plans until December 31, 2020 to adopt an interim amendment for final hardship regulations.
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