Information letters, regulations, legislation aplenty — in ASPPA’s third quarter Washington Update, American Retirement Association Director of Technical Education Robert Kaplan provided his take and insights.
At the IRS
IRS information letters are always relevant — Kaplan remarked that he finds them “a really good resource to give information to clients,” citing a Jan. 11, 2018, letter in which the IRS responded to a question from the U.S. House of Representatives. In the letter, the IRS said that hardship distributions cannot be used to pay off student loans and summarized how distributions can be made for current and heavy financial need. And in a March 26 letter, the IRS provided Sen. Tom Udall (R-UT) a summary of the required minimum distribution (RMD) rules. “It’s good to see when the IRS puts such information in writing,” Kaplan remarked.
“Sanity prevails,” Kaplan said regarding the IRS’ finalization of proposed regulations that clarified that QNECs and QMACs are effective at the point allocated to the participant, not when contributed to the plan. These regulations, which are effective for plan years beginning on or after July 20, 2018, may be applied to earlier periods. This, he said, “allows the allocations to be funded by the forfeiture account.” Kaplan added a caveat, however, that it’s still good to check a plan document to make sure it aligns with practices.
On the Hill
Currently there is a bumper crop of legislation with provisions that would affect retirement plans, and Kaplan provided a look at what members of Congress are proposing that could affect retirement plans.
SIMPLE Plan Modernization Act. Proposed by Sens. Susan Collins (R-ME) and Mark Warner (D-VA), it includes provisions that would raise the limit from $12,500 to $15,000 for employers with less than 26 employees, increase the catch-up to $4,500, give employers with 26 or more employees the option of adopting a higher limit and create rules to encourage transition to traditional 401(k)s.
Retirement Security Commission Bill. Sponsored by Sens. Todd Young (R-IN) and Corey Booker (D-NJ), it would create an independent commission to examine U.S. retirement system and offer recommendations. This would include reviewing the movement from DB to DC plans, coverage, balances, investment trends, costs, retention on distribution, other countries’ programs and societal trends that could lead to less financial security. “This is very important as a long-term vision,” said Kaplan.
Strengthening Financial Security Through Short Term Savings Act. This bill would allow employers to auto-enroll employees in short-term savings accounts and “recognizes that there is a need to get people started in saving,” said Kaplan.
Small Business Employees Retirement Enhancement Act. This bill would eliminate regulatory barriers from employers adopting pooled employer plans (PEPs) and provide that the plans would be administered by the pooled plan provider (PPP). It is premised on “the belief that if somebody else handles administration, small business may be more likely to offer a retirement plan,” Kaplan said.
Retirement Flexibility Act. This bill includes provisions that would raise the QACA cap from 10% to 15%, require auto re-election every three years if an employee is not participating or is participating at less than 3%, allow an employee to opt out, and provide a new QACA flexibility match.
Legislation to Create American Savings Accounts. Reintroduced by Sen. Jeff Markley (D-OR), it would create accounts an employer could offer if it does not have a retirement plan.
Protecting Taxpayers Act. Proposed by Sens. Rob Portman (R-OH) and Ben Cardin (D-MD), this bill would reform the IRS through steps such as expanding the Employee Plans Compliance Resolution System (EPCRS), allowing participant self-correction, self-correction of RMDs, opening EPCRS to IRAs and directing the IRS to come up with another safe harbor for calculating earnings for corrections.
Despite the proliferation of bills, Kaplan offered a caveat. Noting that this is an election year, he told attendees, “The chances of legislation getting passed this year — who knows?”
Webcast Available
This webcast is available on demand. More information about ASPPA webcasts can be found here. More information about on-demand webcasts is available here.
At the IRS
IRS information letters are always relevant — Kaplan remarked that he finds them “a really good resource to give information to clients,” citing a Jan. 11, 2018, letter in which the IRS responded to a question from the U.S. House of Representatives. In the letter, the IRS said that hardship distributions cannot be used to pay off student loans and summarized how distributions can be made for current and heavy financial need. And in a March 26 letter, the IRS provided Sen. Tom Udall (R-UT) a summary of the required minimum distribution (RMD) rules. “It’s good to see when the IRS puts such information in writing,” Kaplan remarked.
“Sanity prevails,” Kaplan said regarding the IRS’ finalization of proposed regulations that clarified that QNECs and QMACs are effective at the point allocated to the participant, not when contributed to the plan. These regulations, which are effective for plan years beginning on or after July 20, 2018, may be applied to earlier periods. This, he said, “allows the allocations to be funded by the forfeiture account.” Kaplan added a caveat, however, that it’s still good to check a plan document to make sure it aligns with practices.
On the Hill
Currently there is a bumper crop of legislation with provisions that would affect retirement plans, and Kaplan provided a look at what members of Congress are proposing that could affect retirement plans.
SIMPLE Plan Modernization Act. Proposed by Sens. Susan Collins (R-ME) and Mark Warner (D-VA), it includes provisions that would raise the limit from $12,500 to $15,000 for employers with less than 26 employees, increase the catch-up to $4,500, give employers with 26 or more employees the option of adopting a higher limit and create rules to encourage transition to traditional 401(k)s.
Retirement Security Commission Bill. Sponsored by Sens. Todd Young (R-IN) and Corey Booker (D-NJ), it would create an independent commission to examine U.S. retirement system and offer recommendations. This would include reviewing the movement from DB to DC plans, coverage, balances, investment trends, costs, retention on distribution, other countries’ programs and societal trends that could lead to less financial security. “This is very important as a long-term vision,” said Kaplan.
Strengthening Financial Security Through Short Term Savings Act. This bill would allow employers to auto-enroll employees in short-term savings accounts and “recognizes that there is a need to get people started in saving,” said Kaplan.
Small Business Employees Retirement Enhancement Act. This bill would eliminate regulatory barriers from employers adopting pooled employer plans (PEPs) and provide that the plans would be administered by the pooled plan provider (PPP). It is premised on “the belief that if somebody else handles administration, small business may be more likely to offer a retirement plan,” Kaplan said.
Retirement Flexibility Act. This bill includes provisions that would raise the QACA cap from 10% to 15%, require auto re-election every three years if an employee is not participating or is participating at less than 3%, allow an employee to opt out, and provide a new QACA flexibility match.
Legislation to Create American Savings Accounts. Reintroduced by Sen. Jeff Markley (D-OR), it would create accounts an employer could offer if it does not have a retirement plan.
Protecting Taxpayers Act. Proposed by Sens. Rob Portman (R-OH) and Ben Cardin (D-MD), this bill would reform the IRS through steps such as expanding the Employee Plans Compliance Resolution System (EPCRS), allowing participant self-correction, self-correction of RMDs, opening EPCRS to IRAs and directing the IRS to come up with another safe harbor for calculating earnings for corrections.
Despite the proliferation of bills, Kaplan offered a caveat. Noting that this is an election year, he told attendees, “The chances of legislation getting passed this year — who knows?”
Webcast Available
This webcast is available on demand. More information about ASPPA webcasts can be found here. More information about on-demand webcasts is available here.
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