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new bills introduced to congress


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congress introduced a few bipartisan bills that could have an impact on NDT- anyone had a look yet- specifically 

S3221 Retirement Felexibility act

this one specifically is designed to incentivize the using ACA and auto escalation and provide some flexibility on SH contributions - anyone have thoughts on this? i was curious as to the flexibility of SH contributions to satisfy testing- it appears to look similar to QACA - see below




(a) In General.—Subsection (k) of section 401 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:


“(A) IN GENERAL.—In the case of a cash or deferred arrangement maintained by an eligible employer (as defined in section 408(p)(2)(C)(i)), for purposes of paragraph (13), the arrangement shall be treated as meeting the requirements of subparagraph (D) thereof if under the arrangement, the total elective deferrals (as defined in section 402(g)(3)(A)) with respect to any employee do not exceed an amount equal to the applicable percentage of the limitation otherwise applicable under section 402(g).

“(B) APPLICABLE PERCENTAGE.—For purposes of subparagraph (A), the applicable percentage with respect to an arrangement is—

“(i) 40 percent in the case of an arrangement which does not meet the requirements of paragraph (13)(D) and is not described in clause (ii) or (iii),

“(ii) 60 percent in the case of an arrangement which is not described in clause (iii) and which would meet the requirements of paragraph (13)(D) if—

“(I) ‘equal to at least’ were substituted for ‘equal to’ in clause (i)(I) thereof,

“(II) ‘2 percent of compensation, and such matching contributions meet the requirement of subsection (m)(11)(B)’ were substituted for ‘6 percent of compensation’ in clause (i)(I) thereof, and

“(III) ‘1 percent’ were substituted for ‘3 percent’ in clause (i)(II) thereof, and

“(iii) 80 percent in the case of an arrangement which would meet the requirements of paragraph (13)(D) if—

“(I) ‘equal to at least’ were substituted for ‘equal to’ in clause (i)(I) thereof,

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I haven't looked at this one yet, but this mornings NAPA NET did point out some issues with the Small Business Employees Retirement Enhancement Act (S. 3219) and the Automatic Retirement Plan Act of 2017 (H.R. 4523).  


...under the bill, an employer would have no obligation to consider cost, competency, financial stability or even the likelihood of fraud in choosing a pooled plan service provider or the plan’s investments – setting aside protections that have been extended to participants since the passage of ERISA in 1974. Unfortunately, it will be the participants who will be at risk for excessive fees, bad investments and potential fraud.




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Here is the full text of the Senate bill: https://www.congress.gov/bill/115th-congress/senate-bill/3221/text

I could see the proposed section 401(k)(14)(B)(i) being appealing to a certain type of employer. It says you have a QACA that satisfies the nondiscrimination requirements with no employer contributions required, as long as you limit deferrals to 40% of the 402(g) limit, and you still have to comply with the auto-enrollment and auto-escalation and notice requirements. 

(ii) and (iii) under the same paragraph seem less interesting; they offer lower safe harbor contribution requirements in exchange for lower 402(g) limits. I suspect that most employers who would be interested in reducing their safe harbor liability at the expense of contribution limits would want to bring it down to 0 or not at all - I could be mistaken though.

I would be worried about communication in these plans. If there's one limit that your average participant is likely to be aware of, it's the 402(g) limit. It could be a tough conversation when they get an email from their tax advisor, or see on the internet that "You can contribute up to $19,000 to your 401(k) in 2019" but it turns out, sorry, in your plan you are actually limited to $7,600.

Re-auto enrolling anyone contributing less than 3% every 3 years is probably a good idea. If they want my opinion I would change it to say "no less often than every 3 years" to give the employer more flexibility.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.

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