Distribution Restrictions Applicable to SECURE Act Qualified Birth and Adoption Distribution

Although it is intended that Qualified Birth and Adoption Distributions are permitted to be taken from any defined contribution plan (Code Section 72(t)(2)(H)(iv)), is anyone considering adopting one for a money purchase plan? According to Section 72(t)(2)(H)(vi)(IV), a Qualified Birth or Adoption Distribution is treated as meeting the distribution restrictions of specific Code sections (which apply to 401(k) plans, custodial 403(b)s, annuity contract 403(b)s and eligible deferred compensation plans). Does the latter section citation concern anyone who has been asked to consider whether to allow Qualified Birth and Adoption Distributions for a money purchase plan? How about as applied to a profit sharing plan without a 401(k) feature?

2 hours ago, rocknrolls2 said:

Although it is intended that Qualified Birth and Adoption Distributions are permitted to be taken from any defined contribution plan (Code Section 72(t)(2)(H)(iv)), is anyone considering adopting one for a money purchase plan? According to Section 72(t)(2)(H)(vi)(IV), a Qualified Birth or Adoption Distribution is treated as meeting the distribution restrictions of specific Code sections (which apply to 401(k) plans, custodial 403(b)s, annuity contract 403(b)s and eligible deferred compensation plans). Does the latter section citation concern anyone who has been asked to consider whether to allow Qualified Birth and Adoption Distributions for a money purchase plan? How about as applied to a profit sharing plan without a 401(k) feature?

First, there are few money purchase plans left (we have none).  I am single handedly responsible for the (almost) elimination of the MP plan because of my insistence that we put a provision in the legislation we were writing for Portman/Carman all those years ago that dropped the 15% profit sharing deduction limitation.  My associates said Congress would never go for it; I cried, banged my shoe, and eventually they gave in to include that provision in our draft and, what do you know, Congress BOUGHT IT!

Anyway, it clearly can be allowed for MP plans.  We have to await guidance to know all the rules, but it will also apply to a PS plan without a 401(k) feature. It is a type of in-service distribution. Ultimately, you will have to add the language to your plan and that will provide the operational process that will apply.  It's too early to be talking about adding this language, IMHO. Wait for guidance.

Thank you, your views on your contributions to the demise of money purchase plans aside. While I agree that the 25% of compensation profit-sharing plan deduction limit has made prospective money purchase plans extinct, I am also aware that many employers that had them did not do well in phasing them out. Many actually merged them into their profit-sharing plans, which imposes QJSA/QPSA rules on at least the money purchase portion. That aside, back to my basic question, I was not even thinking of adding any language in the absence of guidance. However, when you said "you will have to add," I  beg to differ. In my view, it is an optional provision that a qualified defined contribution plan may add. If it does, however, it is my understanding that the statutory remedial period of the end of the 2022 plan year would not apply. If the employer elects to add it for a given plan year, it would have to be adopted by the end of that plan year.

Larry, it was Portman Cardin, of course. He still has his Maryland Senate seat, so I thought I'd point out the typo.

59 minutes ago, rocknrolls2 said:

Thank you, your views on your contributions to the demise of money purchase plans aside. While I agree that the 25% of compensation profit-sharing plan deduction limit has made prospective money purchase plans extinct, I am also aware that many employers that had them did not do well in phasing them out. Many actually merged them into their profit-sharing plans, which imposes QJSA/QPSA rules on at least the money purchase portion. 

ALL of my DC plans have QJSA rules; yes ALL.  To leave out the rules, you are disinheriting the children of a prior marriage.  That is a hidden result that everytime I mention it to new clients that we take over that don't have QJSA rules (especially those who have children from a prior marriage), the reactions are sometimes FURIOUS that they were never told that.  We had MANY 15% PS and 10% MP. We merged all of them in those years.

1 hour ago, rocknrolls2 said:

 That aside, back to my basic question, I was not even thinking of adding any language in the absence of guidance.

THAT MAKES SENSE.

However, when you said "you will have to add," I  beg to differ.

Don't differ; read that as "you will have to add IF you want that provision....". Sorry if it wasn't clear.

In my view, it is an optional provision that a qualified defined contribution plan may add.

We are 100% in agreement.

If it does, however, it is my understanding that the statutory remedial period of the end of the 2022 plan year would not apply. If the employer elects to add it for a given plan year, it would have to be adopted by the end of that plan year.

I think that is true, but I haven't confirmed.  I would certainly not add the benefit without adding the language, and we are certainly not at the point where we would feel comfortable adding language prior to some guidance.

53 minutes ago, Luke Bailey said:

Larry, it was Portman Cardin, of course. He still has his Maryland Senate seat, so I thought I'd point out the typo.

Yeah, I know.  I noted the typo when I re-read it.  I know Ben Cardin; I have pictures with me and my wife and him.  We wrote the legislation when both Ben and Rob were in the HOUSE.  They are both in the Senate now but still hold their position as "the pension guys". I like both of them (though I certainly have differences with some political positions of one or the other).