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[Official Guidance]

Text of FRTIB Proposed Regs: Automatic Enrollment Program -- Increasing Percentage from 3% to 5%

"The Federal Retirement Thrift Investment Board (FRTIB) is proposing to amend its regulations to increase the automatic enrollment percentage from 3 percent to 5 percent of basic pay for all participants who are automatically enrolled in the Thrift Savings Plan (TSP) on or after October 1, 2020 and for Blended Retirement Service (BRS) participants who are automatically re-enrolled in the TSP on or after January 1, 2021."

Federal Retirement Thrift Investment Board [FRTIC]

SECURE Act: What It Means for 401(k) and IRAs

Feb. 25 webinar. Many changes to retirement plans in the SECURE Act are already effective. Plan sponsors and administrators should be reviewing their plan provisions and procedures now.BenefitsLink discount. 

[Official Guidance]

Text of 2020 IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities (PDF)

55 pages. "In most cases, you must withhold tax on the gross amount of pensions and annuities that you pay that are from sources within the United States.... Most tax treaties provide an exemption from tax on non-government pensions and annuities.... The exemption may not apply to lump-sum payments.... The withholding rules that apply to payments to foreign persons generally take precedence over any other withholding rules that would apply to distributions from qualified plans and other qualified retirement arrangements."

Internal Revenue Service [IRS]

[Official Guidance]

Text of Draft Instructions for 2020 IRS 1099-R and 5498: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (PDF)

26 pages; rev. Feb. 14, 2020. "What's New: [1] Form 1099-R ... Section 113 of the [SECURE Act] ... added section 72(t)(2)(H). This new section provides for a distribution of up to $5,000 for a qualified birth or adoption that is exempt from the 10% early distribution tax and that can be repaid.... [2] Form 5498 ... We have added code 'BA' for reporting a repayment of a qualified birth or adoption distribution.... The SECURE Act, section 114, has increased the RMD age from 70-1/2 to 72 for taxpayers turning 70-1/2 after December 31, 2019." [Also available: Draft 2020 IRS Form 5498 and Instructions: IRA Contribution Information and Draft of 2020 IRS Form 1099-R]

Internal Revenue Service [IRS]

[Official Guidance]

Text of Draft Revised Instructions for 2018 IRS Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts (PDF)

10 pages; rev. Feb. 6, 2020. "What's New: ... These instructions have been revised to reflect the changes made by the Taxpayer Certainty and Disaster Tax Relief Act of 2019. The form has also been revised to reflect changes due to this act. Use these instructions with the 2018 version of the form." [Also available: Draft Revised 2018 IRS Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts] 

Internal Revenue Service [IRS]

[Guidance Overview]

SECURE Act Provisions Affecting Defined Benefit Plans

"Although the Act's primary focus is on defined contribution plans, several provisions of the Act and its sister legislation apply only to defined benefit plans.... [1] Earlier in-service withdrawal age ... [2] Increased required beginning date age  ... [3] Nondiscrimination testing and participation relief ... Both soft-frozen and hard-frozen plans can experience compliance testing issues over time as the participant population becomes older or decreases in size. The SECURE Act provides nondiscrimination and participation testing relief for such plans, subject to specific requirements."

Spencer Fane

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Virginia House Passes Legislation to Establish State-Run MEP for Private Sector

"The bill allows all self-employed individuals, sole proprietors, and nongovernmental employers to allow their employees to participate in the Plan. It provides for automatic enrollment of an employer's employees if such employer chooses to participate in the Plan.... The Plan shall allow an enrollee to contribute to an account at a default rate and modify his contributions within the parameters of the Internal Revenue Code. The Plan allows but does not require a participating employer to contribute to the account of any enrollee."

Virginia General Assembly

Social Security: The Windfall Elimination Provision (PDF)

17 pages. "The windfall elimination provision (WEP) is a modified benefit formula that reduces the Social Security benefits of certain retired or disabled workers who are also entitled to pension benefits based on earnings from jobs that were not covered by Social Security and thus not subject to the Social Security payroll tax.... WEP's supporters argue that the formula is a reasonable means to prevent overgenerous payments and unintended benefits to people who have earnings not covered by Social Security and receive pensions from noncovered work. Opponents argue that the provision substantially reduces a benefit that workers may have included in their retirement plans, and it reduces benefits disproportionately for lower-earning households." [Report 98-35, updated Feb. 10, 2020]

Congressional Research Service [CRS]

Millennials Have More Roth IRA Retirement Savings Than Ever

"Millennials, also known as Gen Y, contributed $373 million to IRAs in the fourth quarter, a 46 percent increase over the total amount contributed for the same period in 2018.... Millennials are overwhelmingly putting their money into Roth IRAs[.]"

The Washington Post; subscription may be required

The SECURE Act -- So, What Is a 'Lifetime Income Stream Equivalent' of Your 401(k) Account Balance?

"This post will set forth ... concerns about the new requirements and will highlight some of the open issues that the forthcoming guidance from the DOL is expected to address, including: [1] Assumptions for: commencement date of [lifetime income stream equivalent (LISE)] monthly payments; pre-commencement date investment return; post-commencement date investment return; mortality; future inflation; [2] whether LISE payments at assumed commencement are to be expressed in future dollars (unadjusted for inflation) or in today's dollars (inflation-adjusted); [3] whether LISE payments after assumed commencement are expected to remain fixed or are expected to increase with inflation like Social Security benefits or increase with some other index."

Ken Steiner, FSA Retired

[Opinion]

Comments of American Retirement Association to Treasury and IRS on Guidance Issues Under the SECURE Act (PDF)

[1] [It] is not clear how the elimination of the safe harbor notice for nonelective 401(k) safe harbor plans impacts the current regulatory requirements that in order to either eliminate or add a safe harbor in the middle of the plan year, certain information must be included in the safe harbor notice and/or follow-up notices provided.... [2] [U]nder current regulations a plan must be using the current year testing method in order to add a safe harbor provision to the plan during the year. It is not clear how this requirement would apply in light of the statutory change permitting a plan to add a safe harbor provision up to 12 months after the end of the plan year.... [3] [U]nder current regulations under IRC section 401(m), a plan that uses safe harbor nonelective contributions, complies with the limitations on matching contributions, and complies with the notice requirement ... satisfies the ACP safe harbor provisions of IRC section 401(m)(11). It is not clear how this ACP safe harbor for matching contributions made to a nonelective 401(k) safe harbor plan is impacted by the elimination of the safe harbor notice for nonelective 401(k) safe harbor plans."

American Retirement Association [ARA]

[Opinion]

Comments of American Retirement Association to DOL on Guidance Issues Under the SECURE Act (PDF)

Topics include: [1] Multiple Employer Plans; Pooled Employer Plans; [2] Fiduciary safe harbor for selection of lifetime income provider; [3] Disclosure regarding lifetime income; [4] Combined annual report for Group of Plans; [5] Inclusion of long-term part-time employees.

American Retirement Association [ARA]

[Opinion]

New Jersey Pension Reform 2020: Proposed Implementation of Cash Balance Plan

"When people ignorant of the workings of defined benefit plans propose reforms to save money they come up with SCR170 in the last legislative session and SCR38 this time which creates a cash balance plan for new participants and those with less than 5 years of service ... What needs to be understood is that a cash balance plan IS a defined benefit plan with funding rules and investment risk shouldered by the plan sponsor and can be just as expensive as a plan with a benefit formula based on a percentage of salary and service."

Burypensions

[Official Guidance]

Text of IRS Form 2848, Power of Attorney and Declaration of Representative (PDF)

Revised Feb. 2020. "A separate Form 2848 must be completed for each taxpayer. Form 2848 will not be honored for any purpose other than representation before the IRS."

Internal Revenue Service [IRS]

[Guidance Overview]

SECURE Act Makes Significant Changes to Benefit Plans

"[The article includes a link to] a detailed analysis of the Act based upon the type of Plan, e.g., defined contribution, defined benefit, IRA, health and welfare plan ...[and] a chart showing the effective date of all provisions of the Act, whether the changes are mandatory or discretionary, and whether the change requires a plan amendment."

Williams Mullen

Voluntary Loan Default in California

"We have an employee who is looking to voluntarily default on his $50k loan that he initiated in 2018. He's paid back about $15k but now says the payments are too much and he'd like to stop payments and have the remaining amount defaulted and treated as a deemed distribution. The employee is still contributing to the 401(k) and receiving match. He also has about $12k he can take as a distribution. The participant is 67 years old. We've talked to our general counsel and they've informed us that we should allow the voluntary default because the employee resides in California. The IRS doesn't seem to keen on allowing employees the opportunity to circumvent the law. Has anyone heard of this?"

BenefitsLink Message Boards

Cross-Testing Controlled Group Excludes One Company

"We have a 401k plan that covers several companies part of a controlled group. The plan is not top heavy and is not a 401k Safe Harbor. All employees of all companies are eligible for 401k and match, but PS component excludes one classification of employees (which is mostly HCEs). It handily passes 410b. May one of the companies make no profit sharing contribution for its employees as long as 410b and the general tests under 401a4 passes?"

BenefitsLink Message Boards

Is There Any Safe Harbor Which Can Be Made That Excludes ACP Testing for a Plan Which Is Allowing Voluntary After-Tax Employee Contributions?

"Is there any safe harbor contribution which can be made that excludes ACP testing for a plan which is allowing voluntary after-tax employee contributions?"

BenefitsLink Message Boards

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Press Releases

New Members of the NCEO Board of Directors
National Center for Employee Ownership [NCEO]

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Most Popular Items in the Previous Issue

SECURE Act: Impact on 401(k) Plan Sponsors
Groom Law Group

The SECURE Act: Know the Mandatory Provisions Affecting Retirement Plans and IRAs
McDonald Hopkins

Decumulation Confusion: Social Security Claiming Strategies
Cammack Retirement Group