April 2020
Legislative Update - Special Edition
The SECURE Act & The CARES Act
Setting Every Community Up for Retirement Enhancement
Coronavirus Aid, Relief and Economic Security
We at TSC hope that this edition of the TSC Translator finds you and your families, friends, and colleagues safe and well. Along with the many personal and professional changes that we have all experienced around COVID-19, there have been a number of significant legislative developments involving retirement plans that have occurred in the past few months. This special edition of the TSC Translator is intended to expand your knowledge of some of the major changes included in the new legislation. As additional guidance becomes available, we’ll continue our coverage of these topics. In the meantime, if you have questions about how this impacts your plan, please don’t hesitate to contact your TSC consultant.  
Juhl Stoesz
 On December 20, 2019 President Trump signed the Setting Every Community Up for Retirement Enhancement Act (the “SECURE Act”) into law. This new law ushers in some of the most sweeping retirement plan changes in decades. While many of the specific provisions of the act had been included in legislative proposals over the last few years, their eleventh-hour inclusion in the year-end spending bill presented just the opening needed for them to finally become law.  Read More
Juhl Stoesz

Expanded Tax Credit
One of the primary goals of the SECURE Act was to increase the number of American workers covered by employer-sponsored retirement plans. To encourage employers to adopt plans that would cover a greater number of employees, the SECURE Act expanded the tax credits available to employers. Specifically, the SECURE Act increased the tax credits available for startup plans and created a new tax credit for implementing automatic enrollment provisions in new and existing plans.   Read More
Matt Slyter

Nonelective Safe Harbor Changes & Increased QACA Limit
The annual notice requirement for plans using the safe harbor nonelective formula has been eliminated. However, safe harbor plans utilizing a matching formula, including nonelective safe harbor plans making an additional matching contribution, are still required to provide the notice. Therefore, we recommend continuing to provide the safe harbor notice until additional IRS guidance is provided.  Read More
Andrea Gelhar

Extended Deadline to Adopt Retirement Plans
For tax years beginning after December 31, 2019, an employer can now adopt a plan until the tax filing due date (including extension) for the year the plan is made effective. Generally, the latest deadlines will be either September 15 or October 15 (for entities taxed as sole proprietorships). Since calendar-year plans still need to file a Form 5500 by October 15 (if extended), the practical deadline will be earlier.

Importantly, the 401(k) deferral portion of the plan still needs to be executed before the first deferrals are made to the plan. Meanwhile, the profit sharing portion of the plan can be implemented earlier.
Andrea Gelhar
New Eligibility Requirement for Part-Time Employees
Retirement plans may impose a service requirement to become eligible to participate in the plan. For example, one of the more commonly used service requirements of 1 year and 1000 hours, requires employees to work for 1 year and 1000 hours to become eligible. This can make some part time employees ineligible for the retirement plan. 
Under the new rules of the SECURE Act, part time employees who work 500 hours a year for... Read More  
Jennifer Arntson-Schwientek
New Required Minimum Distribution (RMD) Age  
Qualified plans have long required participants to start taking Required Minimum Distributions (RMD) in the calendar year in which they turn age 70½. However, under the SECURE Act employees who will turn 70½ in 2020 or later are not required to withdraw RMD’s until the calendar year in which they turn 72. Their first RMD can be delayed until no later than April 1 of the following year which would require two distributions that year. But like most rules, there is an exception. Unlike IRAs, employees who are not 5% owners and are still working may delay their RMD until the year in which they terminate their employment.

RMDs are still required for nonworking participants and 5% owners who turned 70½ prior to 2020. Anyone who has already started taking RMDs must continue taking them.  
Paul Erickson

IRA Contributions Past Age 70 1/2
Previously, contributions to Traditional Individual Retirement Accounts (IRAs) after a participant has reached the age of 70 ½ were prohibited. This has changed with the SECURE Act. Participants who are age 70 ½ or older are now able to make contributions to Traditional IRAs. Roth IRAs continue to disregard age for eligibility purposes.
Kyra Dagny

Increased 5500/8955-SSA Penalties
Most plan sponsors are required to file an annual Form 5500 as well as an annual Form 8955-SSA (report terminated participants with a vested balance). The due date for filing these returns is the last day of the seventh month after the plan year ends, with an optional two and one half month extension. For calendar year plans, the due date is July 31 and the extended due date is October 15.
Becky Fisher
Terminating Custodial 403(b) Plans
The SECURE Act also addresses a somewhat obscure issue known mostly to 403(b) sponsors and their service providers. While obscure, it has been a very important issue for employers wishing to terminate their custodial 403(b) plans. This is due to the fact that under prior law, it was nearly impossible to terminate 403(b) plans with individual custodial accounts. Since individual custodial accounts are structured as an investment contract between the participant and the custodian, the employer didn’t actually have the authority to force participants to take a distribution. Thankfully, under the SECURE Act, the employer now has the authority to unilaterally direct the distribution of the individual custodial account to the participant, thereby clearing the way for plan terminations. Importantly, the distribution will be treated as an in-kind distribution of the custodial account which will be maintained on a tax-deferred basis for the benefit of the participant until it is paid out. To cover prior terminations that may have followed this methodology, this provision is retroactively effective back to December 31, 2008. To address technical issues and questions, the IRS will issue further guidance on this topic by June 20 of this year.
Juhl Stoesz

Lifetime Income Provisions
Among the hallmark features of the SECURE Act are its provisions designed to help ensure that retirement plan participants do not run out of money during their retirement. In an attempt to achieve that goal, the SECURE Act includes several provisions related to lifetime income products and lifetime income disclosures. Read More
Juhl Stoesz
Beneficiary Options and Elimination of Stretch IRAs
A notable change with the SECURE Act includes the elimination of lifetime payouts for non-spouse beneficiaries. Previously, individuals could take payouts of inherited retirement plans or Individual Retirement Accounts (IRAs) based on their age or the deceased participant’s age (depending on the relationship of the beneficiary). Many times these inherited dollars would be rolled into an IRA where the payments would stretch over the life of the beneficiary, earning these accounts the nickname of “stretch IRAs”. Read More

Lisa Melberg

Distributions for Birth/Adoption
One of the new provisions provided for in the SECURE Act is a withdrawal option for births and adoptions. Plans may now allow a participant to take a withdrawal (after December 31, 2019) of up to $5,000 per birth or adoption of the participant’s child within the 1-year period following the birth or adoption. If the parents each have a retirement plan account or IRA, they can each separately receive a $5,000 penalty-free distribution.  Read More
Paul Erickson
In-Service Distributions of Pension Accounts at 59 1/2
Previously, a participant who has an account balance of Money Purchase Pension assets needed to reach age 62 in order to receive an In-Service distribution from that source. With the SECURE Act, the age for In-Service Distributions for Pension accounts (also including Defined Benefit plans and governmental 457(b) plans) has been lowered to age 59 ½. This is applicable to plans with a year-end that begins after December 31, 2019. Read More
Kyra Dagny

Pooled Employer Plans (PEPs)
Beginning in 2021, the SECURE Act created a new type of Multiple Employer Plan called a Pooled Employer Plan or PEP. This is a type of plan that allows employers that are not related to one another to join together in the same retirement plan. Policymakers included PEPs in the SECURE Act in an effort to help alleviate perceived fiduciary and administrative concerns by small businesses that they believed prevented employers from establishing retirement plans for their employees.  Read More

Matt Slyter
Adoption and Application of the SECURE Act Provisions
TSC plans to provide a sponsor level amendment to all of its clients’ plans to include the provisions of the SECURE Act so that there is nothing its clients need to do at this point. However, the actual amendment won’t be adopted until we receive additional guidance from the Internal Revenue Service and Department of Labor on some of the outstanding issues. Importantly, the SECURE Act specifically delayed the date by which Plans must be amended to reflect the new changes until the end of the 2022 plan year. Read More

Matt Slyter

On Friday, March 27, 2020 President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Act temporarily provides for new withdrawal options, new and existing loan options, and suspends 2020 Required Minimum Distributions (RMDs) for eligible defined contribution retirement plans. The following summarizes the key retirement provisions of the CARES Act.
Juhl Stoesz

 Special COVID-19 Distributions
The CARES Act permits for the optional provision of “COVID-19-related” distributions of up to $100,000 through December 31, 2020. Importantly, these special distributions are not subject to the normal 10% penalty on early distributions. In addition, the distribution may be repaid at any time over the three-taxable year period that begins on the date the distribution was made. While these distributions are subject to ordinary income tax, individuals may spread out the tax liability over a three-year period beginning with the tax year the distribution occurred. These COVID-19-related distributions are available to “qualified individuals” which are defined as follows: Read More

Juhl Stoesz

Loan Limit Increases
The CARES Act increases the maximum dollar amount available for loans from $50,000 to $100,000 or 100% of a participant’s vested account balance (if less than $100,000). These new loan limits are available only for loans made by September 23, 2020 and only for qualifying individuals.
Juhl Stoesz

Outstanding Loans
Payments to outstanding loans for the remainder of 2020 may be delayed for up to one year for qualifying individuals. Interest continues to accrue during the period and the plan can extend the term of the loan for up to one year.
Juhl Stoesz

Required Minimum Distributions (RMDs)
RMDs due in 2020 are not required for defined contribution qualified plans (401(k), 403(b), and governmental 457(b)) that adopt the CARES Act provision. This includes 2019 RMDs for which the required beginning date falls in 2020. Note that if an RMD was already processed in 2020, then the participant is permitted to roll it back into the plan or into an IRA. It is worth noting that this provision does not apply to defined benefit and cash balance plans.
Juhl Stoesz

Adoption and Application of the CARES Act
TSC plans to provide a sponsor level amendment to all of its clients’ plans to include the provisions of the CARES Act so that there is nothing its clients need to do should they want to take advantage of these new temporary provisions. However, the actual amendment doesn’t need to be adopted before 2022. Clients that do not want to include the new COVID-19 withdrawals and the increased loan limit provisions should notify their TSC consultant.
Juhl Stoesz
TSC Translator Contributing Staff Members

Dennis Culhane - Retirement Plan Administration Consultant
Paul Erickson - Relationship Manager - Retirement Plan Consultant
Becky Fisher - Retirement Plan Administration Consultant
Andrea Gelhar - Retirement Plan Compliance Consultant
Lisa Melberg - Retirement Plan Compliance Consultant
Jennifer Arntson-Schwientek - Rlationship Manager - Retirement Plan Consultant 
Kyra Dagny - Retirement Plan Compliance Technician
Dean Schwientek - Director of IT Operations
Juhl Stoesz - Vice President, Compliance and General Counsel
Matt Slyter - Vice President Operations