A Little Less Conversation, a Little More Action: Major retirement plan legislation is finally signed into law

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by Brenda Berg

After being on the verge of enactment last spring but failing to pass, the SECURE Act will become law after all. Congress included the Setting Every Community Up for Retirement Enhancement Act of 2019 (H.R. 1994) (the SECURE Act) in the year-end spending legislation needed to keep the government running. The House passed the Further Consolidated Appropriations Act, 2020 (H.R. 1865) – which included the SECURE Act provisions – on December 17, 2019. The Senate followed on December 19, 2019, and President Trump signed it on the last day possible for the spending bill – December 20, 2019.

For a summary of the major SECURE Act provisions that impact retirement plans, see our previous article. In addition to including the SECURE Act provisions, the year-end legislation adds a few other provisions impacting retirement plans and other benefits. Defined benefit plans such as cash balance plans can now allow in-service withdrawals once a participant reaches age 59-1/2, instead of age 62. The minimum age for in-service withdrawals from 457(b) plans is also lowered to 59-1/2.

For welfare benefits, the year-end legislation repeals the “Cadillac Tax” which would have otherwise taken effect in 2022. The Cadillac Tax was part of the Affordable Care Act (ACA) and would have imposed a 40% excise tax on the insurer or employer for any “high cost” employer-provided health plan coverage.

Many of the benefits provisions are effective in 2020, although some are optional. The legislation generally provides time to amend retirement plans until the last day of the plan year that begins in 2022, and some governmental plans and collectively bargained plans have later deadlines until as late as 2024.

We will be covering many of the specific changes in more detail in upcoming blog posts. Sign up to regularly receive our blog posts (which come more often and on more varied topics than our Alerts).

Friends in Low Places . . . IRS focusing on late contributions too

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by Kevin Selzer

“I was the last one you’d thought you’d see there…”

We tend to think of untimely remittances to retirement plans as primarily an ERISA issue, and certainly, the cause of many DOL audits. Lately, however, it seems the IRS also sees late contributions as an invitation to examine the plan. 

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Take it to the limit one more time…IRS announces cost-of-living adjustments for 2020!

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by Becky Achten & Lyn Domenick

The Internal Revenue Code imposes dollar limitations on various compensation, benefit and contribution levels under qualified retirement plans. Today, the Internal Revenue Service announced the 2020 cost-of-living adjustments affecting dollar limitations for qualified retirement plans. Check out our chart for easy reference!

Start spreading the news…student loan 401(k) match revenue ruling in the works

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by Ben Gibbons

As you may recall, Private Letter Ruling 201833012 (the “PLR”), concerning the IRS’ approval of Abbott Laboratories’ plan to implement 401(k) matching contributions on student loan repayments, was released to much fanfare in the summer of 2018.  We’ve learned that at last week’s annual NASPP conference in New Orleans, Stephen Tackney, Deputy Associate Chief Counsel of the IRS Office of Chief Counsel (and author of the Section 409A deferred compensation regulations) announced that the IRS is working on converting the PLR into a revenue ruling that can be relied upon by all employers.

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It’s been a hard day’s night: final hardship distribution rules issued

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by Brenda Berg

If you are one of those plan sponsors who was waiting for the final hardship regulations to be issued before making any changes to hardship distributions in your plans – your time has come. The Treasury Department and IRS issued the final regulations on September 19, 2019 for publication today, September 23, 2019.

These regulations finalize the proposed regulations issued on November 14, 2018, and they are essentially the same with some clarifications. Plans that made changes in compliance with the proposed regulations will be deemed to have complied with the final regulations. Overall the rules – which generally apply to 401(k) plans, 403(b) plans, and 457(b) plans – ease some of the restrictions on taking hardship distributions.

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I can’t drive 55 – or classify my workers

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by John Ludlum

Making correct classifications between independent contractors and employees is not getting simpler with flexible, geographically-distributed workforces.  For those with long memories, a key case in the area of worker classification was issued by the Ninth Circuit in Vizcaino v. Microsoft Corporation, 97F.3d 1187 (CA-9, 1996).  Vizcaino v. Microsoft held that certain workers, originally hired as independent contractors, were actually employees who were entitled to benefits under Microsoft’s 401(k) plan and Microsoft’s Employee Stock Purchase Plan.  Determinations like this can lead to substantial corrections costs to fix tax-qualified benefit plans as well as to make the contributions required under plan terms to the improperly excluded employees. 

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Sunshine … on my controlled group makes me happy

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by John Ludlum

The controlled group rules under the IRC are possibly one of the driest and most technical areas in benefits practice, but mistakes in controlled group status can be very expensive and complicated to correct.  The problem we are seeing is that in too many cases, it is not clear whether the plan sponsor or the plan’s service providers have responsibility for monitoring which entities are in the plan sponsor’s controlled group.

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You gotta fight for your right … to arbitrate

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by Holly Stein Sollod

The Ninth Circuit handed Charles Schwab & Co., Inc. a victory this week that could impact plan sponsors by ordering individual arbitration of ERISA claims. A three-judge panel unanimously reversed a California federal judge’s decision denying Schwab’s Motion to Compel individual arbitration of its workers ERISA breach of fiduciary duty claims. The Court overturned Amaro v Continental Can Co. 724 F.2d 747 (9th Cir. 1984), in light of more recent precedent, including the U.S. Supreme Court’s 2013 opinion in American Express v. Italian Colorado Restaurant, 570 U.S. 228, 233 (2013).

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Come together, right now . . . and join a MEP?

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by Beth Nedrow

In late July, the Department of Labor released a rule allowing small businesses to more easily band together in a joint retirement plan. The idea is that a larger plan will have more leverage to obtain better pricing and better service from vendors. Equally important is the ability of employers to offload some or all of the responsibility for maintaining retirement plans.

The final rule alters the definition of “employer” in ERISA for purposes of who may establish and maintain an individual account defined contribution retirement plan. Under the new rule, a group or association, or a PEO (professional employer organization) can sponsor what the DOL refers to as a “MEP” – a “multiple employer plan.” The regulation is limited to “bona fide” groups, associations and PEOs – which means they must have a business purpose or other common connection, and not merely have the purpose of providing the retirement plan. In this way, the new rule mirrors the DOL’s regulations intended to expand the availability of association health plans (“AHPs”), which is currently stalled due to litigation.

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