Effective Date |
Provision Summary |
Perspective and Detail |
Taxable years beginning after December 31, 2008 (in accordance with guidance to be issued by the IRS no later than June 20, 2020) |
In-kind distributions of 403(b)(7) custodial accounts now permitted to effectuate termination of 403(b) plan |
In order for an employer to terminate a 403 (b) plan. all of its assets must be distributed. However, if participants in the plan hold individual custodial accounts, the employer may riot have the ability to force a distribution of the assets in the account, such that the termination of the plan becomes difficult or impossible. This provision solves that problem. allowing the custodial account to be distributed in-kind to the custodian and its tax-favored status preserved as long as it is administered in accordance with required rules. |
December 20, 2019, with retroactive effect |
Clarification of individuals that may be covered under 403(b)(9) retirement income accounts maintained by church-controlled organizations |
Due to its retroactive effect, this is essentially a clarification of current law/intent, rather than a change. The individuals that may be covered include duly ordained, commissioned, or licensed ministers, regardless of the source of compensation; employees of a tax-exempt organization that is controlled by or associated with a church or a convention or association of churches; and certain employees after separation from service with a church, a convention or association or churches, or an organization described above. |
Plan years beginning after December 31, 2015 |
Certain foster care payments now counted as compensation for qualified plan purposes |
Contributions to a defined contribution plan cannot exceed a participant's compensation. Many home healthcare workers are prevented from saving for retirement because their only income comes from difficulty of care payments that are exempt from tax. Compensation (or earned income) now includes qualified foster care payments that are difficulty of care payments that the recipient excludes from income. Contributions attributable to this type of income are treated as after-tax contributions. A similar change applies to compensation for IRA contribution purposes effective for IRA contributions made after December 20, 2019. |
Plan years beginning after December 31, 2017 |
Special minimum funding rules for community newspaper plans |
These are plans sponsored by family-owned, non-publicly traded, independent newspapers. The new rules increase the interest rate for calculating the funding obligations and provide a longer amortization period. The rules cover only those plans under which accrued benefits have not increased since December 31, 2017. |
Plan years beginning after December 31, 2018 |
Modifications to flat and variable rate PBGC premiums for CSEC plans |
These are cooperative and small employer charity pension plans. |
Participant loans made after December 20, 2019 |
Loans from retirement plans are not excludable from income if they are made through the use of a credit card or any other similar arrangement. |
If your plan offers a participant loan arrangement through the use of a credit card or similar arrangement, contact your service provider immediately to discuss suspending those arrangement. |
December 20, 2019 (can optionally be made effective for plan years beginning after December 31, 2013) |
Nondiscrimination testing relief for certain closed defined benefit plans and defined contribution plans. Relief is generally available only to plans that were frozen before April 5, 2017 or that were in effect for at least 5 years before being frozen and did not substantially increase coverage, the value of benefits rights and features, or benefit amounts during that 5-year period. |
Defined benefit plans are sometimes frozen to new participants for financial reasons. Even through frozen, the plans must continue to satisfy minimum participation, coverage and nondiscrimination rules. However, as frozen plans mature and participants receive payment of benefits, the participant population may become less diverse, making it difficult to satisfy applicable rules. This relief treats the plans as satisfying applicable requirements if certain conditions are met, and liberalizes some of the testing rules to make passage easier. |
Distributions made after December 31, 2018 |
Registered apprenticeship program fees and qualified education loans eligible for payment from a 529 education savings account. |
Distributions from 529 education savings accounts are excludable from income if made for qualified higher education expenses. Such expenses now include fees, books, supplies and equipment needed for a designated beneficiary to participate in a registered apprenticeship program, and amounts (up to $10.000) paid as principal or interest on any qualified education loan. |
Distributions made after December 31, 2019 |
"Qualified birth or adoption distributions" are now permissible from IRAs, qualified plans and annuities, 403(b) plans, and governmental 457(b) plans. |
Payments of up to $5,000 per birth or adoption will be exempt from the 10% early payment penalty tax if made within 1 year of a birth or adoption of an eligible adoptee. Distributions can be repaid and if repaid, are excludible from income as though received as part of a rollover. Distributions are not eligible rollover distributions and no special tax notice is required, but 10% income tax withholding is due unless waived. Until guidance is issued, it is not clear that an employer would be required to make qualified birth or adoption distributions available under its plan. |
Plan years beginning after December 31, 2019 |
In-service distributions from pension plans and governmental 457 (b) plans permitted at age 59-1/2 |
Pension plans were previously prohibited from making in-service distributions prior to age 62, and 457(b) plans could not make in-service distributions prior to age 70-1/2. |
Plan years beginning after December 31, 2019 |
Maximum permitted automatic contribution rate under a Qualified Automatic Contribution Arrangement (QACA) is raised to 15% (maximum rate cannot exceed 10% during the period beginning on the date the automatic contribution first becomes effective and ending on the last day of the following plan year) |
The current maximum permitted automatic contribution rate is 10%. |
Plan years beginning after December 31, 2019 |
Elimination of annual safe harbor notice for 401(k) nonelective safe harbor plans and delayed adoption of nonelective safe harbor plans |
An annual notice is still required for 401(k) matching contribution safe harbor plans. Nonelective safe harbor contribution can be adopted any time prior to the 30th day before the close of the plan year (or any time before the last day of the following plan year if the nonelective contribution is at least 4% of compensation), so long as the plan was not a matching contribution safe harbor plan during the year. |
Taxable years beginning after December 31, 2019 |
Increase in plan start-up tax credit for employers that have no more than 100 employees receiving at least $5,000 in compensation in the prior year |
A tax credit is currently available for the first three years a plan is established, equal to 50% of qualified startup costs, not to exceed $500. The $500 limit is increasing to the greater of (i) $500, or (ii) the lesser of {A) $250 times the number of eligible non-highly compensated employees or (B) $5,000. This can help defray the expenses associated with establishing or administering a plan and providing retirement education to employees. The credit is part of the general business credit under Code Section 38(B) and is subject to the limits of that code section. |
Taxable years beginning after December 31, 2019 |
New automatic enrollment tax credit of $500 is available for employers that have no more than 100 employees receiving at least $5,000 in compensation in the prior year |
The credit is available for the first three years an eligible automatic contribution arrangement is included in a qualdiecl plan, SEP or SIMPLE retirement account. The credit is part of the general business credit under Code Section 38(B) and is subject to the limits of that code section. |
Taxable years beginning after December 31, 2019 |
Compensation for IRA contribution purposes now includes taxable non-tuition fellowship and stipend payments received by individuals pursuing graduate or postdoctoral study |
Compensation can affect the extent to which an IRA contribution is deductible. This provision broadens the types of payments that can be included as compensation. |
Contributions made for taxable years beginning after December 31. 2019 |
Age limit for traditional IRA contributions eliminated |
Currently, IRA contributions cannot be made to a traditional IRA after age 70-1/2; this barrier is being eliminated. |
Distributions made for taxable years beginning after December 31, 2019 |
Qualified charitable distributions from IRAs now reduced by deductible IRA contributions made after attainment of age 70-1/2 |
Taxpayers 70-1/2 and older can have IRA distributions (up to $100.000) excluded from income but still counted for required minimum distribution purposes, if the distributions are transferred directly to a charity. Under SECURE, any deductible IRA contributions made after attainment of age 70-1/2 will reduce the amount of charitable distributions that can be excluded from income. |
Plan years beginning after December 31, 2019 |
Distributions to protect elimination of a "lifetime income investment" now permitted |
Lifetime income investments are investment options that allow employees to elect a guaranteed level of annual income and/or an annuity. lf the investment option offering the lifetime income investment is being eliminated from a plan's lineup, the option may be transferred in-kind to an eligible retirement vehicle, or an annuity contract may be distributed to the participant, even if a distribution from the plan is not otherwise permissible. |
Taxable years beginning after December 31, 2019 |
Increase in plan start-up tax credit for employers that have no more than 100 employees receiving at least $5,000 in compensation in the prior year |
A tax credit is currently available for the first three years a plan is established, equal to 50% of qualified startup costs, not to exceed $500. The $500 limit is increasing to the greater of (i) $500, or (ii) the lesser of (A) $250 times the number of eligible non-highly compensated employees or (B) $5,000. This can help defray the expenses associated with establishing or administering a plan and providing retirement education to employees. The credit is part of the general business credit under Code Section 38(B) and is subject to the limits of that code section. |
Taxable years beginning after December 31, 2019 |
New automatic enrollment tax credit of $500 is available for employers that have no more than 100 employees receiving at least $5,000 in compensation in the prior year |
The credit is available for the first three years an eligible automatic contribution arrangement is included in a qualified plan, SEP or SIMPLE retirement account. The credit is part of the general business credit under Code Section 38(B) and is subject to the limits of that code section. |
Taxable years beginning after December 31, 2019 |
Compensation for IRA contribution purposes now includes taxable non-tuition fellowship and stipend payments received by individuals pursuing graduate or postdoctoral study |
Compensation can affect the extent to which an IRA contribution is deductible. This provision broadens the types of payments that can be included as compensation. |
Contributions made for taxable years beginning after December 31, 2019 |
Age limit for traditional IRA contributions eliminated |
Currently, IRA contributions cannot be made to a traditional IRA after age 70-1/2; this barrier is being eliminated. |
Distributions made for taxable years beginning after December 31, 2019 |
Qualified charitable distributions from IRAs now reduced by deductible IRA contributions made after attainment of age 70-1/2 |
Taxpayers 70-1/2 and older can have IRA distributions (up to $100,000) excluded from income but still counted for required minimum distribution purposes, if the distributions are transferred directly to a charity. Under SECURE, any deductible IRA contributions made after attainment of age 70-1/2 will reduce the amount of charitable distributions that can be excluded from income. |
Plan years beginning after December 31, 2019 |
Distributions to protect elimination of a "lifetime income investment" now permitted |
Lifetime income investments are investment options that allow employees to elect a guaranteed level of annual income and/or an annuity. lf the investment option offering the lifetime income investment is being eliminated from a plan's lineup, the option may be transferred in-kind to an eligible retirement vehicle, or an annuity contract may be distributed to the participant, even if a distribution from the plan is not otherwise permissible. |
Returns, statements, and notifications required to be filed or provided after December 31, 2019 |
Substantial increase in penalties for failure to file |
One example: the penalty for failing to file a 5500 required to be filed under Code Section 6058 is increased from $25 a day to $250 a day. |
Pension benefit statements furnished more than 12 months after the Seсretary of the Treasury issues. Certain information |
Lifetime income disclosure must now be included on pension benefit statements for individual account plans once each 12-month period. |
Statements must now include the amount of monthly payments the participant would receive if his/her total accrued benefits were used to provide an annuity for life, The IRS is directed to issue a model disclosure, publish assumptions to be used, and issue interim final rules regarding this new requirement. |
Not specified |
Fiduciary safe harbor for selecting issuer of guaranteed retirement income contract |
The safe harbor, if satisfied, absolves the fiduciary from liability for losses due to an insurer's inability to satisfy its financial obligations under the contract. The safe harbor describes steps the fiduciary should take in selecting the contract insurer. |
Returns filed for plan years beginning after December 31, 2019 |
Electronic filing of returns that include information regarding 250 or more plans |
Electronic filing is generally required if the filer is required to file 250 or more returns. In recognition of changes made by SECURE that permit filing 5500s on an aggregate basis (e.g., by MEPs), this provision looks to the number of plans included in a single return to determine whether the 250 threshold has been met. |
Plan years beginning after December 31, 2020 (employers and pooled plan providers can take advantage of this new provision as long as they comply in good faith with a reasonable interpretation of the new rules) |
The unified plan/one bad apple rule is eliminated for defined contribution MEPs that either have commonality or have a pooled plan provider. A pooled plan provider is a person designated by the plan as a named fiduciary, the plan administrator of the MEP, and as the person responsible to perform all administrative duties (including conducting proper testing with respect to the plan and the employees of each employer in the plan) which are reasonably necessary to ensure that the plan complies with any requirements applicable under ERISA and the Code, who registers as a pooled plan provider, acknowledges in writing it is a named fiduciary and the plan administrator, and ensures all persons who handle assets of or are fiduciaries of the MEP are appropriately bonded. |
Under current law, if a participating employer in a MEP fails to satisfy applicable Code rules, the entire MEP can be disqualified. This rule will be eliminated for MEPS whose terms provide (i) that the assets of a non-compliant plan will be transferred to a plan maintained solely by the noncompliant employer, to an eligible retirement plan for each participant, or to another appropriate arrangement (unless transfer is determined not to be in the best interest of plan participants); and (ii) that the noncompliant employer will be liable for any liabilities of such plan attributable to the employees of such employer. Participating employers will continue to be treated as the sponsor of the plan with respect to their employees, except with respect to duties assumed by the pooled plan provider. |
Plan years beggining after December 31, 2020(plans established prior to December 20, 2019 must affirmatively elect to be treated as a pooled employer plan) |
"Pooled employer plans" are treated as a single plan under ERISA. A pooled employer plan is an individual account plan covering two or more unrelated employers that satisfies applicable tax code rules and that (i) designates a pooled plan provider as a named fiduciary of the plan, (ii) designates one or more trustees (other than an employer in the plan) to be responsible for collecting contributions to the plan, (iii) provides that each participating employer retains fiduciary responsibility for selecting the pooled plan provider and other named fiduciaries and for investing and managing plan assets when not delegated to another fiduciary, (iv) does not subject employers and participants to unreasonable restrictions, fees or penalties for ceasing participation, receiving distributions, or transferring assets, (v) requires the pooled plan provider to provide specific disclosures and requires participating employers to take necessary actions to maintain the qualified status of the plan, and (vi) provides that required disclosures can be provided electronically. |
Treatment as a single plan allows the filing of a single 5500 and maintenance of a single ERISA bond. Currently. only MEPs whose participating employers have commonality, or that satisfy the requirements in recently- finalized DOL regulations, are treated as a single plan under ERISA. Pooled employer plans must have a bond equal to 10% of funds handled, not to exceed $1,000,000. They must also include in 5500 filings a list of participating employers, a good faith estimate of the percentage of contributions and account balances attributable to each employer, and identifying information regarding the pooled plan provider. Pooled employer plans that cover fewer than 1,000 participants may qualify for simplified 5500 reporting if no single employer has 100 or more participants. |
Plan years beginning after December 31, 2020 |
Long-service part-time employees must be allowed to participate in 401(k) plans |
Under current law, employees do not have to be offered participation in a 401(k) plan until they have completed 1,000 hours of service, a requirement that many part-time employees may never satisfy. This provision requires those employees to be offered participation once they have completed at least 500 hours of service in 3 consecutive 12-month periods (counting only periods of service completed on or after January 1, 2021), if they are at least age 21 at the end of that time. Employers do not have to make contributions for employees who become participants solely as a result of this change, and these employees can be disregarded for discrimination and coverage testing purposes, as well as for purposes of top heavy rules. Vesting status will be measured differently for these employees. Collective bargaining employees are generally exempt. |
Annual reports filed for plan years beggining after December 31, 2021 |
Individual account/defined contribution plans that have the some trustee, the same one or more named fiduciaries, plan years that begin on the same date, and the same investment options, may file a single aggregated return. |
This would likely require that an entity with access to each plan's data agree to file an aggregated return on behalf of the plans. |