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Article | Global News Briefs

U.S.: New law brings retirement and benefit plan changes

Retirement|Total Rewards|Health and Benefits
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By Bill Kalten , Ann Marie Breheny and Benjamin Lupin | January 29, 2020

The year-end spending law contains provisions to expand employer-sponsored retirement plans, increase retirement savings and ease administrative burdens.

Employer Action Code: Act

The Further Consolidated Appropriations Act, 2020 (H.R. 1865) contains significant provisions affecting employer-provided retirement, health and benefit plans. These include the repeal of three health care taxes (though not all had been implemented), as well as retirement changes to expand plan sponsorship, increase retirement savings and ease some administrative burdens. The bulk of the retirement changes are contained in the Setting Every Community Up for Retirement Enhancement (SECURE) Act component of the legislative package. The health care taxes were originally enacted as part of the 2010 Affordable Care Act (ACA).

Key details

The new legislation:

  • Repeals the so-called Cadillac tax, a tax on the sale of medical devices, and the health insurance issuer tax (the Cadillac tax would have imposed a 40% excise tax when the value of a group health plan exceeded specified thresholds; its effective date had been delayed several times, most recently to 2022)
  • Allows unrelated employers to offer defined contribution (DC) plans to their employees using a pooled plan provider (i.e., an “open multiple employer plan”)
  • Encourages lifetime income in DC plans by providing a fiduciary safe harbor for selecting an annuity provider, establishing procedures to allow portability of lifetime income investment options and requiring plan sponsors to disclose the lifetime income stream participants would receive from their DC accounts
  • Gives long-term, part-time employees access to employer 401(k) non-collectively bargained DC plans, for employees who work at least 500 hours per year for three consecutive years (employers would not be required to make matching contributions)
  • Increases the commencement age for minimum required distributions to 72 (currently 70.5)
  • Provides nondiscrimination testing relief for closed defined benefit (DB) plans that meet certain requirements
  • Permits in-service distributions from DB plans at age 59.5, establishing a uniform in-service distribution age across retirement plans
  • Eliminates the required annual notice to members in non-elective contribution safe harbor 401(k) plans
  • Increases the deferral cap to 15% of pay (was 10%) for members of an automatic enrollment safe harbor 401(k) plan, after the first year of participation
  • Extends for one year (to December 31, 2020) the temporary tax credit for employers that provide qualifying paid family leave benefits to their employees
  • Extends for 10 years the fee paid by group health plans and health insurance issuers to fund the Patient-Centered Outcomes Research Institute (PCORI)

Further details, including effective dates, can be found at SECURE Act Crosses Finish Line and Congress Repeals Key ACA Taxes.

Employer implications

Some provisions are retroactive, with others effective upon enactment at the end of 2019 or later. Plan sponsors should review the effective dates and determine whether any immediate action is needed. A remedial amendment period is included in the SECURE Act, so employers will have a transition period until at least the end of the 2022 plan year to adopt any necessary plan amendments.

Contacts

Senior Director, Retirement and Executive Compensation

Ann Marie Breheny
Senior Legislative Advisor

Benjamin Lupin
Senior Regulatory Advisor, Health and Benefits

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