News

"[B]eneficiaries who would otherwise be required to take a 'specified RMD' in 2024 ... will not be subject to the excise tax for failure to take such RMD.... [A] plan will not be treated as having failed to satisfy the RMD requirements because it did not make a specified RMD. The definition of a specified RMD is aligned with the IRS's definition of a specified RMD in the 2022 Notice and 2023 Notice, except that it is extended to RMDs for 2024 relating to deaths that occurred in 2020, 2021, 2022, or 2023."

12 pages. "Commonwealth conducted focus groups with 20 workers earning [low and moderate incomes] ... Respondents reacted positively to both the $1,000 withdrawal option and the $2,500 [PLESA], but expressed a preference for the $2,500 option when asked to choose.... Employers and retirement plan providers who choose to use automatic enrollment within the PLESA must be clear and thoughtful about how they communicate it to employees to minimize concerns.... While participants don't expect to withdraw frequently from the account, they still prefer minimal restrictions on withdrawals and quick access to funds through direct deposit."

10 pages. Topics: [1] Required minimum distribution provisions: Increased required minimum distribution (RMD) age; Reduced penalties for a missed RMD; Spousal beneficiaries treated as participants; Roth accounts no longer required in RMD. [2] Early withdrawal penalty relief provisions: Emergency expense withdrawals; Domestic abuse withdrawals; Terminal illness 10% tax penalty relief; Withdrawal relief for disasters; Long-term care contracts purchase. [3] Other distribution and withdrawal provisions: Mandatory cash-out limit; Self-certification of hardship and unforeseeable emergency distributions; Amendment deadlines.

"[ IRS Fact Sheet 2024-19 clarifies] that plan sponsors may opt for the relief to be permanently in effect so the disaster declaration triggers the availability, or they may choose to provide the relief on a case-by-case basis.... [T]hey may limit the relief to, for example, distributions and not loans.... [T]he plan may provide for smaller distributions or smaller loans than the maximum."

"[ IRS Fact Sheet 2024?18 highlights] how three SECURE 2.0 provisions, if offered by a plan sponsor, are reported on Forms W-2 ... and Forms 1099??R beginning with the 2023 tax year. Those provisions are: [1] de minimis financial incentives, [2] ROTH SIMPLE IRAs and ROTH SEP IRAs, and [3] designated ROTH employer contributions ... Plan sponsors who have implemented these features must use updated tax reporting forms (or, as applicable, file amended tax reporting forms) to comply with their reporting obligations."

"Under the proposed rules , in addition to disclosure and operational requirements, [auto-portability providers (APPs)] would need to acknowledge their fiduciary status in writing and would be subject to fiduciary duties. Unlike the existing rules for safe harbor IRAs, the proposed rules provide no fiduciary safe harbor for rollovers to a new employer's plan by an APP.... Moreover, according to the DOL, the decision of an employer to participate in an APP program would constitute a fiduciary act."

"[T]he SECURE 2.0 rule adjustment does not alter a plan sponsor's obligation to comply with the SECURE Act LTPTE rules for 2024. Consequently, the SECURE Act 'three year' rule will apply for 2024. However, effective for 2025 and into the future, the SECURE 2.0 'two year' rule will apply."

"In 2027, the Saver's Match provisioned by SECURE 2.0 will allow for millions of retirement savers in the U.S. to qualify for a match of up to $1,000 per individual from the federal government, depending on income.... The Saver's Match has the potential to help mitigate disparities in 401(k) savings for different groups based on race and gender."

"The Chamber supports automatic portability as a way to increase retirement savings. However, the Chamber is concerned that certain provisions in the Proposed Regulation would discourage automatic portability by making it more difficult for an automatic portability provider to operate and for a plan sponsor to participate in such a program.... [The Chamber is] concerned that number of provisions in the Proposed Regulation are not within the scope of the statute and how DOL may try to apply these provisions to other individual and class PTEs in the future."

"While SECURE 2.0 provided the basic framework to establish PLESAs, the IRS was required to issue regulations to address remedies that employers can use to prevent misuse of these types of accounts. [ DOL FAQs ] supplement Notice 2024-22 and are meant to help employers and participants understand and benefit from the new law."

"This fact sheet issues frequently asked questions about SECURE 2.0 Act of 2022 (SECURE 2.0) that provides for special rules for distributions from retirement plans and individual retirement arrangements (IRAs) and for retirement plan loans, for certain individuals impacted by federally declared major disasters.... [These FAQs] will not be relied on or used by the IRS to resolve a case.... [A] taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax.'

18 Q&As divided into [1] General information; [2] Taxation and reporting of qualified disaster recovery distributions; [3] Repayment of qualified distributions taken for the purpose of purchasing or constructing a principal residence in a qualified disaster area; and [4] Loans from certain qualified plans.

"The SECURE 2.0 Act allows for additional features in various employer retirement plans to encourage use of these plans. The provisions potentially affecting Forms W-2 (including Forms W-2AS, W-2GU and W-2VI) are: [1] De minimis financial incentives ... [2] Roth Savings Incentive Match Plan for Employees (SIMPLE) and Roth Simplified Employee Pension (SEP) Individual Retirement Arrangements (IRAs) ... and [3] Optional treatment of employer nonelective or matching contributions as Roth contributions."

"[E]mployers should take the following next steps: [1] Consider any necessary plan design changes to address the Proposed Rules; [2] Consult with the plan administrator and recordkeeper to confirm any required administrative system updates; [3] Review and confirm operational systems for tracking employee hours and vesting periods; [and] [4] Review service provider contracts for any updates due to the Proposed Rules[.]"

"DOL hopes plan administrators will voluntarily provide extensive historical information -- much of which goes beyond what the act requires -- to help the agency meet its Dec. 29 deadline for setting up the database. If the ICR is approved substantively intact, sponsors will need to carefully consider whether to provide the requested data, including discussing with legal counsel any potential risks under applicable privacy laws. Comments are due June 17."

"Although it remains to be seen what form the DOL regulation will take, and whether it will create new risks for ESOP transactions, most practitioners in the field are anticipating this guidance will resolve basic issues about valuation process and methodology, clearing the way for more ESOP transactions."

"While this database could be helpful to both participants and plan sponsors, the DOL's request would likely be a significant new burden on plans.... [H]aving information on file or in the plan records somewhere does not necessarily mean this will be easy, especially regarding benefits that were already paid. Gathering and organizing the information will be especially difficult in situations where there have been plan sponsor changes, plan mergers, and recordkeeper changes."

"Many plans do not offer Roth options and need to update their systems to flag incomes at or above the limit to be sure they are in compliance. This problem is particularly acute for governmental plans, which tend to have more complicated and less centralized payroll systems, and in many cases require updates to state legislation and collectively bargained labor contracts in order to make the necessary changes."

"The 2024 relief can be divided into two parts. [1] Extended effective date of regulations.... [2] No 2024 RMD payments under the 'at least as rapidly' rule for certain beneficiaries.... As with the prior guidance, the Notice  allows for flexibility in implementing these provisions without triggering plan qualification issues or excise taxes[.]"

"Fiduciaries may find value in having access to a tool that can connect participants and beneficiaries to their plan benefits and conclude the disclosure is in their best interests. However, there are several critical countervailing considerations. First, the scope of the information requested goes well beyond what was reflected in SECURE 2.0.... Second, the notice leaves the DOL's cybersecurity measures to your imagination, simply noting that 'multiple security measures will be in place' to protect the data provided.  ... Third, the DOL did not establish a fiduciary safe harbor or any protections in the event the information the fiduciary volunteers is ultimately compromised, incomplete, or incorrect."

"Under the SECURE 2.0 Act of 2022., plan sponsors can add new features to their 403(b) plans to increase opportunities for participation and access to retirement plan funds. Separately, the [IRS] recently expanded its determination letter program to include individually designed 403(b) plans. This affords plan sponsors that do not use a service provider's pre-approved plan document a helpful new avenue to seek approval of their 403(b) plans in written form."

"[The authors] have compiled a comprehensive guide outlining the multitude regulatory plan document amendments and restatement deadlines. Spanning from 2025 through 2029, these deadlines necessitate meticulous preparation and organization to ensure timely compliance."

"There are still unanswered questions surrounding this guidance, including ... [1] Will designated beneficiaries and successor beneficiaries who do not take their 2021, 2022, or 2023 life expectancy payments be required to take those payments in the future? ... [2] Are amounts that would have been distributed to satisfy a 2021, 2022, 2023, or 2024 life expectancy payment still considered an RMD for other purposes (e.g., rollovers)?"

"A better alternative under SECURE 2.0 might be the provision that allows a plan participant a one-time penalty-free withdrawal of up to $1,000 from their retirement savings account. This provision is easy to implement and carries no added fiduciary responsibility. It also removes the added administrative burden of creating and maintaining a separate sidecar account."

"Perhaps the most significant enhancement is that -- unlike the Saver's Credit -- you don't have to owe taxes in order to be eligible.... [W]hile the Saver's Credit simply offset taxes owed (and thus put no new money in the worker's hands), the Saver's Match will actually be deposited to a qualified retirement account -- employment-based or IRA.... You don't have to think long about the mechanics involved to find yourself saying 'how in the world are 'they' going to do that?' "

"Information is to be collected on the following individuals: [1] Separated vested participants; [2] Participants whose benefits were transferred to [IRAs] under the plan's mandatory cash-out provisions ... [3] Participants whose benefits have been transferred to an annuity provider. The DOL expects that much of this data would be readily available and does not impose any new or additional recordkeeping requirements." [Article includes chart identifying data to be collected for each group of participants.]