The “SECURE Act 2.0” that the Home Roads Committee will designate on May 5 includes several new provisions, including those advocated by the ARA, as well as amendments to some of the existing provisions. Here’s a closer look.
Committee Chairman Richard Neal (D-MA), along with Republican Kevin Brady (R-TX), first introduced the bill, Ensuring a Strong Retirement Act (SSRA), last October as a continuation of SECURITY LAW 2019. Although this version of the law contained some 36 provisions, the new Strong Retirement Act of 2021 (HR 2954) now contains about 45 provisions, including new revenue reimbursements for bill payments.
In keeping with the old…
Most of the provisions contained in the earlier version have been retained in the new one. They contain:
- extending automatic enrollment in retirement plans by automatically enrolling employees in their company’s plan 401 (k) when a new plan is created;
- modification of the loan for the costs of starting a small employer’s pension plan;
- clarifying that Plan 403 (b) may be established and maintained as a member of the EP;
- enabling a greater catch-up limit (with changes);
- increasing the required minimum age for distribution (with changes);
- creating a retirement plan matching program to encourage employees to repay student loans (including a solution identified by the ARA on the impact this new feature of pension plan design could have on the ADP test);
- providing a safe haven for correcting employee election failures;
- reduction of excise duty on certain accumulations in qualified pension plans;
- establishing new lost and found pension savings; i
- expanding the system for resolving compliance with employee plans.
And in accordance with the New
The following are summaries of some additional changes and new provisions in the SSRA.
Amendments to the discretionary retirement plan: Among the items advocated by the ARA is a provision that will give employers more time to adopt useful discretionary amendments to the retirement plan by the due date of the employer’s tax return. This new deadline is in line with the deadline for the adoption of the new retirement plan provided by the SECURITY Act. The provision would give employers with existing plans the flexibility to make their 401 (k) plans more generous for regular workers after the end of the year.
According to the proposal, if the employer changes the share bonus, pension, profit-sharing plan or annuity to increase the benefits gained from the plan valid for the previous planning year (except for increasing the amount of relevant contributions), the change would not otherwise cause the plan to fail. qualification conditions. Moreover, if the amendment is adopted before the legal deadline for filing the employer’s return for the tax year (including extensions) during which the amendment is in force, the employer may decide to treat such amendment as adopted on the last day of the year in which the amendment is effective. The proposal refers to amendments made to the plan for the year beginning after 31 December 2022.
Family attribution rules: Another item advocated by the ARA corrects and modernizes outdated and unjust family attribution rules to ensure that business owners are not punished if they happen to have minor children or live in a state in the community. Under current tax law, spouses in nine states have community property automatically considered to own half of all property acquired during the marriage. As a result, business owners must link their business to that of their spouse when conducting pension plan coverage and non-discrimination tests, which can be especially problematic if there is a family dispute or separation. Instead, the legislation addresses two inequalities in share allocation rules by removing attribution:
- for spouses with separate and unrelated jobs living in states in the community; i
- between parents with separate and unrelated jobs who have minor children.
This provision would apply to planning years beginning on or after the adoption date. This question was also discussed in bilateral legislation recently introduced Representatives Jimmy Panetta (D-CA) and Jodey Arrington (R-TX).
Student loan payments: Last October‘s SECURE Act 2.0 contained a provision to create a retirement plan adjustment program that would encourage employees to repay student loans. As such, employers will be able to pay employee loan payments to employees with a contribution to the employee pension plan. The latest version of the law addresses a problem identified by the ARA regarding the impact of this new feature on the Average Percent Delay (ADP) test related to plans 401 (k). It now allows participants who receive an appropriate contribution to repay a student loan to separate or separate from the rest of the population for the purpose of the ADP test. This change would be effective for contributions started with the 2022 plan.
Promoting an existing saver’s loan: Instead of significantly increasing and modernizing the savings bank, as was done in October 2020, the new version simply requires the finance minister to take steps to raise public awareness of the loan. Further, it would be necessary for the Minister of Finance to report to Congress within 90 days of its adoption, summarizing the envisaged promotion of these efforts. This provision is likely to be reduced compared to the proposed initial extension due to the estimated loss of Treasury revenue.
New required start dates for RMD: Instead of immediately increasing the required minimum age for allocation to 75, the new laws will gradually increase the required starting date from the calendar year in which the IRA employee or owner turns 72 to the calendar year in which the IRA employee or owner turns 73 for individuals who turn 72 after 31 December 2021 and who turn 73 before 1 January 2029. In addition, the proposal changes this age from 73 to 74 for individuals who turn 73 after December. 31 of 2028 and who turn 74 before 1 January 2032. This age is further increased to 75 for individuals who turn 74 after 31 December 2031. The proposed exemption from the RMD rules for individuals with certain account balances.
Higher fee limit for applications aged 62, 63 and 64: Although earlier laws would increase the limit on damages at age 60, new laws instead increase compensation contributions to $ 10,000 for those who have reached 62, 63, or 64 (but not older than 64) by the end of the year. tax year for those participating in plans 401 (k) and 403 (b) under the auspices of the employer. Participants in SIMPLE plans would be allowed to invest an additional $ 5,000. The provision retains the existing contribution limits for those who are 50 years old. In addition, the amount of $ 10,000 and the amount of $ 5,000 are indexed for inflation starting in 2023. The provision applies to tax years beginning after December 31, 2022.
Deferral of tax for certain sales of employer’s stock to ESOPs sponsored by S corporations: The provision in the October 2020 version that would extend Section 1042 of the Code to include the sale of employer shares to SSO ESOPs seems to be exempt from the new proposal.
Additional new provisions: Other new provisions in the law include:
- Separate application of the toughest rules to DC plans involving employees who cannot be excluded, which is included in Portman-Cardin’s Pension Insurance and Savings Act
- Repayment of a qualified birth or adoption is limited to three years
- Self-confirmation for contributions for presumed difficulties
- Withdrawal without penalty from the pension plan in case of domestic violence
- Retroactive election delays for the first year for sole proprietors
- Restricting the cessation of IRA treatment to the portion of the account included in the prohibited transaction
The law also includes an estimated $ 27 billion in new revenue over 10 years. They include the following.
SIMPLE and SEP Roth IRA: The mandate under current law that a Simplified Employee Pension (SEP) and a SIMPLE IRA cannot be designated as a Roth IRA would be changed to be designated as a Roth IRA, such as contributions to the SEP or SIMPLE IRA. a appointed Roth IRA could not be excluded from revenue (employer contributions as well as election delays), while qualified distributions would be exclusive. The proposal refers to tax years beginning after December 31, 2021.
Difficulty withdrawal rules for plans 403 (b): The proposal is in line with the rules for allocating difficulties for plans 403 (b) with those in plans 401 (k). It provides that in addition to election delays, Plan 403 (b) may allocate, at the expense of employee difficulties, qualifying non-selective contributions, qualified appropriate contributions, and earnings on any of those contributions (including election delays). The proposal is effective for planning years beginning after 31 December 2021.
Election delays are generally limited to the regular contribution limit: Section 401 (a) a qualified plan, plan 403 (b) or 457 (b) a plan that allows a qualified participant to make contributions for damages must require that such contributions be Roth contributions. The proposal does not apply to SIMPLE IRA or SEP. The proposal refers to tax years beginning after December 31, 2021.
Optional treatment of adjusting the employer’s contribution as a Roth contribution: Under the proposal, a qualified plan under section 401 (a), plan 403 (b), or plan 457 (b) may allow an employee to determine appropriate contributions as Roth contributions. An employer’s contribution corresponding to the Roth contribution will not be excluded from gross income. This proposal will apply to contributions made after the date of adoption.
It is important to note that this is a preliminary assessment of the changes from the SECURE Act 2.0, which was first introduced in October 2020 compared to the legislation published this week. Also keep in mind that these provisions are subject to change as laws move through the legislative process – starting with the designation of the Committee on Ways and Means, which will be broadcast live at 11:00 a.m. ET on May 5. here.
More detailed information about SSRA is available online: