The Setting Every Community Up for Retirement Enhancement (SECURE) Act’s passage late last year generated a flood of news coverage on the law. Here are some recommended articles to help you and your plan sponsors get the information you need. I’ll update the list as I find new sources that I believe are worth reviewing.
Author: Robert Toth
Excerpt: “'Aggregating' plans has now taken center stage with the passage of the SECURE Act. We now often find ourselves a bit muddled by the new array of terms with which we now need to deal. Keep this as a (hopefully) handy glossary to guide when you find yourself caught in the middle of a conversation about Multiple Employer Plans and need to quickly summarize the different MEP types.”
Author: Newport Group Inc.
Excerpt: “The majority of the SECURE Act provisions take effect in 2020, although some took effect on the date the SECURE Act was signed, and several have retroactive effect. Provisions regarding open multiple employer plans (MEPs) and pooled employer plans (PEPs), as well as provisions regarding the inclusion of part-time workers in 401(k) plans, do not take effect until 2021. Because operational compliance is required when the change takes effect, quick action may be needed for those changes already in effect or taking effect in 2020.”
Authors: Joshua J. Waldbeser and Christopher R. Williams
Excerpt: “The SECURE Act brings quite a few changes that will affect both plan sponsors and participants. It is intended to incentivize employers (particularly small businesses) to offer retirement plans, promote additional retirement savings, and enhance retiree financial security, including several provisions that will impact current plan administration. The changes brought by the Act are generally positive in our view, but certain ones will create some new administrative challenges and questions.”
Author: Robert Toth
Excerpt: “The SECURE Act will make substantial and highly technical changes to some very specific elements of retirement plan laws, many to which we have been putting a good deal of attention (and written about here) throughout the years… Before we try wrap our heads around the details of all of these changes, I thought it would be helpful to list—in chronological order—the effective dates for these changes to help in prioritizing what to pay attention to first.”
Author: Fred Reish
Excerpt: “There are two parts of the SECURE Act that I believe will have the greatest impact on plan sponsors and service providers.
- The first part includes the provisions on retirement income, including the safe harbor for selecting a guaranteed income provider, the ability to distribute guaranteed income investments if a plan no longer wants to offer those products, and a new requirement to give participants projection of their retirement income.
- The second impactful part is the authorization of Open MEPs (Multiple Employer Plans), which the law calls 'PEPs' (or Pooled Employer Plans).”
Author: Craig P. Hoffman
Excerpt: “Another significant change in the bill intended to increase coverage is a new mandate to cover long-term part-time employees. Under SECURE, if an employer maintains a 401(k) plan, then any part-time employee who has not otherwise satisfied the plan’s eligibility conditions must be permitted to participate and make elective contributions if the employee has completed 3 consecutive 12-month periods of employment and was credited with at least 500 hours of service in each of those periods.”
Authors: Lisa H. Barton et al.
Excerpt: “Under existing law, 401(k) plan automatic contribution arrangements that satisfy the qualified automatic contribution arrangement (QACA) safe harbor to avoid 401(k) nondiscrimination testing must cap default automatic contribution rates at no more than 10%. The SECURE Act would retain this 10% cap for a participant’s first year of participation, but permits the rate to be increased to 15% for subsequent years. This change is effective for plan years beginning after 2019.”
Author: Elliot N. Dinkin
Excerpt: “401(k) modifications – Several changes have been made with respect to 401(k) plans:
- The automatic enrollment safe harbor is modified to raise the automatic escalation cap from 10% to 15% of pay.
- Several changes are made to the election of safe-harbor status through the use of non-elective contributions:
- The notice requirement is eliminated.
- Plan sponsors are permitted to switch to a safe harbor 401(k) plan with non-elective contributions at any time before the 30th day before the close of the plan year.”
Authors: Defined Contribution Steering Committee at Russell Investments and O3 Plan Advisory Services
Excerpt: “SECURE requires DC plan administrators to annually provide participants a description of the monthly 'income stream' they would receive if their account balance were paid in the form of a single life annuity and joint and surviving spouse annuity, based on assumptions specified in DOL guidance. DOL is instructed to issue model disclosures.
SECURE provides that plan fiduciaries shall not be liable 'solely by reason of the provision of lifetime income stream equivalents' derived from DOL prescribed assumptions and rules.”
Author: Melanie Nussdorf et al.
Excerpt: “Regulatory responsibility for PEPs is divided. The DOL will issue rules on the administrative and fiduciary responsibilities of PPPs and on disclosures to participants, the IRS on the correction of qualification defects and the spinoff of noncompliant portions of plans. It has also been given the task of preparing a model plan document. Use of this document will not be mandatory. Given that most PPPs will almost certainly be institutions will considerable retirement plan experience, including the preparation of plan documents, fashioning a model plan may not be the optimal use of IRS resources.”
Author: Peter Alwardt, CPA
- The penalty for filing a late Form 5500 is increased from $25 per day for each day the return is late up to a maximum of $15,000 annually to $250 per day with a maximum annual penalty of $150,000.
- The penalty for failing to file a registration statement (IRS Form 8955-SSA) to report terminated participants with a vested benefit due to them will increase from $1 per participant per day to $10 per participant per day with the maximum annual penalty increasing from $5,000 to $50,000.”