The American Retirement Association has outlined a number of high priority clarifications needed following passage of the SECURE Act.
In a letter dated Feb. 12, the ARA submitted to Carol Weiser, Benefits Tax Counsel at the U.S. Department of the Treasury, a list of “certain issues related to the SECURE Act on which guidance is requested.”
The items are organized by sections in the SECURE Act, and request clarification on certain operational and administrative issues relating to:
Multiple Employer Plans/Pooled Employer Plans (specifically plans with regard to the proposed regulations on the unified plan rule exception for defined contribution multiple employer plans published in July 2019 which is impacted by the SECURE Act).
Rules relating to election of safe harbor 401(k) status
Specifically (1) how the elimination of the safe harbor notice for nonelective 401(k) safe harbor plans impacts the current regulatory requirements that in order to either eliminate or add a safe harbor in the middle of the plan year, certain information must be included in the safe harbor notice and/or follow-up notices provided, (2) how the existing requirement to use the current year testing method in order to add a safe harbor provision to the plan during the year would apply in light of the statutory change permitting a plan to add a safe harbor provision up to 12 months after the end of the plan year, and (3) how the current ACP safe harbor for matching contributions made to a nonelective 401(k) safe harbor plan is impacted by the elimination of the safe harbor notice for nonelective 401(k) safe harbor plans.
Treatment of custodial accounts on termination of section 403(b) plans
Specifically looking for guidance on how to deal with cases where employers no longer in existence due to dissolution “stopped” the plan without a method of termination, or in cases where employers may have later adopted section 401 plans but are unable to terminate their section 403(b) plans without further guidance.
Clarification of retirement income account rules relating to church-controlled organizations
In that this provision is retroactively effective for all years, seeking guidance on how this provision applies to past years.
Qualified cash or deferred arrangements must allow long-term part-time employees working more than 500 but less than 1,000 hours per year to participate
Specifically, whether these employees must always be eligible to participate in the plan or whether they can be excluded from a plan if they fit into an excluded classification.
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Penalty-free withdrawals from retirement plans for individuals in case of birth of child or adoption
The most immediate concern highlighted is “clarification that this is an optional plan provision and that plans are not required to alter their current distribution provisions or processes for birth or adoption distributions,” as well as questions on notices and repayment treatment and documentation requirements.
Increase in age for required beginning date for mandatory distributions
Specifically transition relief for payments made in 2020 which have been communicated as being required minimum distributions due for 2020 but which are eligible rollover distributions under the SECURE Act changes, as well as for the special exemption for certain annuity contracts, and the required distribution rules in Section 401 of the SECURE Act involving children and/or the age of majority.
Plans adopted by due date for filing employer’s tax return
Notably is this provision impacted by IRC section 412(d)(2), allowing plan sponsors to make retroactive amendments within 2½ months after the end of the plan year for funding purposes. Also, special rules appear to be warranted for Form 5500 filing purposes since otherwise a Form 5500 could be due before a plan is actually adopted (e.g., if an employer were to establish a plan in October for the prior year).
Also noted were a handful of issues with section 104 of the American Miners Act.
These are, of course, rough summaries of the issues presented and explained in the six-page letter. You can read it in its entirety at: https://www.napa-net.org/sites/napa-net.org/files/Treasury%20IRS%20SECURE%20Act%20letter%202-12-20.pdf
