Tag Archives: defined contribution

CARES Act summary

The following is a summary of the retirement plan provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Defined contribution (DC) plan provisions

Distribution and loan relief to “qualified individuals” means either:

  • Participants (or their spouses or dependents) who have been diagnosed with coronavirus disease (SARS-CoV-2 or COVID-19)
  • Participants who have experienced adverse financial consequences due to the virus resulting from:
    • Being quarantined, furloughed, or laid off
    • Having their work hours reduced
    • Being unable to work due to lack of child care
    • Closing or reducing hours of a business they owned or operated

Required minimum distributions (RMDs) for 2020 are waived for profit sharing, money purchase, 401(k), 403(b) and governmental 457(b) plans. Applies to all RMDs due during 2020, including 2019 initial RMDs due by April 1, 2020.

  • 2020 eligible rollover treatment. If any portion of a distribution made during 2020 would have been treated as a RMD absent this temporary waiver, it is eligible for rollover. However, the 20% federal income tax withholding can be ignored and the distribution is exempt from the IRC Section 402(f) notice requirements (rollover rights explanation).

Single-employer defined benefit (DB) plan provisions

All single-employer funding obligations due during calendar year 2020 can be delayed until January 1, 2021. Accrued interest must be added to the delayed payment(s). There is no distinction to which plan year the DB plan contributions are due.

A plan sponsor may elect to use the single employer DB plan’s funded status for the 2019 plan year to determine if benefit restrictions must be administered. Benefit restrictions prevent the plan sponsor from paying “accelerated forms of distribution” such as lump sums.

The CARES Act is silent on RMDs for defined benefit pension plans.

Plan compliance / federal forms and notice distributions

Plan amendments deadline for adopting any of the relief provided under the Act would be no earlier than the last day of the first plan year beginning on or after January 1, 2022 (January 1, 2024 for governmental plans).

The Department of Labor will have additional authority to postpone certain deadlines that apply to ERISA-covered plans for a public emergency declared by the Department of Health and Human Services, which would include the current public emergency for COVID-19. We believe this will apply to ERISA compliance deadlines, such as Form 5500, Annual funding notice, quarterly (or other periodic) participant statements, and others. This is not an exhaustive list. We note that it is unclear if the postponement authority for DOL extends to Treasury/IRS for compliance deadlines under IRS authority.

Milliman adds IBEW Local 405 as a retirement services client

Milliman has announced it has added the IBEW Local 405 Deferred Savings Plan as a defined contribution client. The plan includes 900 participants and $184 million in assets.

“We chose Milliman based on recommendations from other unions as well as our consultants,“ says Bill Hanes, Business Manager and Trustee. “Milliman’s reputation among labor unions and our peers in the industry is very good.”

Milliman will provide recordkeeping, communications, and ERISA consulting services for the plan.

We are excited to work with the IBEW Local 405. The trustees valued our independence and transparency, but it was also important that our viewpoints aligned regarding how to best serve the needs of their members. Our philosophies were consistent.

For information on Milliman’s employee benefit services, click here.

Retirement plan changes could make sponsors feel less SECURE

Retirement plan sponsors and their third-party administrator (TPA) business partners need to understand the implications of two SECURE Act provisions involving complex changes to human resources (HR) administration systems and savings plan calculation engines. One is a mandatory change concerning long-time part-time employees who may qualify to participate in an employer’s retirement plan if they meet the requisite hours worked for three consecutive years. The second is a voluntary change related to qualified birth or adoption distributions.

In this article, Milliman consultants Charles Clark and Deborah Lachner explain some of the complexities resulting from these provisions and highlight actions plan sponsors can take to avoid being caught off guard.

Annuity industry to SECURE retirement plan opportunities

The SECURE Act has now made it significantly more attractive and less restrictive for employers to offer annuities within their defined contribution (DC) retirement plans. This provision presents a growth opportunity for the annuity industry. In this article, Milliman actuary Ian Laverty highlights those opportunities and provides an overview of the fiduciary and portability changes created by the SECURE Act.

Federal spending compromise bill includes retirement and health benefit plan provisions

Congress has approved two bills to fund the federal government for the remainder of fiscal year (FY) 2020, which ends September 30, 2020. The president will sign the bills.

One of the bills, the “Further Consolidated Appropriations Act, 2020” (H.R.1865), cleared the House on December 17 by a vote of 297-140. It covers “domestic” spending items and includes provisions directly or indirectly affecting benefit programs sponsored by employers. The Senate approved the measure on December 19 by a vote of 71-23.

In the retirement arena, H.R.1865 includes provisions from the “Setting Every Community Up for Retirement Enhancement (SECURE) Act,” which cleared the House in May. The bill calls for:

  • Simplification of the 401(k) safe harbor rules
  • An increase, from age 70-1/2 to age 72, in the required beginning date for mandatory distributions
  • A requirement that 401(k) plans enable participation by part-time workers who satisfy a specified employment service rule
  • A requirement that defined contribution (DC) plan (and IRA) distributions generally be made to nonspouse beneficiaries within 10 years of the death of the account holder
  • Permission for DC plans, including 403(b) or governmental 457(b) plans, to make direct trustee-to-trustee transfers of lifetime income investments to another employer-sponsored retirement plan (or IRA)

The bill also includes provisions targeting specific retirement plan types, such as “open” multiple employer plans (MEPs) for unrelated employers; Pension Benefit Guaranty Corporation (PBGC) premiums paid by cooperative and small employer charity (CSEC) pensions; retirement account rules for church-controlled organizations; special rules for individuals when certain natural disasters strike; funding rules for community newspapers; and tax credits for small-employer plan start-up costs. In addition, the bill significantly increases the penalties for retirement plan filings and for employers failing to file withholding notices, and includes “administrative improvements” to plan adoption and filing dates, disclosures, and nondiscrimination requirements for “closed” pension plans.

In the health benefits area, the bill permanently repeals the 40% excise tax (the “Cadillac” tax) on “high-cost” employer-sponsored health plans and the annual health insurance tax (HIT) on health insurers. H.R.1865 extends the fee supporting the Patient-Centered Outcomes Research Institute (PCORI) through FY2029 and similarly extends the fees on health insurers and self-insured health plans of $2 per average number of lives covered.

The bill also includes one-year tax “extenders” (through 2020) for the tax credit for employers that provide certain paid family leave, the Work Opportunity Tax Credit for hiring individuals from targeted groups, and the Indian Employment tax credit for businesses that employ American Indians or their spouses. It also extends the credit for health insurance coverage for certain individuals receiving Trade Adjustment Assistance or pension benefits paid by the PBGC.

A forthcoming Client Action Bulletin will provide further details, including the effective dates of the various provisions in H.R.1865. For additional information about the bill’s provisions affecting employer-sponsored retirement or health benefit programs, contact your Milliman consultant.

2020 key administrative dates and deadlines for calendar-year DC retirement plans

Milliman’s 2020 key administrative dates and deadlines for calendar-year defined contribution (DC) retirement plans is now available. The annotated list includes relevant 2020 administrative dates encountered by most defined contribution plans (401[k], 403[b], profit sharing, etc.), with deadlines for quarterly benefit statements, participant disclosures, and safe harbor notices. The calendar also provides short descriptions of the actions required to meet each deadline.

To download the calendar, click here.