Reforms to Retirement Plans

2020 Whole Ball Of Tax

Wolters Kluwer Tax & Accounting Highlights Tax Law Changes to Qualified Retirement Plans

(NEW YORK, NY, February 2020) The SECURE Act, enacted on December 20, 2019, as part of the Further Consolidated Appropriations Act, 2020, includes a variety of tax changes to qualified retirement plans, most of which should prove very helpful to plan administrators and plan recipients. There are also, however, a few revenue raisers, at least one of which may require some planning to avoid more negative results than had previously been anticipated.

In general, these provisions apply to plan amendments made on or before the last day of the first plan year beginning on or after January 1, 2022, January 1, 2024 for governmental plans. Most plans are expected to require amendment based on these changes. The changes will also warrant a review of retirement and estate plans. Implementation issues are expected given the short time period between the enactment date, December 20, 2019, and the date many provisions are effective, January 1, 2020.

IRA Changes

  • Moving the start date for required minimum distributions
  • Ending the 70 ½ age limits for contributions
  • Shortening the distribution period for non-spouse beneficiaries

401(k) Changes

  • Requiring plans to offer participation to long-term part-time employees
  • Permitting plans to do penalty-free distributions for qualified births and adoptions
  • Increasing the cap on automatic enrollment
  • Expanded small employer credit for new plans or adding auto-enrollment
  • Streamlining safe harbor rules for non-elective contributions

Other Changes for Individuals

  • Penalty-free distributions for births and adoptions
  • Compensation defined to include taxable non-tuition fellowships and stipends and “difficulty of care payments” of home healthcare workers

Other Changes for Employers

  • Small employers able to join multi-employer plans
  • Liability safe harbor for selection of annuity provider
  • Expansion of trustee-to-trustee transfers
  • New annual disclosure requirements
  • Revision of nondiscrimination rules for closed defined benefit plans
  • Several plan administration changes

New Provisions Outside of the SECURE Act

The Further Consolidated Appropriations Act, 2020 also includes provisions reducing the minimum age for making distributions from a pension plan to a participant who has not separated from service and extends permitted distributions from qualified plans to include victims of Presidentially-declared disasters.

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