overpayments
a participant must take reasonable steps to recoup such
overpayment, such as collecting the overpayment from the
participant or employer in order to maintain the tax-qualified
status of the plan and comply with ERISA. EPCRS includes various
procedures for correcting overpayments made from defined benefit
and defined contribution plans. The PBGC also has overpayment
recoupment policies for terminating defined benefit plans.
(not including a 457(b) plan) will not fail to be a tax favored
plan merely because the plan fails to recover an “inadvertent
benefit overpayment” or otherwise amends the plan to permit
this increased benefit. There is also fiduciary relief for failure
to make the plan whole.
However, the plan sponsor must still satisfy minimum funding
requirements and prevent/restore an impermissible forfeiture.
Alternatively, if the plan sponsor elects to offset future plan
payments to recover the overpayment, restrictions will be imposed
on the offset. Moreover, restrictions will be imposed on collection
efforts from the participant (e.g., no interest, must recover
within 3 years, etc.).
In certain cases, the overpayment is also treated as an eligible
rollover distribution.
Effective upon enactment.
accumulations in qualified retirement plans
if the amount distributed to an individual during a taxable year is
less than the RMD under the plan for that year. The excise tax is
equal to 50% of the shortfall (that is, 50% of the amount by which
the required minimum distribution exceeds the actual distribution).
(The excise tax may be abated under a reasonable cause
exception.)
from 50% of the shortfall to 25%. Further reduces the excise tax to
10% if the individual corrects the shortfall during a two year
correction window.
Effective for taxable years beginning after December 31, 2021.
allocation funds
supply certain performance and benchmark data to participants about
their investment options.
regulations no later than six months after enactment to provide
that, in the case of a designated investment alternative which
contains a mix of asset classes, a plan administrator may, but is
not required to, use a benchmark which is a blend of different
broad-based securities market indices.
Effective upon enactment.
relating to reporting and disclosure requirements
federal agencies (e.g., Form 5500) and provide numerous
notices to participants (e.g., Summary Plan
Description).
and the Director of the Pension Benefit Guaranty Corporation
(“PBGC”) to study the disclosure and reporting
requirements on plan sponsors and submit a report to Congress
addressing possible avenues for simplification, consolidation, or
standardization.
Effective upon enactment.
related to unenrolled participants
participate in an employer-sponsored plan (“unenrolled
participants”) are required to receive numerous communications
from the plan sponsor.
unenrolled participants to consist solely of an annual notice of
eligibility to participate during the annual enrollment period (and
providing any document so entitled upon request).
Effective for plan years beginning after December 31, 2021.
to create an online searchable “Lost and Found” database
maintained by PBGC to collect information on benefits owed to
missing, lost or non-responsive participants and beneficiaries in
tax-qualified retirement plans and to assist such plan participants
and beneficiaries in locating those benefits.
This applies to tax-qualified defined benefit and defined
contribution plans subject to ERISA vesting provisions.
Payments from an ongoing plan to nonresponsive participants where
the vested accrued benefit does not exceed $1,000 must be paid to
the Lost and Found.
Imposes annual reporting requirements for plan sponsors and
additional reporting changes.
Increases the mandatory cashout provisions to $6,000 (up from
$5,000) and expands the rollover options for mandatory
distributions.
Effective upon enactment.
Resolution System (“EPCRS”)
qualified plans have certain opportunities to self-correct plan
errors under EPCRS. This generally involves operational failures
that are insignificant (or otherwise corrected within a two year
period).
in the bill) to be self-corrected under EPCRS (subject to any IRS
imposed restrictions).
This covers 401(a), 403(a), 403(b), 408(p) (SIMPLE IRAs) and 408(k)
(SEPs).
It also directs the Secretary to expand EPCRS to (1) allow
custodians of IRAs to address eligible inadvertent failures, and
(2) add additional safe harbors for correcting such inadvertent
failures (including earnings calculations).
Effective upon enactment.
month” requirement for governmental Section 457(b) plans
may only defer compensation if an agreement providing for the
deferral has been entered into before the first day of the month in
which the compensation is paid or made available.
for 401(k) and 403(b) plans by allowing participants of
governmental 457(b) plans to change their deferral rate at any time
before the compensation is available to the individual. For a
tax-exempt 457(b) plans, participants may defer compensation for
any calendar month only if an agreement providing for such deferral
has been entered into before the beginning of such month.
Effective for taxable years beginning after enactment.
charitable distribution (QCD) to split-interest entity; increase in
qualified charitable distribution limitation
distributions (called qualified charitable distributions) up to
$100,000 are excluded from gross income of the individual. QCDs
also count for minimum required distribution purposes.
up to $50,000 (indexed) for qualifying charitable distributions to
certain split-interest entities, including charitable remainder
annuity trusts, charitable remainder unitrusts, and charitable gift
annuity.
Indexes the $100,000 limit to inflation.
Effective for distributions made in taxable years ending after the
date of enactment.
employees” in a governmental plan to take retirement
withdrawals beginning at age 50 after separation from service
without incurring a 10% early withdrawal penalty.
qualified public safety employees to also apply to private sector
firefighters receiving distributions from a qualified retirement
plan or 403(b) plan.
Effective for distributions made after December 31, 2021.
first responder retirement payments
typically included in the recipient’s taxable income.
disability pension payments (from a 401(a), 403(a), governmental
457(b), or 403(b) plan) from gross income after reaching retirement
age up to an annualized excludable disability amount.
Effective for amounts received with respect to taxable years
beginning after December 31, 2026.
limitations for excise tax on excess contributions and certain
accumulations
contributions made to IRAs (Section 4973), failures to distribute
RMDs from plans and IRAs (Section 4974), and prohibited
transactions involving plans and IRAs (Code Section 4975). The
statute of limitations with respect to a tax liability for excess
retirement contributions or other accumulations generally starts to
run within three years after the tax return (or Form 5329 in
certain cases) is filed, but if a return is never filed, the
statute does not begin to run.
contributions or on certain accumulations in connection with an
IRA, provides that for the applicable return to start the statute
of limitation is the income tax return filed by the person on whom
the tax is imposed for the year in which the act (or failure to
act) giving rise to the liability for such tax occurred. The filing
of Form 5329 is generally no longer be required to start the
statute of limitations.
For a person not required to file a return for that year, the
statute of limitations begins on the date that the return would
have been required to be filed.
Effective upon enactment.
in certain cases
furnish participants and beneficiaries with statements describing
the individual’s benefit under the plan. In defined
contribution plans, benefit statements must be provided at least
once each calendar quarter, if the participant has the right to
direct investments, and at least once each calendar year in other
cases. In defined benefit plans, benefit statements must generally
be delivered at least once every three years.
DOL disclosure regulations include various document delivery safe
harbors. DOL updated the disclosure regulations in 2020 to add two
new additional safe harbors: (1) a 2002 safe harbor that applies
only to individuals who generally either (a) have the ability to
effectively access electronic documents at work, where such access
is an integral part of the individual’s duties; or (b) have
consented to receiving documents electronically; and (2) a 2020
safe harbor where the plan administrator complies with certain
notice, access, and other requirements.
to generally require that:
– for a defined contribution plan, at least one statement
must be provided on paper in written form for each calendar year;
and
– for a defined benefit plan, at least one statement must be
provided on paper every three years.
Exceptions allowed for plans that allow employees to opt in to
e-delivery or plans that follow the 2002 safe harbor.
It also directs the Secretary to make changes by December 31, 2021
to the e-delivery rules to include certain participant
protections.
Effective for plan years beginning after December 31, 2022.
to defined contribution plans covering excludable employees
heavy minimum contribution is three percent of the
participant’s compensation. A defined contribution plan is
top-heavy if the aggregate of accounts for key employees exceeds 60
percent of the aggregate accounts for all employees. If a plan is
top-heavy, minimum contributions or benefits must be provided for
non-key employees and, in some cases, faster vesting is
required.
excludable employees (e.g., the Code’s age and service
eligibility rules — age 21 and one year of service) and which
meet the top-heavy minimum contribution rules testing only this
group, to disregard this group from the top-heavy minimum
contribution testing.
Effective for plan years beginning after date of enactment.
distribution limited to 3 years
limit the period during which a qualified birth or adoption
distribution (QBAD) may be repaid and qualify as a rollover
contribution.
to be recontributed within three years of the distribution in order
to qualify as a rollover contribution. (This aligns the rule with
similar disaster relief provisions and simplifies plan
administration.)
Effective as if included in section 113 of the SECURE Act.
that deemed hardship distribution conditions are met
hardship distributions may be made on account of an immediate and
heavy financial need or an unforeseeable emergency. These needs are
evaluated using facts and circumstances. (There is a streamlined
hardship documentation approach that uses a self-certification
process if certain requirements are met.)
one of the safe harbor events that constitutes a deemed hardship
for purposes of taking a hardship withdrawal from a 401(k) plan or
a 403(b) plan.
The administrator can also rely on the employee’s certification
that the distribution is not in excess of the amount required to
satisfy the financial need.
A similar rule applies for purposes of unforeseeable emergency
distributions from governmental Section 457(b) plans.
Effective for plan years beginning after December 31, 2021.
plans for individuals in case of domestic abuse
the case of domestic abuse in an amount not to exceed the lesser of
$10,000 or 50% of the value of the employee’s account under the
plan.
In addition, such eligible distributions to a domestic abuse victim
(defined in the bill) may be recontributed to applicable eligible
retirement plans, subject to certain requirements. (This is similar
to the QBAD provision.)
This also provides for an in-service distribution event for 401(k),
403(b), and governmental 457(b) plans.
Effective for distributions made after the date of enactment.
address scenarios in which a person, such as a family member, is
treated as having an ownership interest in a business. These rules
take into account the laws on familial property ownership in a
community property state. These rules are important for determining
who is the employer and in the controlled group/affiliated service
group for various testing and distribution rights.
and to disregard community property laws for purposes of
determining ownership of a business. To the extent these changes
result in changes to the controlled group or affiliated service
group, the Section 410(b)(6)(C) transition relief is
available.
Effective for plan years beginning on or after the date of
enactment.
under plan for previous plan year allowed until employer tax return
due date
for plans to meet qualification requirements. In general, a
discretionary plan amendment (which would include an increase in
benefit accruals) must be adopted by the end of the plan year in
which it is effective.
to increase benefits until the employer’s tax filing deadline
(including extensions) for the taxable year in which the amendment
is effective.
This applies to stock bonus, pension, profit-sharing, or annuity
plan to increase benefits for the preceding plan year (other than
increasing matching contributions).
Effective for amendments made in plan years beginning after
December 31, 2022.
for sole proprietors
401(k) plan of a sole proprietor can be funded with employer
contributions as of the due date for the business’s return, but
the elective deferrals must be made as of December 31 of the prior
year.
owner is the only employee), allows elective deferrals to be made
by the tax filing due date (determined without regard to any
extensions).
Effective for plan years beginning after enactment.
portion of account involved in a prohibited transaction
transaction with respect to the IRA, the IRA loses its tax-favored
status and ceases to be an IRA as of the first day of the taxable
year in which the prohibited transaction occurs. As a result, the
IRA is treated as distributing to the individual on the first day
of that taxable year the fair market value of all of the assets in
the account.
when an IRA owner or beneficiary engages in a prohibited
transaction so that only the portion of the IRA that is used in the
prohibited transaction is treated as distributed to the
individual.
Effective for taxable years beginning after enactment.