The SECURE Act, which was signed into law in December 2019, includes major changes impacting retirement plans. Paying attention to the long-term needs and goals of constituents is always a top priority for legislators, so there are a number of further pieces of litigation currently on the table to continue to modify and improve the laws and regulations concerning retirement savings.
- Automatic Enrollment Safe Harbor: One topic addressed in several new pieces of proposed legislation is adding a new actual deferral percentage testing auto-enrollment and escalation safe harbor for 401(k) plans. While the proposals differ on the matching contribution requirements, the concept has bipartisan support. The biggest concern is the required matching contributions which are still high under both proposals.
- Student Loan Repayments: A concept gaining popularity among businesses is allowing employees to make student loan payments and have the employer make matching contributions to a retirement fund, meeting the individual’s short-term need to pay off high-interest loans and their long-term need for retirement savings in a tax-advantaged fashion. One proposal includes student loan repayments and treats them as elective deferrals for purposes of matching contributions. This would make the repayment match-able like regular employee 401(k) contributions but not for purposes of ADP testing.
- Saver’s Credit: Currently, the Saver’s Credit is a non-refundable tax credit equal to 50% of the first $2,000 of contributions low-income employees make to a 401(k) plan or other qualified retirement program. One proposed piece of legislation would increase the income limits for qualifying someone for the credit, make the credit refundable, and require that the credit is paid to a qualified retirement plan.
- Blended Benchmarks: Several pieces of proposed legislation require regulations that allow fund benchmarking that includes multiple asset classes that are based on a “blended” benchmark of broad-based securities market indices.
- Simplifying Disclosure Requirements: To streamline and lower administrative overhead, proposals include allowing agencies to consolidate and simplify disclosure statements and allowing plan sponsors to pay non-cash, minimal financial incentives to plan participants who contribute to a 401(k).
- Minimum Participation: As businesses and their structure become more complex, a new proposal would allow the minimum participation rule to apply separately to different subsidiaries and business divisions when there is a bona fide separation. Currently, the rule applies to all businesses with over 50 employees enrolled in the plan or 40% of the employees in the group.
These changes and many others are currently in consideration in Washington and may gather strength over the coming year. The attorneys at Hall Benefits Law pay attention to upcoming legislation, proposed regulation changes, and other measures that may impact retirement plans so we can advise our clients on the best moves to make long term to ensure they have strong and responsible benefit plans. To learn more, reach out today by calling 678-439-6236 or visit the Hall Benefits Law website.