IRS Notice 2022-33, issued on Aug. 3, 2022, extends plan amendment deadlines for key provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).
Plan amendment deadlines are extended to Dec. 31, 2025 for the following provisions, which were the subject of IRS Notice 2020-68 that was previously released on Sept. 2, 2020:
The prior deadline for most plans was by the last day of the first plan year beginning on or after Jan. 1, 2022.
Plan administrators should review the guidance and determine which types of plan amendments are necessary.
Plan administrators should also continue to monitor the status of the SECURE 2.0 legislation. Key proposals from SECURE 2.0 are described below.
Section 105 of the SECURE Act provides a business credit for eligible employers that establish an eligible automatic contribution arrangement (EACA) under a qualified employer plan. These terms are generally defined as follows:
The credit is equal to $500 for each taxable year during a three-year credit period (beginning with the first taxable year for which an eligible employer includes an EACA in a qualified employer plan that is sponsored). The credit applies to taxable years beginning after Dec. 31, 2019.
IRS Notice 2020-68 provides the following implementation guidance on the credit:
Section 107 of the SECURE Act repeals the prohibition on making contributions to individual traditional IRAs if the individual has attained age 70 ½. Accordingly, for contributions made after Dec. 31, 2019, individuals can contribute to traditional IRAs regardless of their age.
IRS Notice 2020-68 clarifies that a financial institution is not required to accept post-age 70 ½ contributions, but may choose to do so beginning after Dec. 31, 2019. If a financial institution chooses to accept post-age 70 ½ contributions, it must:
Section 112 of the SECURE Act allows employees that have completed at least 500 hours of service during three consecutive 12-month periods and have attained the age of 21 to become eligible to participate in a 401(k) plan. It also provides special vesting rules for these long-term, part-time employees, and modifies the break-in-service rules for these employees.
Section 112 of the SECURE Act applies to plan years beginning after Dec. 31, 2020, except that, for purposes of determining a long-term, part-time employee’s eligibility to participate, 12-month periods beginning before Jan. 1, 2021, are not taken into account. However, the guidance clarifies that 12-month periods beginning before Jan. 1, 2021 are not excluded for purposes of determining a long-term, part-time employee’s nonforfeitable right to employer contributions.
The Internal Revenue Code (Code) generally imposes a 10% additional tax on early distributions from qualified retirement plans (including an IRA or Roth IRA), unless the distribution qualifies for an exception. Section 113 of the SECURE Act adds a new exception for any qualified birth or adoption distribution.
A qualified birth or adoption distribution is defined as any distribution of up to $5,000 from an applicable eligible retirement plan (i.e., a § 401(a) defined contribution plan, a § 403(a) annuity plan, a § 403(b) annuity contract, a governmental § 457(b) plan, or an IRA) to an individual, if made during the one-year period beginning on the date the child is born or the legal adoption is finalized.
IRS Notice 2020-68 includes the following key guidance for plans permitting qualified birth or adoption distributions:
The guidance also addresses difficulty of care payments being taken into account as compensation in determining certain retirement contribution limitations, as well as issues under the Bipartisan American Miners Act of 2019 (which reduces the minimum age for in-service distributions).
In general, a plan amendment made pursuant to a provision of the SECURE Act—whether it is required or discretionary—must be adopted by Dec. 31, 2025. For governmental plans, the deadline is later. The amendment must apply retroactively to the effective date of the SECURE Act provision.
On March 29, 2022, the U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022 (“SECURE 2.0”) with a bipartisan vote of 414-5. Key SECURE 2.0 proposals include:
More information can be found here.
This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.
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