Author: Kathleen O'Connor Adams

As a former consultant in the employee benefits field, Kathleen brings niche experience to the counsel she provides to taxable and tax-exempt entities on a broad range of employee benefits issues. She works with employers on matters related to tax-qualified retirement plans (such as 401(k) plans, defined benefit pension plans, and profit-sharing plans), 403(b) plans, nonqualified retirement plans for management and key employees, health and welfare benefits, and executive compensation. Kathleen also advises on ERISA governance issues, assists with operational failures under both qualified and nonqualified retirement plans, provides fiduciary training for plan committee members, and advises on new plan design opportunities.

SECURE 2.0 Expansion of Self-Correction Program and Plan Loan Error Corrections

The SECURE 2.0 Act of 2022 (SECURE 2.0), the follow-up legislation to the Setting Every Community Up for Retirement Enhancement Act of 2019 (now known as SECURE 1.0) (previously discussed here and here), includes many important legal changes affecting retirement plans. SECURE 2.0 is intended to expand access to retirement plans, encourage additional retirement savings and ease certain administrative burdens on retirement plan sponsors.

In a measure that substantively affects plan sponsors and alters retirement plan correction practices, SECURE 2.0 significantly expands the availability of self-correction by widening the range of operational failures for which self-correction is available, including plan loan errors.

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Student Loan Assistance From Employers

As recently announced, President Biden has authorized forgiveness of up to $10,000 for federal student loan borrowers and $20,000 to individuals who received Pell Grants.

Employers are also able to provide student loan repayment benefits to their employees on a tax-free basis by expanding the type of permitted expenses under a Code § 127 “educational assistance program” to include student loan repayments made by the employer on behalf of an employee. If an employer has or adopts an educational assistance program, the employer may make student loan payments on behalf of an employee in an amount up to $5,250 annually, and such payments would be excluded from the employee’s taxable income.

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IRS Pilots Pre-Examination Compliance Program for Retirement Plans

In its recent June Employee Plans newsletter, the Internal Revenue Service (IRS) announced the launch of a 90-day pre-examination compliance pilot program. Under the program, the IRS will notify a plan sponsor that its retirement plan has been selected for pre-examination. The notification will provide the sponsor with 90 days to review retirement plan documents and operations to determine compliance with current tax law. If the sponsor does not respond within 90 days, the IRS will contact the sponsor to schedule an examination.

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IRS Proposes Updates to the RMD Rules

On February 24, 2022, the IRS issued proposed regulations incorporating the Setting Every Community Up for Retirement Enhancement Act (“SECURE Act”) into the required minimum distributions (“RMDs”) regulations. The IRS is accepting comments until May 25, 2022, and then holding a public hearing on June 15, 2022. The proposed regulations, if finalized as currently drafted, generally would be effective for required minimum distributions that occur on and after January 1, 2022.

SECURE Act RMD Reminder

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Preview of 2022 Required Changes for Retirement Plans

As 2022 begins, retirement plan sponsors and service providers should keep in mind deadlines for required plan changes in 2022. In particular, retirement plan changes under the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) and Coronavirus Aid Relief and Economic Security Act (CARES Act) must be adopted by amendment by December 31, 2022, for calendar year plans. In addition, retirement plans must comply with new SECURE Act disclosure requirements beginning later this year.

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IRS Announces 2022 Cost-of-Living Adjustments for Retirement Plans

The IRS recently announced the 2022 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans. Generally, the IRS increased the applicable limits for 2022, although certain limits remained unchanged. The following limits apply to retirement plans in 2022:

The limit on elective deferrals under 401(k), 403(b), and eligible 457(b) plans increased to $20,500.
The limit on additional catch-up contributions by participants age 50 or older remains unchanged at $6,500. This means that the maximum amount of elective deferral contributions for those participants in 2022 is $27,000.
The Internal Revenue Code (“Code”) Section 415 annual addition limit is increased to $61,000 for 401(k) and other defined contribution plans, and the annual benefit limit is increased to $245,000 for defined benefit plans.
The limit on the annual compensation that can be taken into account by qualified plans under Code Section 417 is increased to $305,000.
The dollar level threshold for becoming a highly compensated employee under Code Section 414(q) increased to $135,000 (which based on the look-back rule is applicable for HCE determinations in 2023 based on compensation in 2022).
The dollar level threshold for becoming a “key employee” in a top-heavy plan under Code Section 416(i)(1) is increased to $200,000.

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Revised IRS Correction Procedures (EPCRS) Include Helpful Changes

On July 16, 2021, the Internal Revenue Service (“IRS”) published an updated version of its correction procedures for qualified retirement plans, Revenue Procedure 2021-30, the Employee Plans Compliance Resolution System (“EPCRS”).

The revisions to EPCRS include a number of changes that are intended to help simplify and provide additional flexibility for correcting certain retirement plan failures. Below is a summary of the major changes:

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Biden Directs DOL to Consider Rescinding Trump-Era Rule on Environmental, Social and Governance Investing

President Biden signed an executive order on May 20 on climate-related financial risk that seeks to change the rules regarding the use of environmental, social, and governance (ESG) investments in retirement plans. The order specifically directs the Employee Benefits Security Administration (EBSA) bureau of the Department of Labor (DOL) to consider suspending, revising, or rescinding the Trump-era “Financial Factors in Selective Plan Investments” rule regarding ESG retirement investments. The executive order is consistent with the expectation that the Biden administration will move to encourage the consideration of ESG factors when selecting retirement plan investments given the emphasis on climate change initiatives.

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Reminder: The SECURE Act’s Safe Harbor for Lifetime Annuity Options Opens New Possibilities for Defined Contribution Plan Sponsors

The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act made a number of changes designed to increase the availability of lifetime income options in defined contribution retirement plans, such as 401(k) plans. Among those changes was a new fiduciary safe harbor for choosing an annuity provider, including an “in-plan” annuity-type product. Although this provision may not have received as much attention due to the COVID-19 pandemic, plan sponsors and committees should be aware of the new safe harbor option, particularly in light of the upcoming requirement to provide lifetime income disclosures to participants, which is set to become effective later this year (discussed here).

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CARES Act Brings Much-Needed Relief (and New Obligations) for Benefit Plans

As people across the country react to the quickly changing COVID-19 pandemic, Congress passed another piece of legislation providing guidance and relief on a variety of issues — the Coronavirus Aid Relief and Economic Security (CARES) Act, signed into law on March 27, 2020. This article includes brief summaries of what employers should know about key benefits-related components of the CARES Act. Plan sponsors should review their plans to assess the impact of these changes and take appropriate steps to implement the changes (some of which are required).

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