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On December 20, 2019, Congress enacted the SECURE Act as part of the Further Consolidated Appropriations Act of 2020 (together, the “Act”). The Act includes both required and discretionary changes for employer-sponsored qualified retirement plans, some of which are effective for the 2020 plan year. Below is an overview of these changes with a reference to each date on or prior to the plan year for which the changes become effective.

Note that this Advisory does not address changes from the Act that do not affect employer-sponsored qualified retirement plans.

Changes Regarding Contributions and Withdrawals

December 20, 2019

  • Credit Card Plan Loans.  Qualified retirement plans are prohibited from making plan loans through credit cards or similar arrangements.

December 31, 2019

  • Default Automatic Contribution Rate. The maximum safe harbor default automatic contribution rate is increased from 10% to 15% (but can’t be more than 10% for the first year of participation).
  • Safe Harbor 401(k) Plan – Election. A 401(k) plan may become a nonelective contribution safe harbor 401(k) plan after the beginning of the plan year if either (i) it is amended by the 30th day before the end of the plan year, or (ii) it provides a nonelective contribution of at least 4% for the plan year and is amended before the last day for distributing excess contributions for the plan year.

Continue Reading SECURE Act Considerations for Retirement Plan Sponsors

Several jurisdictions have recently adopted laws requiring individuals to purchase health coverage or pay a state tax penalty. Employers employing residents in a covered jurisdiction now need to facilitate compliance by reporting health coverage information to local governmental authorities. The following is a brief summary of the new health coverage reporting requirements.

State Individual Mandates

Under the Affordable Care Act’s (the “ACA”) individual mandate, beginning in 2014, individuals were required to either purchase minimum essential coverage (“MEC”) or pay a federal tax penalty for failing to maintain such coverage. MEC generally includes employer-sponsored group health plan coverage. The Tax Cuts and Jobs Act of 2017 effectively eliminated the individual mandate by reducing the penalty to zero starting in 2019. In response, however, California, the District of ColumbiaNew JerseyRhode Island and Vermont (“Adopting Jurisdictions”) have each adopted their own versions of the ACA’s individual mandate.

Note that Massachusetts had already adopted an individual mandate requirement in 2006, well before the ACA became law. This Advisory does not address coverage reporting requirements under Massachusetts law.

Continue Reading Summary of State Mandated ACA Reporting

March 31, 2020 is the deadline for retroactively correcting most 403(b) plan document defects that occurred on or after January 1, 2010.  These defects can be corrected by amending an individually-designed 403(b) plan or by adopting a pre-approved prototype or volume submitter 403(b) plan.

Employers who adopt a pre-approved 403(b) plan by March 31, 2020

The Internal Revenue Service has recently issued final regulations easing requirements for hardship distributions from 401(k) and 403(b) plans. The final regulations reflect a number of statutory changes, including those made under the Bipartisan Budget Act of 2018, as mentioned in our December 2018 Advisory.

401(k) and 403(b) plans may allow for a distribution of deferred compensation following an employee hardship if (i) the distribution is made on account of an immediate and heavy financial need and (ii) the distribution is necessary to satisfy the financial need. As described below, the final regulations revise the hardship distribution rules to make it easier to meet these requirements, as well as to expand the permissible sources from which hardship distributions can be made. While employers are not required to amend their plan’s hardship provisions by the end of 2019, employers should be prepared to implement certain administrative changes no later than the beginning of 2020 and to update employee communications accordingly.

The following is a brief overview of the new hardship distribution rules.

Continue Reading IRS Issues Final Hardship Distribution Rules

The Departments of Labor, Health and Human Services and Treasury recently issued joint final regulations expanding the availability of health reimbursement arrangements (“HRAs”) by introducing two new types of HRAs – Individual Coverage HRAs and Excepted Benefit HRAs. The following is a brief overview of the requirements employers must satisfy in order to offer HRA coverage to their employees, and employees’ dependents, under one of these new arrangements.


HRAs constitute group health plans that are subject to various Affordable Care Act (“ACA”) rules. The ACA rules include prohibitions on capping or requiring cost-sharing for certain benefits (the “Market Reforms”).

Under prior guidance, in order to comply with or avoid the Market Reforms, HRAs generally had to be integrated with other qualifying group health plan coverage or limit the scope of reimbursable expenses to benefits excepted from compliance (e.g., limited scope dental or vision coverage). The new regulations make it easier for employers to offer HRA coverage by providing two new options that do not require integration with a group health plan or limiting the scope of reimbursable expenses.

Continue Reading Employers Have New Ways to Offer Health Reimbursement Arrangements

On July 17, 2019, the Treasury Department and the IRS issued Notice 2019-45 to expand the types of preventive care services and benefits that can be provided to individuals under high deductible health plans (“HDHPs”) before reaching a minimum deductible and without preventing such individuals’ participation in health savings accounts (“HSA”). The additional preventive care services and benefits relate to medical care that helps maintain the health of individuals with chronic conditions.

As background – to be eligible for an HSA, an individual must be covered by a HDHP.  Generally, a HDHP cannot provide benefits for any year until the minimum applicable deductible for that year is satisfied.  However, there is a statutory safe harbor that permits HDHPs to provide “preventive care” without a minimum deductible.  New Notice 2019-45 sets forth a list of 14 medical services and benefits for the treatment of specified chronic conditions (including diabetes, hypertension, and heart disease, among others) that, effective July 17, 2019, can be provided by a HDHP under the preventive-care safe harbor without a minimum deductible.

Continue Reading Treasury Department and IRS Release Guidance on Preventive Care for Chronic Conditions under High Deductible Health Plans

This Advisory supplements our previous advisories dated January 2018, December 2016, December 2015 (as supplemented in January 2016), October 2014, October 2013, November 2012, November 2011, and October 2010, addressing requirements of the Affordable Care Act (“ACA”). Below is a summary of recent developments impacting health care reform, as well as other recent developments affecting employer-sponsored health plans that will be relevant for employer-sponsored plans in 2019.

Review and Update Plan SPDs
Given the changes that have been made to health care reform over the years (legislative changes, new regulations, courts cases, etc.), clients are well advised to take a fresh look at their summary plan descriptions for certain less obvious changes that might be required. While clients might annually update their summary plan descriptions in ordinary course for co-pays, eligibility and contact information, there are additional technical changes that may or may not be required for certain arrangements.

Individual Mandate Repeal
The Tax Cuts and Jobs Act (the “Act”) eliminates the shared responsibility payment for those individuals who fail to maintain minimum essential health coverage beginning January 1, 2019. The Act did not, however, repeal the employer shared responsibility mandate or reporting requirements. Those requirements are still in play, and the IRS has been actively enforcing these requirements against employers.
Continue Reading Health Care Reform – ACA Changes and Other Updates

As mentioned in our January 2018 and March 2018 Client Advisories, the Tax Cuts and Jobs Act (the “Act”), provides a temporary corporate federal tax credit, ranging from 12.5 percent to 25 percent, that may be claimed by eligible employers for certain wages paid in 2018 and 2019 to qualifying employees during family and medical

As we approach the end of 2018, qualified retirement plan sponsors should consider reviewing the various changes brought on by recent legislation, regulations and agency guidance to determine whether any plan amendments or administrative updates are needed. This advisory provides a brief summary of some of the notable changes affecting qualified retirement plans.

Hardship Relief
As mentioned in our February 2018 client advisory, for plan years commencing after December 31, 2018, the Bipartisan Budget Act of 2018 (“Budget Act”) eases hardship withdrawal requirements by:

  • Not requiring a plan loan to be taken before a hardship withdrawal is made.
  • Allowing hardship withdrawals to include qualified matching contributions (“QMACs”), qualified non-elective contributions (“QNECs”), and earnings from all eligible sources.
  • Deleting the six-month suspension on deferrals following a hardship withdrawal.

Pursuant to recent IRS proposed regulations implementing the above legislative changes, plan sponsors may adopt any or all of the above changes for 2019. Plan amendments implementing the changes, however, need not be adopted until the end of the second calendar year that begins after the issuance of the IRS Required Amendment List that includes such changes. Employers seeking to put these hardship relief changes into effect for 2019 should, however, contact their third party administrators now to ensure appropriate administrative changes are in place for a January 1, 2019 effective date.

Continue Reading 2018 Qualified Retirement Plan Changes

As employers look for creative ways to help employees manage their student loan debt, the IRS recently ruled that employer nonelective contributions to a 401(k) plan for employees who make student loan repayments would not violate the Internal Revenue Code’s contingent benefit rule. That rule prohibits an employer from making any benefit (other than matching contributions) contingent, directly or indirectly, on an employee’s making, or not making, elective deferrals under the 401(k) plan.

The guidance came in the form of a Private Letter Ruling (“PLR”), which may only be relied on by the employer who requested the ruling. Nonetheless, the PLR is instructive for other employers wishing to provide similar tax-favored benefits for employees who may not otherwise be in a position to contribute to their retirement savings.

Continue Reading Offering Student Loan Benefits Under 401(k) Plans