Bipartisan Bill Paves The Way For Significant Retirement Plan Reforms

Author:Ms Lisa Loesel and Sarah L. Engle
Profession:McDermott Will & Emery
 
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The House recently passed the most significant piece of proposed retirement plan legislation in more than a decade: the SECURE Act. Although the Senate must also approve the bill before it becomes law, its proposed changes have considerable bipartisan support in Congress. Plan sponsors should start considering how changes included in the SECURE Act could impact their retirement plans. Employers who do not currently offer retirement plans should also review the new retirement plan incentives included in the proposed legislation.

In Depth

On May 21, 2019, the US House of Representatives passed the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) by a vote of 417 to 3. The SECURE Act is one of the most significant pieces of retirement plan legislation in more than a decade and proposes a number of changes to existing retirement plan rules that are designed to make it easier for employees to save for retirement. The legislation aims to help employees achieve retirement security by ensuring that more workers have access to a retirement plan, are able to save enough money to maintain their standard of living in retirement and do not outlive their retirement savings. Key Changes Proposed Under the Secure Act Provisions Designed to Encourage Employer-Provided Retirement Plans The SECURE Act includes provisions to encourage employers to adopt retirement plans for their employees and to expand access to existing plans. In particular, the bill:

Broadens eligibility rules for long-term, part-time employees. Currently, an employer may require its employees to complete 1,000 hours of service during a 12-consecutive-month period to begin participating in its retirement plan. This can result in certain long-term, part-time employees being excluded from plan participation. As a result, the bill requires employers to permit long-term, part-time employees who work at least 500 hours in three consecutive 12-month periods to participate in their plans. However, an employer would not be required to make matching or nonelective contributions on behalf of such employees and could continue to impose an age-21 requirement. Allows small, unrelated employers to adopt "open" multiple employer plans. Existing Department of Labor (DOL) rules require employers that band together to create a multiple employer plan (MEP) to share an economic nexus and commonality of interests completely unrelated to providing benefits. Although the DOL issued...

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