Quick! Raise your hand if you remember the SECURE Act (Setting Every Community Up for Retirement Enhancement Act of 2019). It was signed into law on December 20, 2019 (for those keeping score, it passed the House with a vote of 297-120). December 2019 seems like a LONG time ago. Prior to the pandemic, we were talking about the SECURE Act, which includes:
- Raising the beginning date for required minimum distributions to age 72
- Requirements to offer 401(k) deferrals to part-time employees
- Changes to the timing for distributions following the death of a participant
- Pooled employer plans
- Changes for 401(k) safe harbor plans
- More information in this article
Some SECURE changes became effective in 2020 and some became effective in 2021. Plan amendments required for compliance must be adopted by December 31, 2022 (for calendar year plans).
So, what’s new? Throughout the pandemic, lawmakers and regulatory agencies provided a steady stream of new options and requirements for benefit plans.
March 2020 – The CARES Act
The CARES Act provided for expanded retirement plan loans and distributions for participants affected by COVID-19 along with the suspension of RMDs for defined contribution plans. Plan sponsors who took advantage of these options must amend their plans to reflect changes no later than December 31, 2022 (for calendar year plans). The CARES Act also permits reimbursements for many non-prescription drugs from flexible spending accounts.
April 2020 – Families First Coronavirus Response Act
The Families First Coronavirus Response Act required paid leave for individuals adversely affected by the pandemic and mandated coverage for COVID-19 diagnosis, testing, and treatment.
May 2020 – IRS/DOL Joint Notice Extending Certain Benefit Plan Deadlines
The agencies jointly extended deadlines for HIPAA special enrollment, the election of COBRA continuation coverage, payment of premiums, and notices of certain qualifying events, and filing benefit claims and appeals. The time for making elections, giving notice, etc. was tolled during the “Outbreak Period.”
EBSA Disaster Relief Notice 2020-01
EBSA Disaster Relief Notice 2020-01 provided additional time to furnish certain notices to participants and for filing Form 5500/Annual Reports.
May 2020 – IRS Notices 2020-29 and 2020-33
These notices permitted cafeteria plan participants to make mid-year changes to their coverage elections and their contributions to health and dependent care flexible spending accounts. The guidance also permitted extended periods to incur claims for reimbursement from FSAs and increased the carryover limit for health FSAs.
December 2020 – Consolidated Appropriations Act of 2021
This legislation included the following provisions.
- Employers are permitted to continue the expanded distributions and loans provided under the CARES Act.
- Certain hardship distributions for the purchase or construction of a home may be returned to the retirement plan. The deadline is June 25, 2021.
- Limited relief from the partial plan termination/vesting rules for employee terminations that occurred between March 13, 2020 and March 31, 2021.
- Cafeteria plans may allow carryovers of health and dependent care flexible spending account balances as of the end of 2020 or 2021.
- Flexible spending account balances may be used for up to 12 months following the end of a plan year.
- Dependent care expenses may be reimbursed for children up to 16 years old.
- Plans may allow participants to prospectively revoke, increase, decrease, or make new flexible spending account elections mid-year.
- Employer plans may allow expanded elections for health, dental, or vision coverage, including new elections, revocations, or elections for different coverage.
- Extended CARES Act provisions permitting employers to pay up to $5,250 toward student loan repayments for employees.
- Requires group health plans to disclose direct and indirect compensation paid to brokers and consultants.
The deadline to amend plans for these changes is December 31, 2022 (for calendar year plans).
March 2021 – The American Rescue Plan Act
ARPA requires certain employers to provide COBRA subsidies for “Assistance Eligible Individuals” along with a second chance for certain AEIs to elect COBRA continuation coverage, and it permits employers to allow eligible individuals to elect among different health plans. Employers receive tax credits to offset required COBRA subsidies. ARPA also increased the limit for contributions to dependent care flexible spending accounts during 2021.
Coming Attractions – The SECURE Act 2.0
This legislation is progressing through House committees and it currently includes the following provisions.
- Expanding automatic enrollment for 401(k) plans.
- Increasing catch-up contributions at ages 62, 63, and 64.
- Raising the age to begin required minimum distributions to 75.
- Permitting employer matching contributions for employees who make student loan payments.
- Expanding and improving IRS correction programs for qualified retirement plans.
A House bill was introduced last fall proposed to extend Code Section 1042 deferral of gain on the sale of employer stock to an ESOP to sales of S-corporation stock. This provision appears to have been dropped in the latest version before the House Ways and Means Committee. However, the provision to extend section 1042 to sales of S-corporation stock is included in a Senate bill introduced by Senators Portman and Cardin on May 21, 2021.
This one has a way to go before it becomes law, so stay tuned!