Industry & Regulatory NewsEmployer Tax Credits, Part 2
The SECURE 2.0 Act modifies one small-employer credit and creates another. These credits may make establishing and contributing to a plan much more attractive.
Industry & Regulatory NewsBiden Vetoes Resolution Disapproving DOL ESG Rule
As expected, President Biden has vetoed H.J. 30, a resolution for congressional disapproval of the Department of Labor’s rule “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights.”
Industry & Regulatory NewsSEC Proposes Additional Requirements to Protect Consumer Financial Information
The Securities and Exchange Commission has proposed additional requirements for broker-dealers, investment companies, registered investment advisers and transfer agents (“covered institutions”) aimed at further protecting the privacy of consumer financial information.
Industry & Regulatory NewsPBGC Updates Interest Assumptions for Valuing Benefits for Second Quarter 2023
The Pension Benefit Guarantee Corporation (PBGC) has issued a final rule updating interest assumptions under the asset allocation regulation for plans with valuation dates in the second quarter of 2023.
Industry & Regulatory NewsAffordable Insulin Now Act Proposed in House
Representative Angie Craig (D-MN) has reintroduced the Affordable Insulin Now Act in the House.
Industry & Regulatory NewsProposal Would Allow Permanent HDHP Waiver for Telehealth Services
Sen. John Kennedy, (R-La), has introduced the Telehealth HSA Act. The Act would make permanent the ability of high deductible health plans (HDHPs) to waive the deductible for telehealth services without causing plan participants to lose the ability to contribute to a health savings account (HSA).
Industry & Regulatory NewsHardship Distributions May Be Permitted for Tennessee Severe Winter Storms
The Federal Emergency Management Agency (FEMA) issued a disaster declaration on March 8, 2023, for severe winter storms in Tennessee, for the incident period of December 22, 2022, to December 27, 2022.
Industry & Regulatory NewsSenate Confirms New IRS Commissioner
The United States Senate on Thursday confirmed Danny Werfel, in a 54-42 vote, as the next commissioner of the Internal Revenue Service. Mr. Werfel, who was nominated in November 2022 as his predecessor Charles Rettig’s term ended, will serve through November 2027.
Industry & Regulatory NewsBuild Back Better Provisions Resurface in White House Budget Proposal
President Biden’s fiscal year 2024 budget includes proposed retirement account restrictions for certain taxpayers — similar to those included in the Build Back Better Act passed by the House in 2021 — but left by the wayside enroute to the passage of the Inflation Reduction Act of 2022.
Industry & Regulatory NewsSECURE 2.0 Requires New Plans to Contain Automatic Enrollment Feature
Credible studies have concluded that employers who automatically enroll plan participants into a retirement plan help place them on a lifetime path to meaningful savings. Because auto-enrollment is so effective, Congress has included in the SECURE 2.0 Act a provision that will require most newly established 401(k) and 403(b) plans to include such a feature, starting in the 2025 plan year.
Auto-Enrollment Applies to Plans Established on or After
December 29, 2022
This is perhaps the most important detail in this provision: Although affected employers need not adopt the auto-enrollment feature until the 2025 plan year, it will be required in most plans if they were not established before December 29, 2022. So employers establishing a new retirement plan should consider including this auto-enrollment feature now to avoid an additional amendment for the 2025 plan year.
Some employers and plan types are exempt from this requirement
- Small businesses—that normally employ 10 or fewer employees
- New businesses—those in existence for less than three years
- SIMPLE 401(k) plans
- Church plans and governmental plans
Each employer in a multiple employer plan (MEP) or pooled employer plan (PEP) is considered separately when determining whether the plan is exempt. For example, an employer that establishes a plan by joining a MEP or PEP on or after December 29, 2022, is subject to the auto-enrollment rule even if the MEP or PEP was established before that date.
Beginning with the 2025 plan year, an automatic-enrollment component must contain the following features.
- An eligible automatic contribution arrangement (EACA)—which must allow permissible withdrawals
- An initial auto-enrollment rate of at least 3%, but not more than 10%, which must increase by 1% on the first day of each plan year until reaching at least 10%, but not more than 15% (10% for nonsafe harbor plans until the 2025 plan year)
- Absent a participant’s investment election, assets must be placed in a qualified default investment alternative (QDIA) to preserve principal
- Employers must allow participants to elect to defer at a higher or lower percentage than is required by the auto-enrollment rules—or elect not to defer at all
The automatic-enrollment provision has proven its value for years. In 2025, it will be required of most employers who establish a 401(k) or 403(b) plan on or after December 29, 2022. Consequently, it might make sense to get on board now.
Possible Tax Credit
The SECURE Act of 2019 (SECURE 1.0) provides a $500 per year tax credit to qualified employers that include an EACA in their 401(k) plan. The credit is available to both new and existing plans, but to small employers only (those who had 100 or fewer employees who received at least $5,000 compensation from the employer for the preceding calendar year). This credit is available for up to three years beginning with the first year for which employers include an EACA in an existing or new plan. Employers should consult their tax advisor to determine eligibility for this credit.
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(03/2023) - This information reflects our understanding based on our analysis and information available as of the date of this publication. Additional guidance provided may affect the accuracy of this content. This material is for informational purposes only and is not intended—nor should it be relied on—as legal, tax, or accounting advice. You should consult with your own competent legal, tax, or accounting advisors.