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SECURE Act Squeezes onto the Minibus

Legislation

In a major victory for the advocacy efforts of the American Retirement Association, the most comprehensive retirement savings policy bill since the Pension Protection Act of 2006 took another big step toward becoming law yesterday.

Years in the making, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was included in the Further Consolidated Appropriations Act, 2020, one of the two “minibus” appropriations bills Congress is considering to fund the federal government for the rest of the 2020 fiscal year.

The House Rules Committee voted through the two “minibuses” last night and the full House of Representatives is expected to consider and pass the legislation later today. The Senate will most likely vote on the measures as early as Wednesday, and barring any unexpected hiccups, the bills should reach President Trump’s desk for his signature by the end of the work week.

Remedial Amendment Period Key

All 29 provisions that are in the original House-passed version of the legislation were included in this bill. The only new provision added was language providing for a remedial plan amendment period until the 2022 plan year (2024 plan year for certain governmental plans), or a later date if the Treasury Department provides one, for any plan amendment required under the SECURE Act and its accompanying regulations. The remedial plan amendment language is critical because many of the SECURE Act provisions (everything but open MEPs and provisions affecting long-term, part-time employees) become effective as of Jan. 1, 2020 – just 15 days away. The American Retirement Association strongly advocated for the inclusion of such a remedial amendment period to help smooth compliance with the new law.

The SECURE Act is geared toward addressing the real challenges that small business owners face – including costs, administrative burdens and increased liability for mistakes – when they weigh the decision to provide retirement benefits for their workers. To that end, the SECURE Act allows for unrelated employers to join a pooled employer plan, significantly increases the small employer pension plan startup tax credit up to $5,000 and gives business owners more flexibility to help guide their decision-making.

The legislation would also:

  • simplify the 401(k) safe harbor rules; 
  • expand portability of lifetime income options;
  • allow long-term, part-time workers to participate in 401(k) plans; 
  • allow plans adopting by the filing due date to be treated as in effect as of the close of the year;
  • provide a fiduciary safe harbor for selection of a lifetime income provider;
  • modify the treatment of custodial accounts on termination of 403(b) plans;
  • extend the current required minimum distribution requirements to age 72; 
  • require disclosures regarding lifetime income; and 
  • modify the nondiscrimination rules to protect longer-service participants.

Still to Come 

We’re not out of the woods yet; as noted above, the catch-all spending legislation still needs to be approved first by the House and Senate and signed by the President. Most indications, however, suggest that will happen in short order. Leaders from both parties in the House and Senate and Trump administration officials participated in reaching the agreement. 

Congress has a Dec. 20 deadline to approve the spending bill to avert another government shutdown. The federal government’s fiscal year for 2020 began Oct. 1, but since the annual funding bills had not been completed, lawmakers have been forced to pass temporary funding measures; the previous extension had expired Nov. 21.