Retirement Plan Changes and “Cadillac Tax” Repeal Included in Domestic Appropriations Package
This week, Congress passed and President Trump is expected to sign a domestic spending package that includes significant changes affecting retirement plans in the SECURE (Setting Every Community Up for Retirement Enhancement) Act, and a permanent repeal of the “Cadillac tax” on high-cost employer-sponsored health coverage that was enacted with the Affordable Care Act (ACA). The SECURE Act is the most comprehensive set of changes to retirement plan rules in many years. While this Alert provides a summary of important provisions, our Employee Benefits Group will cover these changes in more detail in our annual update webinar in February, 2020.
SECURE Act Changes for Retirement Plans
The SECURE Act revises several federal tax and fiduciary rules that apply to employer-sponsored retirement plans, including the following:
Required Minimum Distribution Rule Changes
New Rules for 401(k) Plans
Penalty-Free In-Service Withdrawals for Birth or Adoption of a Child
Lifetime Income Disclosure Requirement for ERISA Defined Contribution Plans
The SECURE Act includes a number of other retirement plan changes, including provisions that:
New In-Service Distribution Rule for Defined Benefit and Governmental 457(b) Plans
A separate law, included in the appropriations package, lowered the minimum age at which defined benefit plans may allow participants to receive in-service distributions from 62 to 59½, effective for plan years beginning after December 31, 2019. In-service distributions from governmental 457(b) plans are also permitted for participants who have attained age 59½ , effective for plan years beginning after December 31, 2019.
“Cadillac Tax” Repealed
The ACA's so-called “Cadillac tax” provision would have imposed a 40% excise tax on high-cost employer-provided health care coverage. Originally scheduled to take effect in 2018, implementation of the tax was repeatedly delayed amid continuing efforts by employer groups and unions to repeal it altogether. The new appropriations package includes a complete repeal of the tax, effective for taxable years beginning after December 31, 2019.
If you have questions, please feel free to reach out to your contact in the Hanson Bridgett Employee Benefits Group.
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