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On December 9, 2020, the Internal Revenue Service (“IRS”) issued Notice 2020-86 which provides guidance relating to certain changes to the safe harbor rules that apply to 401(k) plans made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”). The IRS Notice interprets the SECURE Act’s provisions to apply to some, but not all, aspects of the rules regarding safe harbor plans, limiting the applicability of the recent liberalizations to the safe harbor rules.
Please see full Alert below for more information.
Employee Benefits and Executive Compensation Alert December 15, 2020SECURE Act Update: IRS Issues Guidance with Respect to Safe Harbor PlansOn December 9, 2020, the Internal Revenue Service (“IRS”) issued Notice 2020-86 which provides guidance relating to certain changes to the safe harbor rules that apply to 401(k) plans made by the S
Retirement Plan Tax Deductions/Credits for Tax-Exempt Sponsors
Experts from Groom Law Group and Cammack Retirement Group answer questions concerning retirement plan administration and regulations.
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Do the deductibility rules for employer contributions to a retirement plan under Internal Revenue Code (IRC) Section 404 apply to 403(b) plans? And does it matter whether the contribution is nonelective or matching?”
Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:
No. The rules under IRC Section 404 provide a tax deduction for retirement plan sponsors for employer contributions made to a retirement plan that otherwise qualify as ordinary and necessary business expenses. For defined contribution (DC) plans, deductions for contributions are generally limited to 25% of the compensation paid to beneficiaries of the plan during the taxabl
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The IRS recently published Notice 2020-86 (the “Notice”), which provides clarification with respect to certain changes made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”). In particular, the Notice answers several outstanding questions related to the maximum default deferral rate for qualified automatic contribution arrangements.
As previously reported here, the SECURE Act raised the maximum permissible deferral rate for qualified automatic contribution arrangements to 15% of compensation from 10% of compensation for the second plan year and all subsequent plan years. The maximum deferral rate through the end of the first year remains set at 10% of compensation.
Annexus Retirement Solutions Launches to Address In-Plan Guaranteed Income
The new division of Annexus will focus on “re-engineering” target-date fund (TDF) structures to better enable guaranteed lifetime income as part of defined contribution (DC) plans.
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Annexus has announced the launch of a venture called “Annexus Retirement Solutions,” a new division that will focus on “re-engineering” the target-date fund (TDF) structure to better enable guaranteed lifetime income as part of defined contribution (DC) plans.
In conversation with PLANSPONSOR, Dave Paulsen, former president of individual solutions and chief distribution officer of Transamerica, and Charles Millard, former director of the U.S. Pension Benefit Guaranty Corporation (PBGC), said they are pleased to have been brought onto this project as advisers. Paulsen confirmed that the new venture intends to debut its first retirement solution in early 2021, to be followed up by multiple other solutions l
Guaranteed Income, Private Equity Coming Soon to a TDF Near You
Legislation, regulations and market volatility will serve as catalysts for inclusion of income products and private equity in target-date funds, asset managers suggest.
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The strategic incorporation of lifetime income products and alternative investments in target-date funds (TDFs) could potentially help providers deliver superior long-term outcomes for plan participants and differentiate themselves in a market dominated by a handful of low-cost providers, according to the December issue of “Cerulli Edge U.S. Asset and Wealth Management Edition.”
Momentum for including income products in TDFs has been building since 2014, when the IRS issued guidance providing that plan sponsors can include deferred income annuities in TDFs used as qualified default investment alternatives (QDIAs) in a manner that complies with plan qualification rules. A significant barrier to plan sponsor adoption of guaranteed income