Published November 9, 2021 – In late 2019 and early 2020, Congress passed two pieces of legislation which affected retirement plans. These were the Setting Every Community Up for Retirement Act (SECURE Act) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Both the SECURE Act and the CARES Act continue to affect plans and therefore, plan fiduciaries, into the future.

This article is an excerpt from Dopkins Employee Benefits Newsletter.
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SECURE Act:

On December 20, 2019 the SECURE Act was signed into law.  There are two main provisions which will affect retirement plans in the coming years:

• Changing the age to start taking Required Minimum Distributions (RMDs).
• Requiring employers to offer their retirement plan to long-term part-time employees.

Changing the age to start taking RMDs

With the passing of the SECURE Act, participants must start taking RMDs by April 1^st of the year the participant reaches age 72. This is effective for participants whose date of birth is July 1, 1949 or later. Previously, the age was 70 ½. For example:

• If a participant was born on June 30, 1949, the participant must follow the old rules and take RMDs by April 1^st of the year the participant reaches age 70 ½ or April 1, 2020.
• If a participant was born on July 1, 1949, the participant must start taking RMDs by April 1^st of the year the participant reaches age 72 or April 1, 2022.

Offering retirement plans to long-term part-time employees

With the passing of the SECURE Act, employers must offer long-term part-time employees eligibility to their retirement plan.  A long-term part-time employee is defined as an employee who has worked at least 500 hours per year for the previous three years.  It is important to note that the hours prior to 2021 are not considered.  Based on these rules, the earliest entry for these employees would be January 1, 2024. However, plan sponsors should begin to consider this provision now if it will result in a change to their plan, as they are required to track hours and offer participation beginning in 2024.

CARES Act:

On March 27, 2020 the CARES Act was signed into law. The intent of the CARES Act was to provide immediate relief to people affected by the coronavirus pandemic and therefore, the majority of the provisions were effective for 2020. However, there are some items to consider going into 2021:

• If the plan adopted the coronavirus related distribution or the loan expansion under the CARES Act, an amendment to the plan document to adopt these provisions is needed by December 31, 2022.
• If a participant did receive a coronavirus related distribution, the participant may repay the distribution within three years to refund the taxes that were paid on the original distribution and restore their account balance.
• A participant had the right to waive their RMD for 2020.  In 2021, the RMD should resume being paid to the participant. Plan sponsors should ensure that this is being done by third party administrators.
• The CARES Act allowed for the suspension of loan payments in 2020. If a participant did request to have their loan payments suspended, the recordkeeper should re-amortize the loan with the interest that accrued during the suspension.  This should be reviewed by the plan sponsor to ensure this was done accurately.

Plan sponsors and plan fiduciaries should continue to be aware of these provisions as they will continue to affect their plans.

For more information, please contact Vincent Pasini at vpasini@dopkins.com.

About the Author

Vincent Pasini CPA

Vincent Pasini holds extensive experience in contract design, management and review/audit of financial statements.