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Tax & AccountingJune 25, 2020

Important legislative & regulatory changes affecting retirement planning

Wolters Kluwer looks at how the SECURE Act, the CARES Act, and the IRS responses to COVID-19 have affected retirement planning.

Many legislative and regulatory changes enacted in the past several months directly impact qualified retirement plans and are helpful to many taxpayers but not all. Several of them require qualified plan administrators and plan participants to take them into account to ensure maximum benefit is realized at retirement. Taxpayers should consult with their retirement planning advisor about the changes to required minimum distributions, possible beneficiary designation changes, using annuities in a retirement plan, meeting current financial needs with retirement plan assets, and many other planning issues resulting from these legislative & regulatory actions.

Why

In December 2019, the SECURE Act (Setting Every Community Up for Retirement Enhancement Act) put in place a series of reforms for qualified retirement plans. This March, the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) also included several relief measures relating to retirement plans in response to the COVID-19 pandemic. And, the Internal Revenue Service (IRS) has also taken several steps this year to provide additional relief, which has affected retirement plans. Below are some of the changes that taxpayers should consider when it comes to retirement planning.
 
SECURE Act Changes
  • Required minimum distribution age postponed from age 70 ½ to age 72
  • More rapid distribution of 401(k) and IRA accounts on participant’s death
  • Part-time employees eligible to participate in 401(k) plans
  • Qualified Automatic Contribution Arrangement maximum percentage increased from 10 percent to 15 percent
  • Pension plans may permit certain in-service distributions starting at age 59 ½
  • Greater ability for qualified retirement plans to offer annuities
  • Penalty-free distributions for births and adoptions
  • New 401(k) non-elective contribution safe harbors
 
CARES Act Changes
  • Penalty-free distributions up to $100,000
  • Plan loan limits increased to $100,000 and 100 percent
  • No required minimum distributions for 2020
  • Pension plan funding relief
 
IRS Changes
  • Many qualified plan filing deadlines extended to July 15, 2020
  • Several pre-approved defined benefit plan deadlines extended to July 31, 2020
  • Due dates for IRA Form 5498 and HSA Form 5498-SA extended to August 31, 2020
  • 403(b) plan amendment deadlines extended to June 30, 2020
  • Waiver of requirement for physical presence of notary for spousal consent to distributions
 
Employer Changes
  •  Employee layoffs may result in partial termination of qualified retirement plans

Who

Tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, can help explain the new options available for net operating losses

About Wolters kluwer

Wolters Kluwer (WKL) is a global leader in professional information, software solutions, and services for the health, tax & accounting, governance, risk & compliance, and legal & regulatory sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services.