Some Highlights from the Recently Enacted SECURE Act, Part 3

Daniel L. Morgan

This third installment of summaries of some of the key provisions of the Setting Every Community Up for Retirement Enhancement Act of 2020 (“the SECURE Act”) discusses an extension of the date for adopting a new employer retirement plan.

Under prior law, an employer that wanted to deduct a contribution to a tax-qualified retirement plan for a tax year had to adopt the plan by the last day of the year, but had up until the due date of the tax return for the year, including extensions, to make the contribution.

Effective for tax years beginning after December 31, 2019, the SECURE Act allows an employer to adopt a tax-qualified retirement plan for a tax year up until the due date, including extensions, of the tax return for the year. Continue reading “Some Highlights from the Recently Enacted SECURE Act, Part 3”

Some Highlights from the Recently Enacted SECURE Act, Part 2

Daniel L. Morgan

In this second of a four-part series providing an overview of some key provisions of the Setting Every Community Up for Retirement Enhancement (“SECURE”) Act of 2019, I summarize the Act’s liberalization of the 401(k) plan nondiscrimination testing safe harbors and the Act’s effort to make it easier for employers to offer annuity payments as a distribution option under 401(k) plans. I also discuss why the changes made by the Act do not go nearly far enough to remove the legal and regulatory barriers that discourage 401(k) plans from offering annuity payments.

Easing of 401(k) Safe Harbor Requirements

An employer can avoid the Internal Revenue Service (“IRS”) nondiscrimination test applicable to elective contributions to a 401(k) plan by satisfying safe harbor requirements that include making a matching contribution or a matching contribution to the plan.

The SECURE Act increases employer flexibility in using these safe harbors, in several respects. Continue reading “Some Highlights from the Recently Enacted SECURE Act, Part 2”