Page 154 - FebDefComp

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Key Provisions of the SECURE Act

Effective Immediately. Below are key provisions from the SECURE Act that became effective immediately (as of the date
the Act was signed into law), or have an effective date no later than January 1, 2020.

REQUIRED OR
PROVISION DESCRIPTION EFFECTIVE DATE OPTIONAL
Fiduciary safe harbor for Creates a new fiduciary safe harbor related to the Plan Sponsor’s 12/20/2019 (Became This is an optional safe
selection of lifetime selection of a lifetime income provider. To meet the safe harbor, a effective as of the date harbor intended to help
income provider fiduciary must consider (i) the financial capability of the insurer and (ii) the SECURE Act was fiduciaries meet the
the cost in relation to the benefits and product features of the contract signed into law) prudent person
and administrative services to be provided. Other key aspects of the requirements of ERISA
safe harbor include: §404.
 Fiduciary must obtain written representations from insurers
regarding their status under state insurance law for purposes of
considering the insurers’ financial capabilities.
 Specifies that a fiduciary is not required to select the lowest‐cost
contract but may consider the value provided by other features and
benefits and attributes of the insurer.
 Clarifies that fiduciaries are not required to review the
appropriateness of a selection after the purchase of a contract for a
participant.
 Deems fiduciaries to have conducted a periodic review if the fiduciary
obtains annual written representations from the insurer.
Modification of Defined benefit plans that were closed to new hires were subsequently 12/20/2019 (Became Optional
nondiscrimination rules to forced to freeze completely because the grandfathered group of effective as of the date
protect older, longer employees still accruing benefits became too small or were the SECURE Act was
service participants disproportionately highly paid, resulting in nondiscrimination failures. signed into law, without
To avoid these “hard” freezes, closed defined benefit plans that meet regard to when the plans
certain requirements may be aggregated and tested on a benefits basis are modified) Plan
with one or more defined contribution plans. The modifications Sponsor can elect to
provide testing relief for these plans and are aimed to protect the apply to plan years
benefits for older, longer service employees as they near retirement. beginning after
December 31, 2013.
Increase in age for The provision increases the required beginning date for required Distributions made after Required
required minimum minimum distributions from age 70 ½ to 72. 12/31/2019 for
distributions individuals who attain
Example: A terminating participant who turned age 70 ½ in 2019 is not age 70 ½ after such date.
subject to this new requirement and must take the first required
minimum distribution no later than April 1, 2020.
Penalty‐free withdrawals Permits plan distributions used for childbirth or adoption expenses up Distributions made after Optional.
for individuals in case of to $5,000. Such distributions are not subject to the 10% early 12/31/2019. If a plan offers qualified
birth or adoption withdrawal tax. birth or adoption
distributions, it must also
A qualified birth or adoption distribution would be any distribution allow repayments.
during the one‐year period beginning on the date on which the child is
born or adopted.
Modification of required Upon death of a participant, a non‐spouse beneficiary is required to Applies to distributions Required
distribution rules for take a distribution of his/her entire inherited interest within ten years. with respect to
designated beneficiaries This rule does not apply to any portion of the distribution payable to employees who die after
an "eligible designated beneficiary." An eligible designated beneficiary 12/31/2019 (12/31/2021
is any designated beneficiary who is: for governmental plans
 The surviving spouse and collectively
 A child under the age of majority (the 10‐year rule applies as of the bargained plans)
date the child attains the age of majority)
 Disabled or chronically ill individuals
 Any other person who is not more than 10 years younger than the
participant.

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