Page 166 - FebDefComp

Public Sector Retirement

News & Views | Q1 2020

WASHINGTON UPDATE

In late December, the U.S. Senate approved an appropriations bill funding most domestic programs for the remainder of the fiscal
year, and the President signed. This is great news for retirement savings plans, as it included important provisions from the SECURE
Act, which passed the House last May but was stalled in the Senate until now.
The key provisions in SECURE pertaining to governmental retirement savings plans include:

• Raising the age for Required Minimum Distributions to 72, effective for all distributions required after 2019;
• Governmental 457(b) and 401(a) plans may begin offering in-service distributions at age 59 1/2; and

• Participants will be allowed to take penalty-free withdrawals or loans.

Most of the provisions in SECURE are effective January 1, 2020; however, because the Act was passed so late in the year it is
anticipated that enforcement will not begin until plan sponsors have a reasonable opportunity to implement the changes.

Passage of the SECURE Act offers meaningful reforms to pension provisions, and we are optimistic that this will help continue to
pave the way for added reforms. Senators Rob Portman (R-Oh) and Ben Cardin (D-MD), who are widely credited for the passage
of significant reforms in the past two decades, introduced the Retirement Security and Savings Act (RSSA) last May. RSSA includes
numerous additional pension reform provisions of interest to governmental plans:

• Elimination of the §457 Deferred Compensation “first of the month rule”, for implementing new enrollments and deferral
increases;

• Exempting Roth accounts from the Required Minimum Distribution calculation;

• Allowing Roth IRAs to be rolled into existing accounts; and
• Establishing a new catch-up limit of $10,000 for participants over age 60.