Secure Act in the Presence of COVID-19

The Internal Revenue Service (IRS) recently released IRS Notice 2020-68 to provide guidance for employers implementing the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was signed into law by President Trump in December 2019.   This release comes at a time when many of the country’s organizations are navigating their way through the COVID-19 pandemic.  A continuing topic of discussion among employers during the pandemic is how to manage the organization’s personnel and continue to provide employees with optimal benefit options.    IRS Notice 2020-68 clarifies many of the benefit options provided under the SECURE Act, including coverage of part-time employees within employer-sponsored retirement plans and penalty-free withdrawals for the birth or adoption of a child.  Other key details within the SECURE Act that you and your organization should be aware of include:

1. Small Employer Automatic Enrollment Credit – This $500 credit is eligible to organizations with no more than 100 employees who receive at least $5,000 of compensation from the employer for the preceding year, and have established an eligible automatic contribution arrangement (EACA).  The eligible period to receive this credit begins when the employer first includes an EACA in a qualified employer plan.  For example, if a plan implements the EACA in 2021, the organization may be eligible to receive the $500 tax credit for the successive three-year credit period that begins with the initial adoption year of 2021 (2021 – 2023).

2. Multiple-Employer Plans (MEPs) and Pooled-Employer Plans (PEPs) – The SECURE Act allows for employers to pool resources from multiple organizations and create MEPs or PEPs in order to reduce the administrative costs of maintaining an employee benefit plan and take advantage of economies of scale. PEPs are similar to MEPs, except that they are not subject to the common interest rule. Meaning, participating employers in a PEP can be unrelated to each other, whereas they are required to share a common interest – other than the participation in the plan – in order to participate in a MEP e.g., members of a common industry group or employers located within a narrow geographic area. The new law under the SECURE Act also shields participating employers from penalties should another member of the MEP or PEP violate its responsibilities under the plan.

These are just a few of the provisions included within the SECURE Act.  If you (or your organization) have further questions, please review our internal Schneider Downs Retirement Services SECURE Act eBook or contact a member of the ERISA group at Schneider Downs for additional information.  

Sources:

https://www.jdsupra.com/legalnews/irs-notice-2020-68-implementing-long-23208/ 
https://www.hrmorning.com/articles/irs-issues-401k-guidance-on-secure-act-regs/ 
https://www.irs.gov/pub/irs-drop/n-20-68.pdf