In the past 18 to 24 months, two acts were signed into law that could have a significant impact on plan 2020 year audits — namely, the Setting Every Community Up for Retirement Enhancement (SECURE) Act
(passed in December 2019) and the Coronavirus Aid, Relief and Economic Security (CARES) Act (passed in late March 2020). Each act contains provisions that will affect the questions that plan sponsors will field from auditors this year.
IMPACTS OF SECURE ACT
This Act represents the first significant retirement-related legislation since the 2006 Pension Protection Act. The following key changes from the act were effective for plan years beginning Jan. 1, 2020:
- Auto-enrollment safe harbor plans may increase the cap on payroll contributions from 10 percent to 15 percent
- Allow part-time workers to participate in certain 401(k) plans
- Allow in-service withdrawals (penalty free) for childbirth and adoption expenses
- Increases age for required minimum distributions from 70.5 years to 72 years
- Modifies filing penalties to $250/day to a maximum of $150,000
IMPACTS OF CARES ACT
The CARES Act contained several provisions specific to retirement plans in order to aid participants and help plan sponsors navigate the challenges of the pandemic. To be eligible under the Act, a participant must be considered a qualified individual — defined as a participant, spouse or dependent diagnosed with COVID-19 or a participant who has experienced financial consequences due to COVID-19, including inability to work, furlough/layoff/work hours reduction, inability to work due to childcare requirements or delay/rescinding of a job offer. Provisions of this act include:
- Allow participants to take a coronavirus-related distribution (CRD) of up to $100,000 (which may be repaid over a three-year period) or the tax on such withdrawals may be spread over three years
- Allow participants to borrow up to $100,000 from qualified plans for loans made between March 27, 2020 and Sept. 22, 2020
- Allow suspension for loan payments due between March 27, 2020 and Dec. 31, 2020 for up to one year
- Allow suspension of 2020 required minimum distributions
If you have questions about these various provisions or 2020 plan year reporting requirements, please reach out to GHJ’s Employee Benefit Plan Audit Team.