President Trump issued an Executive Order (EO) on Retirement Plans last week that gained a fair amount of general press given its broad reach and potential impact for some major changes in retirement plan strategy (particularly for small employers).
This summarizes what the EO covers and what to expect in the coming months:
1. Expanded Access to MEPs
The Order directs the Department of Labor (DOL) to “examine policies” that would:
- clarify and expand the situations in which multiple employer plans (MEPs) can be used (particularly by small and mid-sized business) as a workplace retirement option for their employees; and
- increase retirement security for part-time workers, sole proprietors, working owners, and other entrepreneurial workers with non-traditional employer-employee relationships by expanding their access to workplace retirement plans, including MEPs.
The Secretary of Labor has 180 days to issue proposed rulemaking, so expect action quickly. This is likely to impact smaller employers, but not larger ones.
2. Revisit Notice and Disclosure Rules/Burdens
The DOL, in consultation with the IRS, is directed to revisit the rules and consider opportunities to make retirement plan disclosures required under ERISA and the Internal Revenue Code:
- more understandable;
- more useful;
- more cost efficient; and
- less burdensome (in terms of production and distribution).
Specifically mentioned are the electronic delivery rules (which, under current guidance, are complicated and cumbersome under both DOL and IRS rules – which differ from one another).
A year was afforded for this review, so expect action by Q3 of 2019. Any new guidance is unlikely to be solidified for open enrollment heading into 2020, but we could be pleasantly surprised if the DOL and IRS work more quickly than mandated.
3. Consideration of the Age 70 ½ RMD Rule
The IRS is directed to examine the life expectancy and distribution period tables in the regulations on required minimum distributions (RMDs) and assess whether current mortality data supports delaying the RMD age beyond its current point (generally triggered at age 70 ½). The EO also directs the IRS to consider whether updates based on mortality date should be made annually or “on another periodic basis.”
As with the MEP guidance, 180 days is the magic deadline for action on this topic.
Given the EO, plan sponsors and administrators should expect changes during the 2019 and 2020 plan years. How expansive and impactful those changes will be remains unseen.