Graff Outlines Impact of SECURE Act

Addressing the NTSA Summit in Denver on Jan. 26, American Retirement Association CEO Brian Graff outlined provisions of the new SECURE Act that will affect the 403(b) marketplace along with the rest of the retirement industry.

Graff stressed the challenges posed by the current climate in Washington, remarking that “It’s almost miraculous” that what has been accomplished has been, and noting that it took more than a decade of work for such changes as those wrought by the SECURE Act to come about. “It actually represents really strong retirement policy,” Graff said of the new law.

The centerpiece of the effort to increase participation, said Graff, is the pooled employer plan (PEP) – the new name for open multiple employer plans (MEPs). It “completely changes the economics” of the effort, he said. Among the changes is that there is no common interest requirement and the “one bad apple” rule has been eliminated. “This is game-changing stuff,” Graff said.

Graff advised that there is more to come concerning PEPs, noting that the IRS and the Department of Labor have been directed to issue guidance concerning aspects of them, and suggested that the process for spinning off assets of a “bad employer” plan may need revised guidance. 

Graff observed that the provisions concerning PEPs apply to 401(k)s and payroll deduction IRAs, but not 403(b)s. But regardless, it will affect your business, Graff told attendees. 

Graff also highlighted the provisions that are targeted toward small businesses. “It’s about increasing participation and coverage,” Graff said, adding that “there’s a lot of value here in terms of opportunity.” 

Among the most significant is the retroactive tax deduction. Under that provision, which does not apply to 401(k)s, plans with employer contributions can now generate a retroactive tax deduction if the plan is adopted before the due date of the tax return (with extensions). Even for C corporations, a plan must be adopted, and contributions made, by Sept. 15 of the following year to get the benefit of the deduction. “You may want to think about this one,” Graff advised, calling the opportunities it creates “enormous.”

Another change Graff discussed is the elimination of the stretch IRA, discussion of which he said started in 2011. The stretch IRA “is no more” as a plan tool, he said, adding that “the likelihood of it coming back is zero” in the current political climate. 

Graff also highlighted changes that will affect 403(b)s, including the treatment of accounts from terminated 403(b)s plans and the clarifications regarding how “covered individuals” are defined for church-controlled organizations. He called the changes affecting church plans “very generous,” telling attendees that “it’s a big deal.”