The impact of the SECURE Act—the most significant retirement-related legislation in more than a decade—is well-known in many respects. Among the lesser-known impacts of the new law are those on 403(b) plans. A Feb. 11 NTSA webinar discussed them.
Andrew Remo, the American Retirement Association's Director of Legislative Affairs, discussed the effects the SECURE Act has on 403(b) plans, administrators and participants. He noted that he law was long in coming, and as hard as that process was, there is more to be done. “Thirteen years of debate and discussion, and now, implementation,” he said.
And many of those effects are immediate, Remo indicated: provisions of the SECURE Act generally are effective for the 2020 plan year, which for most plans began on Jan. 1, 2020. Plan amendments are not required until the end of the 2022 plan year, but, he noted, the IRS could extend that if implementing rules for certain provisions are delayed further.
Provisions in the SECURE Act that affect 403(b)s include the following.
Treatment of Custodial Accounts from Terminated 403(b) Plans. The new law directs the Treasury Department to issue guidance within six months allowing in-kind distribution of 403(b) custodial account to a participant or a beneficiary. “The even better news,” said Remo, is that it would be effective retroactively for tax years beginning Jan. 1, 2009.
Clarification of Church-Controlled Organizations. The SECURE Act changes the definition of “covered individuals,” effective for years before or after date of enactment, so it includes:
- ordained, commissioned, or licensed ministers (regardless of source of compensation); and
- employees of tax-exempt organization controlled by or associated with a church.
Combined Annual Report for Groups of Plans. Under the SECURE Act, a group of plans can file a single Form 5500. It defines a group of plans as individual account plans that have the same trustee, named fiduciary, plan administrator and investment options. This provision is effective beginning Jan. 1, 2022.
Required Minimum Distributions. The SECURE Act increases the age at which RMDs must begin. For those born July 1, 1949 or later, the required beginning date is changed to April 1 of the year following that in which one reaches age 72. The new law also makes changes to the post-death RMD rules. They:
- generally require all defined contribution and IRA distributions after the death of the account owner within 10 years;
- do not apply to designated beneficiaries that are surviving spouses, disabled or chronically ill;
- do not apply if the designated beneficiary is within 10 years of age of the deceased account owner, nor apply to minor children until they reach the age of majority (plus 10 years); and
- are effective for deaths after Dec. 31, 2019, but existing (as of Dec. 20, 2019) qualified annuity contracts are grandfathered.
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