The document summarizes key changes to retirement plans and health and welfare plans under recent legislation. For retirement plans, the SECURE Act made numerous changes including allowing employers to join pooled employer plans, increasing auto-enrollment contribution limits, and changing required minimum distribution rules. For health plans, the repeal of the Cadillac tax and extension of the PCORI fee were highlighted, along with removal of some excise taxes. Fiduciary safe harbors and other changes were also outlined.

1. Understand the SECURE Act, the Repeal of the
“Cadillac Tax” and Other Health and
Welfare Developments
John Barlament, Partner
john.barlament@quarles.com
414-277-5727
Michael Wieber, Partner
michael.wieber@quarles.com
414-277-5109
Brooke Monahan, Sr. Counsel
brooke.monahan@quarles.com
602-229-5294
Carolyn McAllister, Partner
carolyn.mcallister@quarles.com
414-277-5101
January 8, 2020
(Updated Version a/o January 9, 2020)
Presented by:

2. The "SECURE Act"

3. The SECURE Act
• On December 20, 2019, a significant piece of retirement plan
legislation known as the "Setting Every Community Up for Retirement
Enhancement Act of 2019" or the "SECURE Act" was signed into law.
• This legislation is expected to have a significant impact on the
retirement plan landscape and includes changes intended to expand
and preserve retirement savings, improve the administration of such
plans, and provide other related benefits.
3

4. Pooled Employer Plan
• Description: Variation on the Multiple Employer Plan, but without the
requirements for commonality
• Requires a PEP sponsor, single trustee
• No "one bad apple" rule
• Each employer is a fiduciary with their portion (for selecting the PEP provider and investments
(unless shifted to PEP provider)).
• Plans Impacted: 401(k), Profit Sharing
• Action Required: Consider benefits / costs of switching to this design.
• Effective Date: 12/31/2020
Comments:
 Trustee responsible for collecting deferrals: Not an attractive feature to trustees.
4

5. QACA Auto-Enroll Maximum Percentage Increase
• Description: Plan sponsors can now increase auto-enroll contributions to 15%
(rather than 10%).
• Plans Impacted: 401(k), 403(b)
• Action Required: If applicable and desired, amend plan by end of plan year
beginning in 2022 (or later) (2024 for Governmental plans).
• Effective Date: Plan years beginning after 12/31/19
5

6. Safe Harbor Nonelective Annual Notice
• Description: No longer required to give annual notice.
• Must amend plan 30 days before end of plan year (if giving 3%) or no later than 12 months after
plan year (if giving 4%).
• Plans Impacted: 401(k), 403(b)
• Action Required: If applicable and desired, amend plan by end of plan year
beginning in 2022 (or later) (2024 for Governmental plans) and by 30 days before
end of year(s) implemented.
• Effective Date: Plan years beginning after 12/31/19
Comments:
 May create opportunities to decide after completing testing whether contribution is worth it
 Applies to traditional and QACA safe harbor plans
 No change to matching safe harbor rules
6

7. Start-Up Credit for 50% of Expenses for Small Employer Plans
• Description: Increased to up to $5,000 (or up to 3 years)
• Plans Impacted: 401(k), Profit Sharing, Money Purchase Pension,
403(b), Defined Benefit
• Action Required: If eligible and interested, adopt plan.
• Effective Date: Taxable years beginning after 12/31/19
Comments:
 Nice incentive for those who are considering a plan
 Additional $500 credit (for up to three years) if includes auto-enrollment
7

8. Post 70-1/2 Traditional IRA Contributions
• Description: No longer prohibited from contributing after reaching
70-1/2, but do still need income
• Plans Impacted: Traditional IRAs
• Action Required: None
• Effective Date: For taxable years after 12/31/19
Comments:
 This was already allowed for Roth IRAs.
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9. No Plan Loans Using Credit Cards
• Description: Participants may not increase their plan loan balance
using credit cards.
• Plans Impacted: 401(k), Profit Sharing, Money Purchase Pension,
403(b), 457(b) Governmental, Defined Benefit (in concept)
• Action Required: If necessary, amend plan or loan policy by end of
plan year beginning in 2022 (or later) (2024 for Governmental
plans).
• Effective Date: 12/20/2019
9

10. Portability of Lifetime Income Options
• Description: If the plan is eliminating these, it can allow participant to take
a distribution of the option even if not otherwise allowed.
• Plans Impacted: 401(k), Profit Sharing, Money Purchase Pension, 403(b),
457(b) Governmental
• Action Required: If desired, amend plan by end of plan year beginning in
2022 (or later) (2024 for Governmental plans).
• Effective Date: Plan years beginning after 12/31/19
Comments:
 May be useful if plan had Individually Directed Account option and is eliminating that option.
10

11. 403(b) Plan Custodial Account Terminations
• Description: Offers plan sponsors the opportunity to distribute individual
custodial accounts or annuities (depending on funding structure of 403(b)
Plan) in connection with plan termination.
• Plans Impacted: 403(b)
• Action Required: If applicable and desired, amend plan by end of plan year
beginning in 2022 (or later) (2024 for Governmental plans).
• Effective Date: Taxable years beginning after 2008
Comments:
 Historically, very difficult to "wrap up" a 403(b) without participant involvement and cooperation.
11

12. Long-term, Low-hour Employees Must Be Allowed into 401(k) Plans
• Description: For employees who work at least 500 hours per year for three
years, they must be allowed to make deferrals.
• Plans Impacted: 401(k)
• Action Required: Amend plan by end of plan year beginning in 2022 (or later)
(2024 for Governmental plans).
• Effective Date: Plan years beginning after 12/31/20, but only consider service
after that date, so earliest entry would be 1/1/24
Comments:
 Testing safe harbors will exist.
 Does not change maximum entry requirements for employer contributions (like match and profit
sharing)
 Doesn't impact 403(b) (because of universal availability)
12

13. Withdrawal for Births and Adoptions
• Description: Up to $5,000 penalty-free within one year of birth or
finalization of adoption
• Plans Impacted: 401(k), Profit Sharing, Money Purchase Pension, 403(b),
Defined Benefit, 457(b) Governmental, IRAs
• Action Required: If desired, amend plan by end of plan year beginning in
2022 (or later) (2024 for Governmental plans).
• Effective Date: Distributions after 12/31/19
Comments:
 Participants can recontribute these amounts (no deadline specified and treated as pre-tax).
 For adoptions, only applied to those who are not yet 18 or physically or mentally incapable for
caring for themselves.
 Applies on employer-by-employer basis (so both spouses could take from their respective
employers' plans). 13

14. Difficulty-of-Care Payments
• Description: Parent can contribute these amounts to a plan on an after-
tax basis.
• Plans Impacted: 401(k), Profit Sharing, 403(b), 457(b) Governmental,
IRAs
• Action Required: If desired, amend plan by end of plan year beginning in
2022 (or later) (2024 for Governmental plans).
• Effective Date: Plan years beginning after 12/31/2015
Comments:
 Contributions are treated as after-tax contributions, so much of the value is lost.
14

15. Change of Required Minimum Distribution (RMD) Date
• Description: RMDs start at April 1 of the year following later of participant
attaining age 72 and their termination of employment (age 72 for 5% owners).
• Plans Impacted: 401(k), Profit Sharing, Money Purchase Pension, 403(b),
Defined Benefit, 457(b) Tax Exempt, 457(b) Governmental, IRAs
• Action Required: If desired, amend plan by end of plan year beginning in 2022
(or later) (2024 for Governmental plans).
• Effective Date: Distributions are required to be made after December 31, 2019
with respect to individuals attaining age 70-1/2 after such date.
15

16. No More "Stretch" RMDs
• Description: Except for beneficiaries who are not more than 10 years younger
than participant, spouses, minor children, disabled and chronically ill, RMDs
must be complete within 10 years of death of participant (whether or not in
pay status at death).
• Plans Impacted: 401(k), Profit Sharing, Money Purchase Pension, 403(b),
Defined Benefit, 457(b) Tax Exempt, 457(b) Governmental, IRAs
• Action Required: Amend plan by end of plan year beginning in 2022 (or later)
(2024 for Governmental plans).
• Effective Date: Generally, death after 2019
16

17. No More "Stretch" RMDs cont.
Comments:
 Applies to children after they reach majority (age 18) (so paid out by age 28)
 No requirement to pay pro rata. It could all be paid on last day of the 10 years or spread (but
cannot decelerate if in pay status).
 Eliminates estate planning option for young adult beneficiaries spreading distributions over
their lifetime
 Could accelerate payment streams if participant is in pay status
17

18. In-Service at Age 59-1/2 for Pension Plans and DB Plans
• Description: Plan sponsors may amend Money Purchase and Defined
Benefit Pension plans to allow in-service distributions at age 59-1/2.
• Changed from historical general limit of age 62 for earliest in-service distributions
• Plans Impacted: Money Purchase Pension, Defined Benefit
• Action Required: If applicable and desired, amend plan by end of plan year
beginning in 2022 (or later) (2024 for Governmental plans).
• Effective Date: Plan years beginning after 12/31/19
Comments:
 Makes pension plans more logically similar to profit sharing / 401(k) plans
 Simplifies retirement income stream planning and retirement planning for participants
18

19. Adoption of New Plan Until Tax Filing Deadline
• Description: Employers may now adopt a profit sharing plan until their tax
filing deadline as extended (September 15 of following year for calendar
year plans).
• Plans Impacted: 401(k), Profit Sharing, Money Purchase Pension, Defined
Benefit
• Action Required: Adopt plan by tax filing deadline.
• Effective Date: Plans adopted for plan years beginning after 12/31/19
Comments:
 Cannot add 401(k) / elective deferrals retroactively
 Planning opportunity if employer wants a "unique" formula that has not been adopted by year
end (adopt-then-merge option?)
19

20. Combined Annual Form 5500 Reporting
• Description: Allows a single Form 5500 for all defined contribution
plans in a controlled group (with same TPA, trustee, plan year,
investment options)
• Plans Impacted: 401(k), Profit Sharing, Money Purchase Pension
• Action Required: Nothing yet
• Effective Date: Plan years beginning on or after 12/31/21
Comments:
 Probably of limited benefit: Law does not appear to waive audit or plan compliance
testing requirements for individual plans and that is likely the biggest time and money
issue for most plan sponsors.
20

21. Increased Penalties
• Description: Maximum penalties for Form 5500 and certain others: up to
10 times prior penalties
• Plans Impacted: All plans subject to ERISA: 401(k), Profit Sharing, Money
Purchase Pension, 403(b), Defined Benefit
• Action Required: File reports by applicable deadlines.
• Effective Date: Returns due after 12/31/19 (NOTE: NOT plan years
beginning after 12/31/19)
Comments:
 Stay in contact with your accountants and trustees.
21

22. Disclosure of Lifetime Income Options
• Description: Each year, plan sponsor must provide participants with an
estimate of their lifetime income based on their account balance.
• Plans Impacted: 401(k), Profit Sharing, Money Purchase Plan, 403(b)
• Action Required: None (or talk to your TPA)
• Effective Date: 12 months after latest of final rules, model disclosure and
assumptions
Comments:
 Model Disclosure will be created.
 Safe harbor for fiduciaries who create these as long as follow DOL's directions
 TPAs will likely offer this service.
22

23. Nondiscrimination Compliance Options for "Closed" DB Plans
• Description: Lifts many of the restrictions on accruals (and benefits,
rights and features) for defined benefit plans.
• Plans Impacted: Defined Benefit
• Action Required: None
• Effective Date: 12/20/19 (or as early as 2013 in some cases)
Comments:
 Helpful for "soft" frozen DB plans -- no new participants
 Doesn't eliminate all testing, but allows combined testing with other employer plans in
certain circumstances where the DB plan could not stand alone.
23

24. Fiduciary Safe Harbor for Selecting Annuity Providers
• Description: Encourages plans to offer an annuity option by offering plan
sponsors more protection
• Plans Impacted: 401(k), Profit Sharing, 403(b), Defined Benefit, 457(b)
Governmental
• Action Required: None, but can take advantage of this if/when plan offers
annuity option
• Effective Date: None specified (so likely viewed as 12/20/19)
Comments:
 As long as the provider has been in good standing in the state, and plan sponsor can
demonstrate objective, thorough and analytical search, there will be no fiduciary liability for
plan sponsor.
 Law explicitly does not require plan sponsor to select low-cost provider.
24

25. Section 529 Plan Changes
• Description: Can use distributions to pay for certain Apprenticeship
Program expenses
• Plans Impacted: Section 529 Plans (like Edvest)
• Action Required: None
• Effective Date: Distributions after 12/31/2018
Comments:
 Recognizes that other post-secondary education is expensive and should be supported.
25

26. Section 529 Plan Changes cont.
• Description: Repay Student Loans up to $10,000 per beneficiary (not
an annual cap, but lifetime beneficiary).
• Plans Impacted: Section 529 Plans
• Action Required: None
• Effective Date: Distributions after 12/31/2018
Comments:
 Can use one sibling's 529 to pay another sibling's student loans
 Coordinates with other student loan interest deductibility
26

27. Health & Welfare

28. Legislative Update – Health and Welfare
• Further Consolidated Appropriations Act of 2020 ("FCAA") made modest changes to
health and welfare plans.
• Big change is the complete elimination of the "Cadillac" tax.
• 40% excise tax on "excess cost" of "high-cost" health plans
• For example, suppose family plan costs $30,000 per year (employer plus employee contributions)
• Suppose the "limit" was $27,500
• Excess is $2,500 ($30,000 - $27,500)
• Excise tax is 40% of excess, or $1,000 per family enrolled in the plan (40% x $2,500)
• Threatened to erode willingness of employers to provide coverage
• Threatened to cause employee anger if employers provided "skimpier" coverage to avoid the tax
• Who's affected: Everyone with a health plan
Comment:
 Great news for employers – no downside. 28

29. Legislative Update – Health and Welfare cont.
• Patient-Centered Outcomes Research Trust Fee ("PCORI Fee") extended for 10
more years.
• PCORI Fee was established under Affordable Care Act ("ACA").
• Modest fee that insurers / self-funded health plans pay
• Used to conduct research into evidence-based medicine
• Fee applies to most self-funded, major medical health plans (even
"grandfathered" health plans).
• Fee started at $2 per covered life per year.
• Adjusted for inflation; $2.45 for plan years ended 9/30/2019
• Now will go through 2029
• Who is impacted: Insurers and employers with self-funded health plans
(generally; some exceptions)
Comment:
 A bit annoying to employers, but not huge $. 29

30. Other Health & Welfare Updates
• FCAA also removed 2.3% excise tax on medical devices.
• And a health insurance tax on insurers of fully-insured plans
• Employers may like this, as cost probably was passed on to employers (so now it won't be,
hopefully).
• Fifth Circuit remanded case about whether ACA should be stricken in its entirety. (!)
• Argument is that with individual mandate going to $0 as of 1/1/2019, no constitutional basis for
the ACA so entire thing must be stricken.
• New Centers for Medicare & Medicaid reporting relating to Medicare Secondary
Payer Rules begins January 2020.
• Talk to your PBM about whether they will do it for you (if you are an employer).
• Proposed regulations on "transparency" and new disclosure rules for plans
(Nov. 2019) – no action steps yet.
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31. Questions
31

32. Thank You
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© 2020 Quarles & Brady LLP - This document provides information of a general nature. None of the information contained herein is intended as legal advice or opinion relative to specific
matters, facts, situations or issues. Additional facts and information or future developments may affect the subjects addressed in this document. You should consult with a lawyer about
your particular circumstances before acting on any of this information because it may not be applicable to you or your situation.
John Barlament, Partner
john.barlament@quarles.com
414-277-5727
Michael Wieber, Partner
michael.wieber@quarles.com
414-277-5109
Brooke Monahan, Sr. Counsel
brooke.monahan@quarles.com
602-229-5294
Carolyn McAllister, Partner
carolyn.mcallister@quarles.com
414-277-5101