Provisions in RESA relating to “expanding and preserving retirement savings” and to administrative improvements to the qualified plan rules include:
Multiple employer plans
- Provide that multiple-employer defined contribution plans meeting certain requirements would not fail to qualify for tax-favored treatment merely because one or more of the employers of employees covered by the plan failed to take the actions required of employers for the plan to meet such requirements. Estimated to cost approximately $3.179 billion over 10 years.
Cooperative and small employer charity plans
- For cooperative and small employer charity plans (“CSECs”), reduce the premiums paid to the Pension Benefit Guaranty Corporation (PBGC) so that flat-rate premiums are $19 per participant and the variable rate premiums paid to the PBGC to $9 for each $1,000 of unfunded vested benefits. Estimated to cost approximately $1.004 billion over 10 years.
Section 401(k) plans
- For section 401(k) plans, remove the 10% limit on the deemed election rate under the automatic enrollment safe harbor after the first year that the deemed election applies. Estimated to have negligible revenue effect over 10 years.
- Change the rules for the “nonelective contribution 401k safe harbor” to: (1) eliminate the notice requirement; and (2) allow a plan to be amended to become a nonelective safe harbor plan to satisfy the safe harbor requirements during or after the plan year in certain cases. Estimated to have negligible revenue effect over 10 years.
Small employer credits
- Change the calculation of the flat dollar amount limit on the small employer start-up credit. Estimated to cost approximately $24 million over 10 years.
- Allow eligible small employers a new credit of $500 per year for up to three years for startup costs for new section 401(k) plans and SIMPLE IRA plans that include automatic enrollment, as well as for adding automatic enrollment as a feature of an existing plan. Estimated to cost approximately $1 million over 10 years.
Contributions to qualified plans
- Treat certain non-tuition fellowship and stipend payments as compensation for purposes of determining the amount an individual may contribute to an IRA. Estimated to cost approximately $2 million over 10 years.
- Repeal the prohibition on contributions to a traditional IRA by an individual who has attained age 70½ years prior to the close of a year. Estimated to cost approximately $58 million over 10 years.
- Extend the period during which a qualified plan loan offset amount may be contributed to an eligible retirement plan as a rollover contribution. Estimated to have negligible revenue effect over 10 years.
Distributions and withdrawals
- Direct the Treasury to revise the applicable regulations to eliminate the requirement that an employee be prohibited from making elective deferrals and employee contributions for six months after the receipt of a hardship distribution in order for the distribution to be deemed necessary to satisfy an “immediate and heavy” financial need. Estimated to have negligible revenue effect over 10 years.
- Treat a plan loan that is made through the use of a credit card or similar arrangement as a deemed distribution, subject to special rules (contained in the Chairman’s modification to the mark) for electronic card systems through which such loans are provided as of September 21, 2016. Estimated to have negligible revenue effect over 10 years.
- Provide that, if a lifetime income investment is no longer authorized to be held as an investment option under a qualified defined contribution plan, section 403(b) plan, or governmental section 457(b) plan, except as provided by guidance, the plan will not fail to satisfy Code requirements solely by reason of allowing: (1) qualified distributions of a lifetime income investment; or (2) distributions of a lifetime income investment in the form of a qualified plan distribution annuity contract. Estimated to have negligible revenue effect over 10 years.
Section 403(b) plans
- Provide that custodial amounts are deemed to be IRAs if an employer terminates a section 403(b) plan under which amounts are contributed to custodial accounts and the person holding the account assets is an IRS approved nonbank trustee. Estimated to have negligible revenue effect over 10 years.
- Clarify that employees of nonqualified church-controlled organizations, in addition to employees of churches and qualified church-controlled organizations, may be covered under a section 403(b) plan that consists of a retirement income account. Estimated to have negligible revenue effect over 10 years.
Fiduciary safe harbor
- Specify optional measures that a plan fiduciary may take with respect to the selection of an insurer and a guaranteed income contract to assure that the fiduciary meets ERISA’s “prudent man” standard. Estimated to have no budget effect over 10 years.
- Provide relief from nondiscrimination requirements with respect to benefit accruals and benefits, rights, and features for a closed class of participants under a defined benefit plan; and permit a defined contribution to be tested on an equivalent benefits accruals basis, without having to satisfy threshold conditions, if certain requirements are met. Estimated to have negligible revenue effect over 10 years.
- Provide that, if an employer adopts a stock bonus, pension, profit-sharing or annuity plan after the close of the tax year but before the time for filing the employer’s return for the tax year (including extensions), the employer may elect to treat the plan as having been adopted as of the last day of the tax year. Estimated to cost approximately $142 million over 10 years.
- Direct the IRS and Department of Labor to work together to modify Form 5500, Annual Return/Report of Employee Benefit Plan, so that all members of a group of plans meeting certain requirement may file a single consolidated Form 5500. Estimated to have negligible revenue effect over 10 years.
- Require a benefit statement provided to a defined contribution plan participant to include an annual lifetime disclosure setting forth the lifetime income stream equivalent of the participant’s total account balance under the plan. Estimated to have no budget effect over 10 years.
Other revenue-losing provisions
RESA also includes the following other provisions that are scored as losing revenue:
- Allow a qualified employee to elect to defer for five years (for income tax purposes) inclusion of the amount of income attributable to qualified stock transferred to the employee by the employer. Such election would be made no later than 30 days after the first time the employee’s right to the stock is substantially vested. Certain events would trigger inclusion of deferred income before the end of the five-year deferral period. Estimated to cost approximately $894 million over 10 years.
- Allow an IRA (including a Roth IRA) to be a shareholder of an S corporation that is a bank without regard to whether the IRA held bank stock on October 22, 2004. The IRA’s share of S corporation income and loss would be taken into account in determining its unrelated business taxable income. Estimated to cost approximately $198 million over 10 years.
- Reinstate for one year the exclusions for qualified state or local tax benefits and qualified reimbursement payments provided to members of qualified volunteer emergency response organizations and increase the exclusion to $50 each month during which a volunteer performs service. Estimated to cost approximately $109 million over 10 years.