May 24, 2019

House Passes Pension Bill; Senate Action Delayed

On May 23, 2019, the House of Representatives passed a long-awaited bipartisan pension bill by a vote of 417-3. It is unclear whether the Senate will try again to pass the House bill by unanimous consent at some point after it returns from the one-week Memorial Day recess. If not, the bill is likely to have a slow road (or even no road) to passage in the Senate.

The House-passed bill is H.R. 1994, the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). It contains many of the elements of S. 972, the Retirement Enhancement Savings Act of 2019 (RESA), which is the current Senate Finance Committee bill, the bill that Congress has been considering for the last several years. The SECURE Act does not address multiemployer plan funding or the financing of the Pension Benefit Guaranty Corporation’s (PBGC) multiemployer plan guarantee fund.

If passed by the Senate in its current form and signed by President Trump, the SECURE Act would affect sponsors of existing defined contribution (DC) and defined benefit (DB) plans, employers that might wish to sponsor a retirement plan and the participants in all such plans, as well as individuals with regard to their personal savings. Some of the more significant changes are noted below.

Defined Benefit Plans

  • Providing permanent relief from nondiscrimination testing problems for closed DB plans
  • Providing funding relief for certain community newspapers with single-employer DB plans
  • Lowering the PBGC premiums for Cooperative and Small Employer Charity (CSEC) plans

Defined Contribution Plans

  • Requiring lifetime income disclosure in ERISA-covered DC plan participant statements

401(k) Plans

  • Adjusting the 401(k) automatic enrollment safe harbors to provide more flexibility and to encourage greater savings 
  • Requiring 401(k) plan sponsors to include as participants long-term, part-time employees who have worked at least 500 hours in three consecutive years

Multiple Employer Plans

  • Creating a new type of DC multiple employer plan called a “pooled plan”
  • Eliminating for all multiple employer plans the current “one-bad-apple rule” that can disqualify an entire multiple employer plan if one employer fails nondiscrimination testing

All plans

  • Creating a new fiduciary safe harbor for all types of ERISA-covered plans for the selection of annuity providers 
  • Increasing the IRC §401(a)(9) required beginning date from age 70½ to age 72 for all plans

If enacted, the SECURE Act will be the first broad bill addressing pensions and savings incentives in more than a decade. For DC plan sponsors particularly, it could be an opportunity to reconsider plan design, including changes in automatic enrollment, to encourage employees to contribute more to their retirement. While the path to enactment is still not clear, or even certain, passage by the House is a positive step forward. Sibson will keep you informed of future developments as they occur.

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