Time to learn: 2 min
On Aug. 31, President Donald Trump signed an executive order directing the Departments of Labor and Treasury to contemplate adjustments that will make it simpler for companies to hitch collectively to take part in a number of employer plans (MEPs).
MEPs permit teams of small employers to pool staff into one 401(okay) plan, serving to them to attain economies of scale on funding, document protecting and administration prices. They additionally relieve employers of reporting necessities to the Department of Labor (DOL) and permit MEP suppliers to share employers’ fiduciary necessities underneath the Employee Retirement Income Security Act of 1974 (ERISA).
The steerage from the DOL and the Treasury Department (the Treasury) would doubtless eradicate the present requirement that employers share commonality, or nexus (comparable to membership in a commerce group), to realize the advantages of MEPs. It would additionally eradicate the so-called “one bad apple” rule, which topics MEPs to disqualification if a single collaborating employer fails to satisfy administrative necessities.
The executive order additionally:
- Directs the Treasury to evaluate the principles on required minimal distributions (RMDs) from retirement plans (to see if retirees might maintain more cash in 401[k]s and particular person retirement accounts for longer durations of time). The Treasury is instructed to look at the life expectancy and distribution interval tables in RMD rules, which might end in smaller RMDs after age 70½ (serving to to protect property in retirement).
- Directs the Treasury and the DOL to contemplate methods to enhance discover necessities to scale back paperwork and administrative burdens. The evaluate particularly requires “an exploration of the potential for broader use of electronic delivery as a way to improve the effectiveness of disclosures and to reduce their associated costs and burdens.”
Preliminary response to the executive order is favorable within the retirement trade. The thought of enjoyable entry necessities to MEPs already has assist in Congress. MEPs are a key provision within the bipartisan Retirement Enhancement and Savings Act of 2018 (RESA), a broad-based retirement safety invoice, and RESA’s MEP provision might discover its means into an upcoming tax reform package deal on Capitol Hill. The RMD provision is considerably stunning, within the sense that the federal government might quickly forego tax income if the interval for taking RMDs is prolonged, however retirees might admire the flexibility to defer distributions for longer time frames. The retirement trade has lengthy promoted the idea of advancing digital disclosures within the identify of streamlining administrative necessities and chopping prices for plan sponsors and contributors.
This newest motion by the executive department is meant to increase entry to retirement plans (particularly amongst smaller employers), rework “outdated distribution mandates” which pressure retirees to make “excessively large withdrawals from their accounts (potentially leaving them with insufficient savings in their later years),” and ease regulatory burdens by lowering the quantity and complexity of worker profit plan notices.
We’ll maintain you posted on how these instructions are carried out.
The White House, “Executive order on strengthening retirement security in America,” Aug. 31, 2018
The White House, “President Donald J. Trump is strengthening retirement security for American workers,” (Fact sheet), Aug. 31, 2018
BenefitsPRO, “Trump’s executive order instructs Labor to set table for open MEPs,” Nick Thornton, Aug. 31, 2018
NAPA Net, “ARPs, RMDs and e-delivery — oh, my!”, Nevin E. Adams, JD, Aug. 31, 2018
Blog header picture: Diego Grandi/Shutterstock.com
Senior Analyst Retirement Research, Invesco Consulting
Senior Analyst Jon Vogler attracts on intensive pension experience to supply retirement thought management for Invesco. In addition to writing Invesco’s Retirement weblog, he tracks legislative and regulatory developments and contributes as a author and editor to a wide range of retirement-related Invesco communications.
Prior to becoming a member of Invesco in 2008, Mr. Vogler spent greater than 25 years within the analysis, writing, compliance and underwriting areas of the retirement providers trade, together with roles as a senior guide at Mutual Benefit Life’s pension consulting firm and as a compliance supervisor within the Automatic Data Processing retirement providers division.
Mr. Vogler earned the Fellow, Life Management Institute (FLMI) and Competent Toastmaster (CTM) designations. He earned a BA diploma in historical past from Rutgers, The State University of New Jersey.