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Strategic Benefits Advisors Urges 401(k) Plan Sponsors to Review Payroll Procedures Before Year’s End to Ensure SECURE Act Readiness

ATLANTA, Ga. -- Independent, full-service employee benefits consulting firm Strategic Benefits Advisors, Inc. (SBA) today issued guidance urging 401(k) plan sponsors to review their payroll systems and procedures in advance of January 1, 2021, to ensure compliance with the federal Setting Every Community Up for Retirement Enhancement (SECURE) Act.

The SECURE Act includes a mandatory requirement for plan sponsors to allow long-term, part-time employees to participate in 401(k) plans alongside full-time employees. Starting January 1, 2021, plan sponsors must begin counting hours for part-time employees who work at least 500 hours a year. Employees who work 500 hours for three consecutive years must be offered the opportunity to participate in their organization's 401(k) plan beginning in 2024.

"Plan sponsors who don't move fast will be hard-pressed to make necessary changes in just 60 days," said SBA Founding Principal Andy Adams. "Changes involving payroll providers and HRIS systems are notoriously time-consuming, so a sense of urgency is called for to ensure effective processes for counting hours are in place by January 1."

Historically, many retirement plan sponsors have only tracked hours for part-time employees who work 1,000 or more hours per year. Others have simplified timekeeping by crediting part-time employees a fixed number of hours for each day or pay period worked. Regardless of their approach for tracking hours or using equivalencies, plan sponsors will need to coordinate with their recordkeepers, payroll providers and HR information system (HRIS) providers to make a plan for crediting part-time employees who work 500 hours or more.

Counting hours for part-time employees is not always straightforward. To relieve themselves of the administrative burden of counting hours, some plan sponsors may decide to extend eligibility to all part-time employees, regardless of hours worked.

"The calculus behind the decision to extend eligibility to every part-time employee will vary greatly from one plan sponsor to the next depending on the size and nature of its workforce and its available resources," said Adams. "Plan sponsors will also need to decide whether newly eligible part-time employees should be allowed to share in employer contributions, as the SECURE Act leaves this decision entirely in employers' hands."

SBA recommends plan sponsors seek expert advice on how best to determine part-time employees' hours. The SECURE Act represents the most significant changes to employer-sponsored retirement plans in over a decade. SBA published a summary of the law's provisions in April 2019.

About Strategic Benefits Advisors

Strategic Benefits Advisors, Inc. (SBA) is an independent, full-service employee benefits consulting firm focused on creatively and effectively solving complex benefits challenges for clients ranging from 1,000 to over 300,000 employees. Founded in 2002 by veteran consultants Mindy Zatto and Andy Adams, SBA provides practical consulting recommendations and expert implementation of solutions for all types of employee benefits programs, including retirement, health and welfare, financial wellness and employee recognition. With an average of over 25 years in the field, SBA's team of actuaries, consultants and systems specialists is among the most experienced in the industry. For more information, visit https://www.sba-inc.com/.

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Related link: http://www.sba-inc.com/

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Business, Free News Articles, Government

New Bill Targets Employer-Sponsored Retirement Plans

ATLANTA, Ga. -- Independent, full-service employee benefits consulting firm Strategic Benefits Advisors (SBA) issued a statement today informing employers that bipartisan legislation currently pending could significantly revise the rules for employer-sponsored retirement plans.

The House Ways and Means Committee advanced the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 on April 2, the same day the Senate reintroduced its latest version of the Retirement Enhancement Savings Act (RESA) of 2019. The bills provide some administrative relief to employers and incentivize them to offer more savings plan opportunities and retirement income security to workers. A reconciled version of the two bills is expected to become law.

According to SBA Principal Mindy Zatto, the proposed legislation stands to benefit both employers and employees.

The SECURE bill includes provisions for employer-sponsored retirement plans which would:
* Relieve nondiscrimination testing requirements for closed defined benefit (DB) plans
* Delay the required minimum distribution starting age from 701/2 to 72
* Provide more time to retroactively adopt certain retirement plans
* Simplify rules and notice requirements related to qualified nonelective contributions in safe harbor 401(k) plans
* Increase the cap on auto-escalation of contributions for safe harbor 401(k) plans from 10% to 15% of pay
* Allow employers of all sizes to join together and create "open" multiple-employer plans (MEPs) to make defined contribution (DC) plans more affordable
* Encourage lifetime income options in DC plans through new participant disclosures, new provider selection rules and new ways to increase the portability of lifetime income investments
* Offer consolidated Form 5500 for certain DC plans to reduce administrative costs
* Allow long-term, part-time workers to participate in employer 401(k) plans
* Increase penalties for failure to file retirement plan returns (such as Forms 5500), required notifications of changes and required withholding notices
* Prohibit DC plans from extending loans to participants via credit cards
* Reduce payout period for nonspouse beneficiaries of DC plans (and IRAs) to 10 years after the participant's (owner's) death
* Convert custodial accounts from terminated 403(b) plans into IRAs
* Increase or create tax credits for small employers that start new retirement plans or automatically enroll workers into new 401(k) savings plans
* Reduce premiums for cooperative and small-employer charity (CSEC) plans
* Provide funding relief for community newspaper pension plans and clarify church plan requirements

Other provisions of the SECURE Act specifically for individuals are designed to:
* Eliminate the current age 701/2 limit for contributing to an IRA
* Allow graduate students to count stipends and non-tuition fellowship payments as compensation for IRA contribution purposes
* Permit penalty-free withdrawals of up to $5,000 from qualified retirement savings plans to help pay for childbirth or adoption expenses (with repayment permitted)
* Expand allowable expenses for 529 college savings plans to include apprenticeships, homeschooling, private school costs or up to $10,000 of qualified student loan repayments
* Increase penalties for individuals who fail to file tax returns.

"Employers that offer retirement programs should take the opportunity now to evaluate options for their current and future plans under the SECURE Act," said Zatto. "The proposed bill includes features that can be substantially beneficial for both plan sponsors and participants who want to increase retirement income security."

A summary of the SECURE Act's provisions can be found here (PDF): https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE%20Act%20section%20by%20section_0.pdf.

A summary of the similar RESA can be found here (PDF): https://www.finance.senate.gov/imo/media/doc/RESA%20Summary%204.1.19-banner-converted.pdf.

To speak with Strategic Benefits Advisors' experienced team of benefits consultants about the potential impact of these bills on your plans, call 770-551-8989.

About Strategic Benefits Advisors:

Strategic Benefits Advisors, Inc. (SBA) is an independent, full-service employee benefits consulting firm focused on creatively and effectively solving complex benefits issues for clients ranging from 500 to over 250,000 employees. Founded in 2002 by veteran consultants Mindy Zatto and Andy Adams, SBA provides practical consulting recommendations and expert implementation of solutions for all types of employee benefits programs, including retirement, health and welfare, financial wellness and employee recognition. With an average of over 20 years in the field, SBA's team of actuaries, consultants and systems specialists is among the most experienced in the industry.

For more information, visit http://www.sba-inc.com/.

Twitter: #StrategicBenefitsAdvisors #EmployeeBenefits #HR1993 #SECUREACT #RetirementPlans

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