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"You Got a Friend in Me": Partnering Up to Make Your Life Easier

| November 24, 2020
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As the proverbial year from hell begins to draw to a close plenty of negative news still dominate the headlines but there finally appear to be some signs of hope out on the horizon as well. I think it would be safe to say that most of us are more than ready to put this year in the rear view mirror but for those who oversee the running of a company's retirement plans it is extremely important to take care of some housekeeping before officially shutting the door on 2020, and what to be looking out for moving into 2021. (::whispers:: Stay tuned until the end to find out who might be able to do all of this for you)   

There are still the standard items that someone needs to make sure are being taken care of like annual notices (QDIA, Automatic Enrollment, etc.) as well as any plan amendments that must be adopted before the year is out. However, to make things all the more difficult, at least in the "keeping it all straight" department, if any amendments were made due to the SECURE and CARES Acts the plan gets until the end of 2022 to take care of adopting those. To make things easier on the notices front the DOL did issue a rule to officially allow for electronic delivery, either in email form or an accessible website. Plansponsors should consult their recordkeepers and TPAs to check and see how they can help them take advantage of this change.

Speaking of 2020's piece of legislation that we knew was coming (before the CARES Act was something we ever knew we were going to need to worry about), the SECURE Act has a couple of new items in it that may need monitoring moving forward. Although they were technically available in 2020 they were quickly overshadowed by COVID related distribution rules in CARES but one new option that many people anticipate seeing an uptick in utilization of are the qualified birth or adoption distributions (or QBOADs, because we always have to acronym-ize everything). If a plan allows QBOADs then their participants may take distributions of up to $5,000 as a penalty-free early withdrawal to help cover expenses related to adoption or the birth of a child. IRS did go on to clarify that the $5,000 maximum amount applies separately to each parent for every child born or adopted in a one-year period. SECURE Act Birth and Adoption Distribution Rules

Another item that won't actually come into play until 2024 but whose clock will start running on January 1st of 2021 is how certain part-time employees are treated with regard to their employer's retirement plan. Up until now if an employee never worked 1,000 hours in one calendar year then an employer never had to allow them to participate in their retirement plan. One of changes that will soon be in effect is that now any employee who works a minimum of 500 hours in three consecutive years will have to be considered as an eligible employee for retirement plan purposes. Include Part-Time Employees in Retirement Plans

Now having said all that, as these acts and provisions continue to change almost yearly wouldn't it be nice if there was someone else who could keep track of all it for you? Like advisors before them who needed to show their commitment to the retirement plan space by offering their services in a co-fiduciary capacity, TPAs are now doing the same. Whereas the code words (code numbers?) for advisors were 3(21) and 3(38) a TPA goes by the 3(16) name but the end result can be the same for those that oversee a retirement plan, a work "plate" that might suddenly include a whole lot less retirement plan related to-do's!

The "Soon to be Christmas time" music related footnote: I have never been one to go all in on Christmas music. If you dig around you can find plenty of great versions of most Christmas standards but, for the most part, by the time the 25th rolls around I am more than happy to go another 330+ days without hearing another holiday season tune. Having said that, this year the national treasure that is Dolly Parton has blessed us with a new Christmas album that even my seasonal music Grinch like heart will probably be playing come this Friday morning!

A Holly Dolly Christmas       

 

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