The President has instructed the agencies to work on regulations enhancing retirement security through, for example, expanding the ability of small employers to join a MEP and facilitating greater use of electronic means of providing required disclosures to participants.
On August 31, 2018, President Trump signed an executive order (EO) directing the Departments of Labor (DOL) and Treasury to work on a number of matters affecting the private retirement system. The EO includes the following directives:
Expanding multiple employer plans (MEPs); limited amount can be done without Congress. Under current DOL guidance, a MEP exists only if the employers participating in a retirement plan have a strong connection unrelated to the provision of retirement benefits. MEPs enjoy certain economies of scale and efficiencies that the participating employers would typically not experience if they were each responsible for their own retirement plan. As noted, RESA and the House retirement bill would allow completely unrelated employers to participate in an “open MEP.”
The EO directs DOL to clarify and expand the circumstances under which small and mid-sized businesses in particular may sponsor or adopt a MEP (which are referred to as Association Retirement Plans (“ARPs”) in certain Administration documents). DOL has already prepared a proposal that could be published as early as later this month. As the Administration is referring to MEPs as ARPs in certain documents, the proposal from the DOL may mirror in many respects the Association Health Plans regulation that was finalized earlier this year. Under that rule, the circumstances under which unrelated employers may join together to provide health insurance to their employees is fairly restrictive. Therefore, without a change from Congress, it is not anticipated that the proposal will allow open MEPs or very materially expand MEP availability.
MEP “one bad apple” rule. As noted, under the so-called one bad apple rule, if a single employer participating in a MEP violates the Internal Revenue Code’s retirement plan qualification rules, then the entire MEP may be disqualified, resulting in severe tax consequences for both the employers and participants. The EO directs Treasury to consider guidance that would provide relief from this result, so that only the employer violating the rules (and its participants) would be adversely affected. It is unclear if the Treasury relief will be as comprehensive or effective as the relief in RESA and the House bill.
Required minimum distributions (RMD) update. As a general rule, individuals must take a certain minimum annual distribution from their retirement plans and non-Roth IRAs after reaching age 70½. The amount that an individual is required to take is based on the joint life expectancy of that individual and his or her beneficiary according to life expectancy tables provided by the IRS.
The EO directs Treasury to consider updating the life expectancy tables in the RMD regulations to reflect the increase in average lifespans. Updating the tables is expected to result in lower annual RMDs, thereby allowing individuals to keep more money in their retirement accounts.
Retirement plan notices. Plan sponsors are required to provide a number of notices to plan participants at certain times and in conjunction with certain events. Under current rules, employers may not – as the default option – deliver the notices using electronic methods. The EO directs DOL to explore ways to reduce the cost of retirement plan notices for plan sponsors, such as through the broader use of electronic delivery. DOL is also instructed to consider ways to improve mandatory retirement plan notices by making them “more understandable and useful.”
The views expressed in this material are the views of SSGA Defined Contribution as at 05 November 2018, and are subject to change based on market and other conditions.
This document contains certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. Investing involves risk, including the risk of loss of principal. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
Diversification does not ensure a profit or guarantee against loss.
Before investing, consider the funds' investment objectives, risks, charges and expenses. To obtain a prospectus or summary prospectus which contains this and other information, call 1-800-997-7327, download a prospectus or summary prospectus now, or talk to your financial advisor. Read it carefully before investing.
Distributor: State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, an indirect wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates. Certain State Street affiliates provide services and receive fees from the SSGA Funds.
THIS SITE IS INTENDED FOR U.S. INVESTORS ONLY.
No Offer/Local Restrictions
Nothing contained in or on the Site should be construed as a solicitation of an offer to buy or offer, or recommendation, to acquire or dispose of any security, commodity, investment or to engage in any other transaction. SSGA Intermediary Business offers a number of products and services designed specifically for various categories of investors. Not all products will be available to all investors. The information provided on the Site is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
All persons and entities accessing the Site do so on their own initiative and are responsible for compliance with applicable local laws and regulations. The Site is not directed to any person in any jurisdiction where the publication or availability of the Site is prohibited, by reason of that person's nationality, residence or otherwise. Persons under these restrictions must not access the Site.
Information for Non-U.S. Investors:
The products and services described on this web site are intended to be made available only to persons in the United States, and the information on this web site is only for such persons. Nothing on this web site shall be considered a solicitation to buy or an offer to sell a security to any person in any jurisdiction where such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction.