The President Urges Regulatory Action to Expand Access to Employer-Sponsored Retirement Plans
On August 31, 2018, President Trump issued an Executive Order (the “Order”) calling on the Department of Labor (“DOL”) and the Internal Revenue Service (“IRS”) to consider issuing regulations and guidance directed at expanding the availability of employer-sponsored retirement plans. The Order mainly takes aim at the availability of retirement plans to all employees, noting that one-third of workers in the private sector have no access to workplace retirement plans.
Amongst the Order’s directives are expanding access to retirement plans for American workers by allowing employers to join together to offer Association Retirement or Multiple Employer Plans (“MEPs”), revising required notices associated with plans, and assessing the accuracy of current mortality tables used to calculate Required Minimum Distributions (“RMDs”) for retirees age 70 ½ and older.
In particular, the DOL is tasked with considering the expansion of MEPs, enabling groups of smaller employers to band together to offer a retirement plan to their employees while sharing the cost and responsibility of sponsorship with other employers. According to the Order, such guidance will allow small employers to avail themselves of the benefits and purchasing power available to larger qualified retirement plans.
The DOL has 180 days from the execution of the Order (February 27, 2019) to consider issuing proposed rulemaking and guidance on whether a group or association of employers can be considered a single employer under ERISA. The IRS has the same 180 days to consider amendments to regulations and other guidance regarding the qualified status of MEPs, including the consequences of a participating employer failing to do all that is required for the MEP to be qualified under the Code. The Order dictates coordination and consultation between the DOL and IRS before issuing any proposed guidance.
The DOL, in coordination with the IRS, has one year from the issuance of the Order (August 31, 2019) to consider improvements to notice and disclosure requirements for qualified retirement plans, including expanding the use of electronic delivery. If the DOL determines improvements are possible, it will work with the IRS to produce regulations and guidance for improved and less burdensome notice and disclosure requirements.
The Order also directs the IRS to evaluate the soundness of the current mortality tables upon which RMDs are calculated. Within 180 days of issuance of the Order, (February 27, 2019), the IRS must evaluate the current mortality tables and make a recommendation on the applicability of the current tables, whether tables should be updated, and how often tables should be evaluated on a prospective basis.
It is also important to note that the legislative calendar includes the Retirement Enhancement and Savings Act of 2018 (“RESA”), which has the support of both parties. RESA has the same ultimate goal of improving retirement plan access and lowering the costs and administrative burdens associated with sponsoring qualified retirement plans. While the ultimate impact of the Order is not certain, it may also spur Congress to address and reconcile the House and Senate versions of RESA before mid-term elections.