On February 9, 2018, Congress passed the amended Bipartisan Budget Act of 2018. This Act contained provisions impacting retirement plans. Sponsors should decide whether to adjust their plan documents and policies in response to these changes.
Hardships
First, this two-year budget agreement will make retirement funds more accessible to participants. Effective for plan years beginning after December 31, 2018, the Act will ease rules on hardship distributions by removing (1) the requirement to exhaust all other options by taking a loan from the plan, (2) the restriction on withdrawing certain employer contributions, and (3) the requirement to suspend participant contributions for 6 months after the hardship distribution. For the first time, qualified nonelective contributions (QNECs), qualified matching contributions (QMACs), contributions made to certain stock bonus plans or profit-sharing plans, safe harbor contributions, plus earnings on all contributions, are now available for hardship withdrawal.
California Wildfires
Individuals impacted by the California wildfires will find some additional relief. Generally, individuals who had their principal residence in the California wildfire disaster area, and who suffered economic loss by reason of the wildfires, may be entitled to what the Act calls “qualified wildfire distributions.” The relief for qualified wildfire distributions includes:
In addition, if a participant received a hardship distribution between April 1, 2017, and January 14, 2018, for the purchase or construction of a home that was then cancelled on account of being within a wildfire disaster area, the participant can recontribute that amount to the plan by June 30, 2018.
The maximum permissible limit on loans from retirement plans were also increased and the repayment deadline extended for individuals impacted by wildfires.
Tax Levies
The Act also provides relief relating to certain tax levies. If the funds held in a retirement fund are ever levied by the IRS and subsequently returned to the taxpayer, then the individual can contribute that amount, with interest, into an eligible retirement plan (including an IRA). The amount will be treated as a rollover contribution, and must be contributed by the filing deadline for the taxpayer’s tax return in the year the funds are refunded. This rule applies to amounts refunded in tax years beginning after December 31, 2017.
Next Steps
All of the above changes are permissive, not mandatory. Sponsors should consider whether they want to adjust retirement plan administration in response. Particularly:
Sponsors should be sure to speak with their plan administrator and benefits counsel to ensure these decisions are properly reflected in both the plan and administrative procedures to avoid potential errors and sanctions for improper administration.
RALEIGH, N.C. — Poyner Spruill partner Kelsey Mayo has been named the 2019 Client Choice Award winner in the Employment & Benefits category for North Carolina.
How an employer manages an employment termination is often the determinative factor in whether an employee sues for wrongful termination. This webinar discussion focuses upon best practices that should be used to minimize frequency of post-termination lawsuits, severance and release considerations, and essential planning and documentation for termination of an employee.
Leadership of the N.C. Adult Care Licensure Section, along with members of the p.s. Health Law Team, will present an update on adult care home survey and regulatory issues, including new developments in regulatory interpretation and application during surveys by the Adult Care Licensure Section.
RALEIGH, N.C. — Poyner Spruill’s Brandi Hobbs will again be a featured speaker in the UNC School of Law’s Festival of Legal Learning. The two-day event offers attendees the chance to earn up to 12 CLE credits and will take place Friday and Saturday, Feb. 8-9, at The William & Ida Friday Continuing Education Center in Chapel Hill.
RALEIGH, N.C. — Poyner Spruill LLP is pleased to announce 16 attorneys at the firm have been selected to the 2019 North Carolina Super Lawyers list. No more than 5 percent of the lawyers in North Carolina are selected.