Under existing law, the group sponsoring a MEP has to have a particularly close economic or representational nexus to the employers and employees participating in the plan in order to be considered a single plan. The Act creates a new MEP called a "Pooled Employer Plan" that allows unrelated employers to join together to participate in one MEP. The Act amends ERISA to define the Pooled Employer Plans and Pooled Plan Providers, which will administer this type of MEP.

The Act addresses the "bad apple" problem that exists for MEPs, where the qualification of the entire MEP is at risk based on the actions of one participating employer. Under the Act, the qualification of the MEP will not be affected if certain procedures are followed, including transferring the assets of the violating plan to a separate plan and making the employer liable for any liabilities regarding the plan.

The changes are effective for plan years beginning after December 31, 2020. For more information on MEPs, see Practice Note, Multiple Employer Retirement Plans (MEPs).

The Act increases the limit on default automatic contribution rates from 10% to 15% (10% for the first year of participation). This provision is effective for plan years beginning after December 31, 2019.

The Act makes the following changes for nonelective 401(k) safe harbor plans:

These provisions are effective for plan years beginning after December 31, 2019.

The Act requires that 401(k) plans permit participation by long-term employees working more than 500 but less than 1,000 hours per year in three consecutive years. This provision is effective for plan years beginning after December 31, 2020.

Under Section 108 of the Act, qualified retirement plans cannot make loans to participants through a credit card or other similar arrangement. The rule is effective on the date of enactment.

A new distribution rule will allow participants to take a penalty-free withdrawal of up to $5,000 from a plan following the birth or legal adoption of a child. The distribution option applies to 401(k) plans, 403(b) plans, governmental 457(b) plans, and Individual Retirement Accounts (IRAs). It does not apply to defined benefit plans.

The distribution would be exempt from the 10% penalty on distributions and can be repaid to certain plans. Participants are eligible for the distribution up to one year after the child is born or the adoption is finalized. It is effective for distributions after December 31, 2019.

Currently, required minimum distributions from a retirement plan or IRA must start once an individual turns age 70.5. Under the Act, this age is increased to age 72. The change is effective for distributions required to be made after December 31, 2019, with respect to individuals who turn 70.5 after December 31, 2019.

For defined contribution plans and IRAs, where a participant dies before the distribution of their entire interest, the distributions must now be made by the end of the tenth calendar year following the participant's death. The new requirement does not apply if the beneficiary is an eligible beneficiary (for example, a surviving spouse or minor child).

This change is generally effective for distributions made for employees who die after December 31, 2019. For governmental plans, the change is effective for employees who die after December 31, 2021. It does not apply to qualified annuities that are binding annuity contracts as of the date of the Act's enactment.

The Act permits participants in defined contribution plans, 403(b) plans, and governmental 457(b) plans to take a distribution of lifetime income investment in the form of an annuity if:

This provision is effective for plan years beginning after December 31, 2019.

The Act requires employers to provide defined contribution plan participants with new lifetime income disclosures that:

The Act directs the DOL to draft a model disclosure. This provision is effective for benefits statements provided more than 12 months after the DOL issues a rule or provides model disclosures.

The Act creates a fiduciary safe harbor for the selection of an insurer for providing lifetime income options to participants. Under the safe harbor, a fiduciary would:

The Act requires the Secretary of Treasury to issue guidance on the treatment of custodial accounts upon a 403(b) plan's termination. Specifically, the guidance will allow custodial accounts to be distributed in-kind to participants and beneficiaries and the accounts will retain their tax-deferred status until amounts are actually paid. The guidance will be retroactive for taxable years after December 31, 2008.

The Act clarifies that employees of non-qualified church-controlled organizations may participate in Internal Revenue Code (Code) Section 403(b)(9) (26 U.S.C. § 403(b)(9)) retirement income accounts. The clarification is effective before, on, and after the date of enactment of the Act.

The Act allows all members of a group of plans to file a single annual report (the Form 5500) instead of multiple reports for each plan. The plans eligible are individual account or defined contribution plans that have the same:

The IRS and DOL are directed to modify the Form 5500 requirements to implement the change by January 1, 2022. These changes will apply to returns for plan years beginning after December 31, 2021.

If a qualified retirement plan is adopted by the tax return filing date for an employer (including any extensions), the employer can elect to treat the plan as adopted on the last day of the taxable year. This is effective for plans adopted for taxable years beginning after December 31, 2019.

The penalty under Code Section 6651(a) (26 U.S.C. § 6651(a)) for failing to file a plan tax return is increased from $330 to $435, effective for returns with due dates after December 31, 2019.

The Act includes a series of penalty increases which apply to returns required to be filed, and statements required to be provided, after December 31, 2019.