9. Penalty-free withdrawals for childbirth or adoption

Up to $7,500 can be withdrawn from qualified plans, penalty-free, in the event of a childbirth or an adoption.

See more about the bill, including its sponsors and legislation that influenced it in the article below.

The Retirement Savings, and Other Tax Relief Act of 2018, and the Taxpayer First Act of 2018:

For proponents of the reforms, the best news may be that the Retirement Savings, and Other Tax Relief Act of 2018 and the Taxpayer First Act of 2018 are being introduced apart from more politically contentious legislation that would make permanent the cuts to the individual tax rates in last year’s Tax Cuts and Jobs Act.

Read the rest of the article below for background on the bill.

The slides that follow reveal some key retirement provisions in the bill. (Photos: Shutterstock)

1. Open Multiple Employer Plans

The bill amends the Employee Retirement Income Security Act to establish Open MEPs, which would allow employers to pool workers under one 401(k) plan.

The bill goes substantially further than a rule currently being finalized by the Labor Department, by removing the existing commonality requirement necessary to join a MEP.

It also removes the existing “one bad apple” rule, which disqualifies a MEP’s tax preferred status if one employer fails reporting and fiduciary requirements.

The bill would establish plan service providers as the fiduciaries to MEPs. Individual employers would still be fiduciaries, but only with respect to the employees and assets that account for the individual employer’s portion of MEP assets.

2. Annuity selection safe harbor for plan sponsors

Under a new safe harbor, plan sponsors will be able to choose an annuity provider without having to verify an insurance company’s capacity to meet future contract obligations.

Sponsors would still have a fiduciary responsibility to verify an insurance company’s financial credibility at the time of selection, and would be required to monitor providers via annual written certifications of insurers’ financial stability.

Sponsors that satisfy the provisions of the new safe harbor would not be liable for investment losses in annuity contracts, or liable for insurers’ inability to meet future obligations.

3. Lifetime income disclosures on retirement plan statements

Retirement plan statements would be required to include an annuitized value amount of the savings in an account at least one time annually.

Calculations for how to base the estimated annuitized stream of income would be established by the Labor Department.

Sponsors and plan fiduciaries would not have liability for the accuracy of the income assumptions.

4. Repeal of maximum age for traditional IRA contributions

If passed, the bill would remove the existing prohibition on contributions to IRAs after age 70, and would be effective at the beginning of 2019.

5. Increase in cap on deferrals in safe harbor plans

The bill increases the 10 percent cap on automatic deferrals in safe harbor 401(k) plans to 15 percent.

6. Incentives for small employers to sponsor retirement plans

One provision would increase the start-up tax credit for newly sponsored plans to as much as $1,500, and another would incent automatic enrollment features with a $500 tax credit for three years.

7. No RMD for smaller accounts

IRAs and 401(k)s with less than $50,000 in value would be exempted from the existing required minimum distribution schedule that begins at age 70 ½ .

When RMDs are required, minimum distribution would be changed to be no greater than the interest earned on account balances for the year the distribution is required.

8. Modified plan nondiscrimination rules and testing

The bill relaxes nondiscrimination testing of closed defined benefit plans, and allows DB and defined contribution plan assets to be considered under one testing model when employers sponsor both types of plans.

9. Penalty-free withdrawals for childbirth or adoption

Up to $7,500 can be withdrawn from qualified plans, penalty-free, in the event of a childbirth or an adoption.

See more about the bill, including its sponsors and legislation that influenced it in the article below.