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This is the third in a series of articles describing key provisions ofthe SECURE Act with a focus on defined benefits plan changes. The SettingEvery Community Up for Retirement Enhancement Act is part of theFurther Consolidated Appropriations Act, 2020. It makes numerouschanges (including a variety of enhancements) affecting qualifiedretirement plans, 403(b) and 457(b) plans, individual retirementaccounts, and other employee benefits as well as defined benefitsretirement plans.

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Related: SECURE Act — What are the lifetime incomeoptions?

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Plan sponsors generally have sufficient time to amend plandocuments to comply with any required or optionalchanges because although some of the changes under theSECURE Act are effective immediately, others are effective in planor tax years beginning on or after January 1, 2020. The Actprovides for a remedial plan amendment period that does not enduntil the last day of the 2022 plan year (the 2024 plan year forgovernmental plans).

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Nevertheless, employers must modify certain aspects of planadministration (and potentially financial planning decisions) nowto align with the SECURE Act's more immediate changes.

Defined benefits plan changes

A few of the SECURE Act's changes apply only to defined benefitplans, including relaxed nondiscrimination testing for frozen plansand in-service distributions permitted at age 59½.

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1. Relief for certain closed or "soft-frozen" definedbenefits plans: The Act provides nondiscriminationtesting, minimum coverage, and related relief for certain closed or"soft-frozen" defined benefit plans. The relief permits existingparticipants in such plans to continue accruing benefits withoutviolating these testing requirements. This affects only definedbenefit plans that were closed or frozen before April 5, 2017, andthose that satisfy other detailed requirements.

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This is optional but effective immediately, and this change maybe particularly helpful for "soft-frozen" plans with older, morehighly compensated participant demographics.

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2. Reduction in age for in-servicedistributions: Another portion of the legislation thatincluded defined benefits plans is the provision that reduces theage at which in-service distributions may be taken from definedbenefit, money purchase pension, and governmental 457(b) plans.Such distributions now may be taken at age 59½ — rather than 62 forpension plans and 70½ for governmental 457(b) plans.

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Defined benefit plans, money purchase pension plans, andgovernmental 457(b) plans have this option for plan years beginningon or after January 1, 2020.

If chosen, modify notices and request forms appropriately

This change was designed as a revenue generator in order tooffset the cost of other changes made by the legislation, andalthough plan amendments are not immediately required, employerschoosing to offer the earlier distribution option should modifyparticipant notices and distribution request formsappropriately.

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Greg Ash is apartner at Spencer Fane LLP in the firm's Overland Park, Kansasoffice. He is chair of the firm's Employee Benefits Practice Groupand helps his clients maximize the value and minimize the risksinherent in their benefit plans.

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