Updates for 2020 in the Retirement Plan Industry

The IRS has published Defined Contribution Plan Limits for 2020 Affecting 401(k), 403(b) and most 457 plans

Defined Contribution Plans20202019Change
Maximum employee elective deferral $19,500 $19,000 +$500
Employee catch-up contribution (if age 50 or older by year-end) 1 $6,500 $6,000 +$500
Defined contribution maximum limit, all sources (employee + employer) 2 $57,000 $56,000 +$1,000
Defined contribution maximum limit (if age 50 or older by year end); maximum contribution all sources plus catch-up $63,500 $62,000 +$1,500
Employee compensation limit for calculating contributions $285,000 $280,000 +$5,000
Key employees' compensation threshold for nondiscrimination testing 3 $185,000 $180,000 +5,000
Highly compensated employees’ threshold for nondiscrimination testing 4 $130,000 $125,000 +5,000
Roth and Traditional IRA Contribution Limits $6,000 $6,000 $0
Roth and Traditional IRA Contribution Catch up Limit $1,000 $1,000 $0
SIMPLE IRA Contribution Limits $13,500 $13,000 $500
SIMPLE IRA Catch up Limit $3,000 $3,000 $0
1 The $6,500 catch-up contribution limit for participants age 50 or older applies from the start of the year for those turning 50 at any time during the year.
2 Total contributions from all sources may not exceed 100% of a participant's compensation.
3 Includes officers of the company sponsoring the plan.
4 For the 2020 plan year, an employee who earns more than $125,000 in 2019 is an HCE. For the 2021 plan year, an employee who earns more than $130,000 in 2020 is an HCE.


IRS EXTENDS FILING DEADLINES AND PENALTY RELIEF FOR HEALTH COVERAGE REPORTING FORMS

The IRS has extended the due date for furnishing individuals with the 2019 Form 1095-B, Health Coverage and the 2019 Form 1095-C, Employer Provided Health Insurance Offer and Coverage from January 31, 2020 to March 2, 2020.

The IRS has also state accuracy related penalties will not be imposed on health insurers and employers who make a good faith effort to comply with reporting requirements, provided they furnished statements to individuals and filed with the IRA on a timely basis.

On December 12, 2019, the IRS extended the deadline for the Hardship Amendment until December 31, 2021. The previous deadline was December 31, 2019 and was extended as per Revenue Procedure 2020-09.


IRS PROVIDES ADDITIONAL TEMPORARY NONDISCRIMINATION RELIEF FOR CLOSED DEFINED BENEFIT PLANS

Notice 2018-69 extends the temporary nondiscrimination relief for certain closed defined benefit plans concerning benefits, rights, or features. Closed defined benefit plans are plans that are closed to new entrants as of a specified date, but continue to provide ongoing accruals for existing participants. The temporary relief applies for plan years ending after November 13, 2019, and beginning before January 1, 2021.

The temporary nondiscrimination relief for closed plans that is provided in Notice 2014-5 has been extended to plan years beginning before 2020 if the conditions of Notice 2014- 5 are satisfied. This extension is provided in anticipation of the issuance of final amendments to the § 401(a)(4) regulations. In addition, it is expected that the final regulations will provide that the reliance granted in the preamble to the proposed regulations may be applied for plan years beginning before 2020.


403(b) PLAN DOCUMENT RESTATEMENT COMING IN 2020

The IRS has set a deadline of March 31, 2020 for 403(b) document restatement. The document must be restated on IRS approved documents is the plan sponsor wants to assure its plan document provisions retroactively (January 1, 2020) meet IRS requirements.

PBGC TO RAISE PENSION PREMIUM RATES FOR 2020

The Federal Pension Benefit Guaranty Corporation (PBGC), which insures defined benefit pension plans against the inability to meet their obligation to vested participants, announced that premiums will increase approximately 3.6 % from the previous year.

The nation’s private pension plan insurer has announced the premium rates for 2020 plan years in accordance with the indexing rules provided in section 4006 of ERISA.

The per-participant rate for flat-rate premiums for single-employer plans will rise to $83 from $80 for the 2019 plan year. Variable rate premiums for those programs will increase to $45 per $1,000 UVBs (unfunded vested benefits), with a per participant cap of $561. For 2019, those rates were $43 and $541, respectively.

For multi-employer plans, the per-participant rate for 2020 for flat-rate premium will increase to $30 from $29 in 2019.

If you have any questions please contact Ohio Pension Services at 330-777-0073 or email at susan@ohiopension.com or andy@ohiopension.com.



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