On August 31, 2018, President Trump signed an executive order directing the Departments of Labor and Treasury to make it easier for employers to offer retirement and savings programs. The majority of workers are employed at small businesses where they are less likely to have access to 401(k) plans and other retirement plans than workers at large companies. Small employers often say they are reluctant to offer plans due to concerns about administrative requirements and overhead costs.
The executive order has no immediate effect. It simply directs the Departments to review existing regulations and consider changes that would make plans easier and less costly to administer.
There are three main items:
- Notices and Disclosures: The Departments are directed to review ERISA and Internal Revenue Code (Code) requirements on plan disclosures. Over the next year, they will consider changes to make the notices more understandable and useful to employees and reduce the employer’s production and distribution costs by allowing broader use of electronic delivery.
- Multiple Employer Plans: The Departments are directed to review Code requirements and ERISA guidance on defining the “employer” for purposes of sponsoring retirement plans. Over the next six months, they will consider proposing changes to expand opportunities for unrelated employers to team up in sponsoring a single plan. Currently, unrelated employers must each have their own plan; they cannot share a plan to pool contributions or costs except in limited cases that usually involve employers in a trade association. Sole proprietors and working owners could also benefit if changes are made to allow them to participate in multiple employer plans.
- Required Minimum Distribution (RMD) Rules: Treasury is directed to consider updating current requirements on retirement plan distributions. Currently, participants are required to begin withdrawing (and paying taxes on) money from certain types of retirement accounts starting at age 70 ½. The RMD tables have not been updated for many years and may not reflect current life expectancy. Over the next six months, Treasury will consider whether to propose changes in the starting age and/or annual percentages for RMDs.
In summary, last week’s executive order is intended to expand access to retirement plans, particularly for workers at small and midsize companies. No changes are imminent, but the Departments of Labor and Treasury will be considering ways to reduce federal regulations that currently discourage employers from offering plans. Any changes likely would not take effect until 2019 or later.
ThinkHR will continue to monitor developments in this area.