The MERS Retirement Board recently approved adding a default provision to the DC forfeiture rules. This means that if action is not taken to utilize forfeiture funds by the required deadline, funds will automatically be distributed as an equal share to any active participant in that DC plan. This ensures that employers remain in compliance… Continue reading
The timeframe you in which you must use forfeiture funds from your defined contribution plan has been extended. As a reminder, in years prior, the MERS Plan Document required employers to utilize DC forfeiture funds in the plan year in which they occurred. Effective January 1, 2024, the IRS will allow forfeitures to be used… Continue reading
Exception to penalty on early distribution for individuals with a terminal illness Creates a new 10% early distribution penalty exception for individuals who are terminally ill. For purposes of this exception, the individual is deemed to be “terminally ill” if they have “been certified by a physician as having an illness or physical condition which… Continue reading
Exception to 10% early distribution penalty and expanded access to plan loans for plan participants in disaster areas Allows up to $22,000 to be distributed from employer retirement plans or IRAs for affected individuals. Such distributions, called “Qualified Disaster Recovery Distributions,” are not subject to the 10% early distribution penalty, and the individual may include… Continue reading
Modification of required minimum distribution rules for special needs trusts SECURE 2.0 places limits on the ability of beneficiaries of defined contribution retirement plans and IRAs to receive lifetime distributions after the account owner’s death. Special rules apply in the case of certain beneficiaries, such as those with a disability. In the case of a… Continue reading
Repayment of Qualified Birth or Adoption Distribution SECURE 2.0 includes a provision that allows individuals to receive distributions from their retirement plan in the case of birth or adoption without paying the 10% additional tax. Distributions can be repaid to a retirement plan or IRA and are treated as timely rollovers. SECURE 2.0 now restricts… Continue reading
Public Safety Officer Health Insurance Previous law provided the opportunity for public safety officers to exclude $3,000 from gross income for a direct payment for health insurance premiums from a governmental retirement plan. With SECURE 2.0, insurance premium payments no longer need to be paid directly from the retirement plan to qualify for the tax… Continue reading
Reduction in excise tax on RMDs Reduces the penalty for failure to take an RMD from 50% to 25%. Further, if a failure to take an RMD from an IRA is corrected in a timely manner, as defined under SECURE 2.0, the excise tax on the failure is further reduced from 25% to 10%. This… Continue reading
Required minimum distribution (RMD) age changes Increases the required minimum distribution (RMD) age from 72 to 73 for individuals who attain age 72 after January 1, 2023, and age 73 before January 1, 2033. Further, there is a subsequent increase to age 75 for any individual who did not attain age 74 prior to January… Continue reading
On December 1, 2022, The MERS Retirement Board approved changes to Sections 6(5), 6(6) and 50(2)[a] of the Plan Document to include amendments relating to employee transfers/rehires for “cash or deferred arrangement” (CODA) prohibition compliance. Per a recent IRS ruling, any benefit option that presents an employee with a choice between cash or deferred compensation after… Continue reading