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08/31/2018

President Trump Announces Retirement Initiative

Today, President Trump signed an executive order that is expected to prompt a number of improvements to America's voluntary, employer-sponsored retirement system. The President has directed the Department of Labor and the Treasury Department to make changes in three areas:    

  • New regulations that would encourage small businesses to join and participate in a multiple employer plan, 
  • New guidance offering options that would reduce paperwork and administrative expense, and 
  • New regulations to update minimum required distribution requirements for tax qualified retirement plans and Individual Retirement Accounts to reflect improvements in life expectancy.   

Multiple Employer Plans / Association Retirement Plans 
Today, only a modest number of small businesses have combined to participate in an "open" Multiple Employer Plan ("open MEP").  Because of Department of Labor requirements, DOL Advisory Opinion 2012-04A, employers who have adopted those plans in the past have had limited ability to achieve economies of scale and to reduce administrative burdens and expense.  Initial information suggests these "Association Retirement Plans" would be similar to and/or patterned after the recent Department of Labor guidance regarding Association Health Plans

Reduced Paperwork and Administrative Expense
While details are not yet available, we expect the guidance that would reduce paperwork and administrative expense will include an update to the Department of Labor's 2002 regulations on delivering mandated disclosures through electronic means. Note that this guidance applies to both tax-qualified retirement plans and welfare benefit plans subject to ERISA mandated disclosures and notices.  This guidance is likely to be consistent with an earlier Executive Orders issued by Presidents Trump (Executive Orders 13771  and 13777), Obama (Executive Order 13563), and Clinton (Executive Order 12866). 

The American Retirement Association and its membership divisions, including the Plan Sponsor Council of America, support updates to those regulations to achieve significant potential savings in terms of administrative complexity and compliance expense, while improving the effectiveness of benefit plan notices and mandated disclosures (read more here, here, and here). More than six years ago, the Department of Labor solicited industry input  on updating the requirements for using electronic means to comply with mandated disclosure requirements.  

Reducing Mandated Distributions 
Finally, the Executive Order suggests that the Department of Treasury review and potentially update the rules that are used to determine required minimum distributions from tax qualified retirement plans and Individual Retirement Accounts (IRAs) (except for Roth IRAs). The life expectancy and distribution period tables at Treasury Regulation §1.401(a)(9)-9 were last updated more than 15 years ago.