PLANSPONSOR - October/November 2020 - 7

retirement security challenges. We believe
that, as Congress works to refine this bill,
ultimately it will improve the retirement
readiness of Americans and help millions
attain a secure financial future. "
A preliminary analysis suggests the
legislation is ambitious and a potentially
worthy successor to the highly popular
SECURE Act.
The American Council of Life
Insurers (ACLI) summarized the provisions
of the act in the following list of goals:
* Promote saving earlier for retirement
by enrolling employees automatically
in their company's 401(k) plan, when
a new plan is created;
* Create a new financial incentive for
small businesses to offer retirement plans;
* Increase and modernize the existing
federal tax credit for contributions to a
retirement plan or individual retirement
account (IRA)-the saver's credit;
* Expand retirement savings options
for nonprofit employees by allowing
groups of nonprofits to join together to
offer retirement plans to their employees;
* Offer individuals 60 and older
more flexibility to set aside savings as
they approach retirement;
* Allow individuals to save for retirement
longer by upping the RMD age to 75;
* Allow individuals to pay down a
student loan instead of contributing to a
401(k) plan and still receive an employer
match in their retirement plan;
* Make it easier for military spouses,
who change jobs frequently, to save for
retirement;
* Allow individuals more flexibility to
make gifts to charity through their IRA;
* Allow taxpayers to avoid harsh
penalties for inadvertent errors managing
their IRA that can lead to a loss of retirement
savings;
* Protect retirees who unknowingly
receive retirement plan overpayments; and
* Make it easier for employees to find
lost retirement accounts by creating a
national online database of lost accounts.
-John Manganaro
More From Washington
And the Courts
DOL Issues Final Rule
On ESG
The Department of Labor (DOL) has
published the final version of a new retirement
plan investing rule, retaining the
proposed version's formal title: " Financial
Factors in Selecting Plan Investments. "
The final version includes some important
differences compared with the proposed
version, though the substance largely
remains intact. The proposed rule, which
focused on environmental, social and
governance (ESG) considerations for retirement
plan investments, was published on
June 30, and it generated a tremendous
amount of public input during the 30-day
comment period. There were more than
1,100 unique comment letters and more
than 7,000 signed form letters submitted
by the investment industry and the public.
The proposed version of the rule proved to
be controversial-reflected in the fact that
the majority of public comments called the
rulemaking unnecessary and antiquated
in its unyielding views of ESG investing.
The final version includes some
significant changes, which will seemingly
protect the use of ESG investing to some
extent. Chief among these is the fact that
the text of the final rule no longer refers
explicitly to " ESG. " Rather, it presents a
framework that emphasizes that retirement
plan fiduciaries should use only
" pecuniary " factors when assessing investments
of any type-which is to say they
should use only factors that have a material,
demonstrable impact on performance.
In this sense, the rule does seem to leave
ample room for employing of ESG-related
investments, presuming these types
of investments are assessed in a purely
economic manner and that their financial
features make them prudent investments.
Another change is that the final rule
does not explicitly prohibit the selection
of a fund that uses ESG factors as a plan's
qualified default investment alternative
(QDIA). The final rule requires that a
fund being selected as the QDIA must be
assessed using purely pecuniary factors
that are directly material to its financial
performance. Beyond this, the final
rule does stipulate that a fund is inappropriate
as a QDIA if its stated objectives
include explicitly non-pecuniary
factors-for example addressing climate
change itself, rather than addressing
climate change's impact on the financial
outcomes of investors.
IRS Guidance on the
Transfer of Unclaimed
Property Funds
In Revenue Ruling (Rev. Rul.) 202024,
" Withholding and Reporting With
Respect to Payments From Qualified
Plans to State Unclaimed Property Funds, "
the IRS notes that Internal Revenue Code
(IRC) Section 3405 provides federal
income tax withholding rules regarding
designated distributions. Because none of
the statutory exceptions from treatment as
a designated distribution in Section 3405
apply to the payment of an individual's
accrued benefit from a qualified plan, the
payment, including the amount withheld,
is to be considered a designated distribution
and is subject to federal income tax
withholding, the IRS says.
The payment of an individual's
accrued benefit from a plan, including
both the amount sent to a state unclaimed
property fund and the amount withheld,
is a designated distribution under Section
3405(e)(1) that exceeds the reporting
threshold. This means the employer must
report that designated distribution in Box 1
and the federal income tax withheld in Box
PLANSPONSOR.COM October - November 2020 7
http://www.PLANSPONSOR.COM
PLANSPONSOR - October/November 2020

Table of Contents for the Digital Edition of PLANSPONSOR - October/November 2020
