PLANSPONSOR - October/November 2020 - 8

RULES & REGULATIONS
4 of Form 1099-R for 2020.
In Revenue Procedure (Rev. Pro.)
2020-46, effective as of October 16 this
year, the IRS modified the list of permissible
reasons for self-certification of eligibility
for a waiver of the 60-day rollover
requirement set forth in Rev. Pro. 2016-47
by adding " the distribution was made to a
state unclaimed property fund. "
The IRS says a self-certification
under Rev. Pro. 2020-46 applies only
to receiving a waiver from meeting the
60-day rollover requirement; it does not
waive the need to meet any other requirement
in order to ensure that a rollover is
valid. " For example, a taxpayer may not
roll over a distribution if it is a required
minimum distribution [RMD] or if the
taxpayer is a non-spouse beneficiary. In
addition, in the case of a distribution from
an IRA [individual retirement account], (i)
a rollover to another IRA is not permitted
if the taxpayer [rolled over] an IRA distribution
in the prior 1-year period, and (ii) any
rollover must consist of the same property
distributed (e.g., if shares of a company are
distributed from an IRA, some or all of the
shares may be rolled over, but no proceeds
from the sale of those shares can be rolled
over), " the guidance states.
2021 Contribution
And Benefit Limits
Effective January 1, 2021, the limit on
contributions by employees who participate
in 401(k)s, 403(b)s, most 457 plans
and the federal government's Thrift
Savings Plan remains unchanged, at
$19,500. The catch-up contribution limit
for employees ages 50 and older who
participate in these plans also remains
unchanged at $6,500. Further, the limitation
regarding SIMPLE [savings incentive
match plan for employees] retirement
accounts will stay at $13,500, and the limit
on annual contributions to an individual
retirement account (IRA), will stay at
$6,000. The additional catch-up contribution
limit for individuals ages 50 and older
is not subject to an annual cost-of-living
adjustment (COLA) and remains $1,000.
The limitation on the annual benefit
under a defined benefit (DB) plan under
Section 415(b)(1)(A) remains unchanged
at $230,000. For a participant who separates
from service before January 1, his
limitation under a DB plan under Section
415(b)(1)(B) is computed by multiplying
his compensation limitation, as adjusted
through 2020, by 1.0122. The limitation
for defined contribution (DC) plans
under Section 415(c)(1)(A)-i.e., annual
additions-will increase for 2021 to
$58,000 from $57,000. The limitation
used in the definition of " highly compensated
employee " (HCE) under Section
414(q)(1)(B) will remain at $130,000.
DOL Independent
Contractor Proposal
The Department of Labor (DOL)
announced a proposed rule intended
to help employers determine whether
a worker is an employee under the Fair
Labor Standards Act (FLSA) or an independent
contractor. The DOL says it
believes the ruling will streamline and
provide consistency for purposes of
minimum wage, overtime pay, child labor
and recordkeeping by helping clearly
determine a worker's status. Currently,
independent contractors are considered
self-employed and therefore are ineligible
for unemployment, health, retirement,
sick time or family leave benefits-all of
which experts and research say play a big
part in workers' physical and financial
well-being. Independent contractors may
also not form a union with other workers
and are unprotected by employment laws
including the Fair Labor Standards Act.
Cost of Living Increase
The Social Security Administration
(SSA) announced that Social Security
and Supplemental Security Income (SSI)
benefits will increase 1.3% in January
2021. In addition, based on the growth
in average wages, the maximum amount
of earnings subject to Social Security
tax-i.e., the taxable maximum-will
increase to $142,800 from $137,700.
SAVE Act Would
Incentivize ESOP
Conversions
The bipartisan Savings for All Vocations
Enhancement (SAVE) Act was introduced
in mid-October by U.S. Representative
Ron Kind, D-Wisconsin, and backed by
Republican Representatives Mike Kelly of
Pennsylvania and Jason Smith of Missouri.
The bill would expand access to savings by
incentivizing owners of S corporations-
i.e., corporations that elect to pass corporate
income, losses, deductions and credits
through to their shareholders for federal
tax purposes-to convert to employee stock
ownership plans (ESOPs). By allowing
for the deferral of tax for certain sales of
employer stock to an ESOP that an S corporation
sponsored, the bill would encourage
the use of ESOPs. It would also ensure that
an inadvertent mistake with a person's
individual retirement account (IRA) would
not eat up the person's retirement savings
in penalties but would rectify the penalties
by bringing them in line with those paid in
401(k) plans. Further, it would allow 403(b)
plans to use open multiple employer plans
(MEPs), enabling 403(b)s for nonprofit
organizations such as hospitals, school
districts and churches to pool their retirement
investments together. The Setting
Every Community Up for Retirement
Enhancement (SECURE) Act included
provisions allowing for the similar pooled
employer plans (PEPs), but they apply only
to 401(k)s, not 403(b)s.
The legislation also would reduce
excise taxes on certain accumulations in
qualified retirement plans and on failures
to take required minimum distributions
(RMDs). -PS
For in-depth coverage of these topics and more, go to PLANSPONSOR.com/compliance.
8 PLANSPONSOR.COM October - November 2020
http://www.PLANSPONSOR.com/compliance http://www.PLANSPONSOR.COM
PLANSPONSOR - October/November 2020

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