One day expedited setup of Section 139 tax-free disaster relief assistance plans for small businesses

Speed of service is key when setting up disaster relief to employees of small businesses. The federal government allows employers to replace or supplement part of taxable salary with tax free disaster relief payments. Each dollar sent through a disaster relief plan saves up to $.40 in total payroll and income taxes. That savings allows employers and employees to make available cash flow go further during the crisis.

WHO IS ELIGIBLE: All businesses are eligible but Freedom Benefits limits service to small businesses with less than 500 employees.

PURPOSE: The plan is intended to make direct payments from an employer to its employees that are not subject to the usual wage and income taxes.

COVERAGE: The coverage, amount, length and plan design is largely up to the employer. The IRS has few restrictions on these types of employee benefits. Your plan adviser will answer any questions and help guide this process.

EXPEDITED SERVICE OFFER: Freedom Benefits announces expedited one day setup for new Section 139 disaster relief plans. The first step is to schedule a planning call with the plan adviser to answer all questions, plan the benefit and authorize the adviser. Initial appointments and plan setup are available are available on same or next business day.

WHAT WE DO: At your option or request, your designated plan adviser will: 1) Plan the benefit with the business owner or representative, 2) prepare prototype plan documents and employee communications, 3) enroll employees, 4) integrate the new plan with the business payroll system, 5) integrate the plan with the employer’s existing health plan, 6) establish accountable plan policies, 7) administer claims. We recognize that every business works a little differently, so the plan is customized to match your employee benefit practices.

COST: Consult and setup fee is $300. The plan administrative cost is $3 per employee per month. Freedom Benefits has a minimum annual fee of $1,000 for all tax, accounting, payroll and benefits services combined for each business client for continued service.

MORE INFORMATION: Information about all of Freedom Benefits plans is available online at FreedomBenefits.org. See our latest blog post titled “Five practical steps in setting up a Tax Free Small Business Section 139 Qualified Disaster Relief Payment Program“.

Text of SECURE Act

This is a plain text version of the SECURE Act as passed into law December 20, 2019. Color highlights and annotations may be added as indicated. Some words are incorrectly hyphenated; this is just a technical error of the document reproduction technology.

DIVISION O—SETTING EVERY COMMUNITY UP FOR RETIREMENT ENHANCEMENT
SEC. 1. SHORT TITLE, ETC.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Setting Every Community Up for Retirement Enhancement Act of 2019’’.
(b) TABLE OF CONTENTS.—The table of contents of this Act is as follows:

Sec. 1. Short title, etc.
TITLE I—EXPANDING AND PRESERVING RETIREMENT SAVINGS
Sec. 101. Multiple employer plans; pooled employer plans.
Sec. 102. Increase in 10 percent cap for automatic enrollment safe harbor after 1st plan year.
Sec. 103. Rules relating to election of safe harbor 401(k) status.
Sec. 104. Increase in credit limitation for small employer pension plan startup costs.
Sec. 105. Small employer automatic enrollment credit.
Sec. 106. Certain taxable non-tuition fellowship and stipend payments treated as compensation for IRA purposes.
Sec. 107. Repeal of maximum age for traditional IRA contributions.
Sec. 108. Qualified employer plans prohibited from making loans through credit cards and other similar arrangements.
Sec. 109. Portability of lifetime income options.
Sec. 110. Treatment of custodial accounts on termination of section 403(b) plans. Sec. 111. Clarification of retirement income account rules relating to church-controlled organizations.
Sec. 112. Qualified cash or deferred arrangements must allow long-term employees working more than 500 but less than 1,000 hours per year to participate.
Sec. 113. Penalty-free withdrawals from retirement plans for individuals in case of birth of child or adoption.
Sec. 114. Increase in age for required beginning date for mandatory distributions.
Sec. 115. Special rules for minimum funding standards for community newspaper plans.
Sec. 116. Treating excluded difficulty of care payments as compensation for deter- mining retirement contribution limitations.
TITLE II—ADMINISTRATIVE IMPROVEMENTS
Sec. 201. Plan adopted by filing due date for year may be treated as in effect as of close of year.
Sec. 202. Combined annual report for group of plans. Sec. 203. Disclosure regarding lifetime income.

Sec. 204. Fiduciary safe harbor for selection of lifetime income provider.
Sec. 205. Modification of nondiscrimination rules to protect older, longer service participants.
Sec. 206. Modification of PBGC premiums for CSEC plans.
TITLE III—OTHER BENEFITS
Sec. 301. Benefits provided to volunteer firefighters and emergency medical responders.
Sec. 302. Expansion of section 529 plans.
TITLE IV—REVENUE PROVISIONS
Sec. 401. Modification of required distribution rules for designated beneficiaries. Sec. 402. Increase in penalty for failure to file.
Sec. 403. Increased penalties for failure to file retirement plan returns. Sec. 404. Increase information sharing to administer excise taxes.
TITLE V—TAX RELIEF FOR CERTAIN CHILDREN
Sec. 501. Modification of rules relating to the taxation of unearned income of certain children.
TITLE VI—ADMINISTRATIVE PROVISIONS
Sec. 601. Provisions relating to plan amendments.

TITLE I—EXPANDING AND PRESERVING RETIREMENT SAVINGS
SEC. 101. MULTIPLE EMPLOYER PLANS; POOLED EMPLOYER PLANS.
(a) QUALIFICATION REQUIREMENTS.—
(1) IN GENERAL.—Section 413 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
‘‘(e) APPLICATION OF QUALIFICATION REQUIREMENTS FOR CER-
TAIN MULTIPLE EMPLOYER PLANS WITH POOLED PLAN PROVIDERS.—
‘‘(1) IN GENERAL.—Except as provided in paragraph (2), if a defined contribution plan to which subsection (c) applies— ‘‘(A) is maintained by employers which have a common
interest other than having adopted the plan, or
‘‘(B) in the case of a plan not described in subparagraph (A), has a pooled plan provider,
then the plan shall not be treated as failing to meet the requirements under this title applicable to a plan described in section 401(a) or to a plan that consists of individual retirement accounts described in section 408 (including by reason of sub- section (c) thereof), whichever is applicable, merely because one or more employers of employees covered by the plan fail to take such actions as are required of such employers for the plan to meet such requirements.
‘‘(2) LIMITATIONS.—
‘‘(A) IN GENERAL.—Paragraph (1) shall not apply to any plan unless the terms of the plan provide that in the case of any employer in the plan failing to take the actions described in paragraph (1)—
‘‘(i) the assets of the plan attributable to employees of such employer (or beneficiaries of such employees) will be transferred to a plan maintained only by such employer (or its successor), to an eligible retirement plan as defined in section 402(c)(8)(B) for each individual whose account is transferred, or to any other arrangement that the Secretary determines is appropriate, unless the Secretary determines it is in the

best interests of the employees of such employer (and the beneficiaries of such employees) to retain the assets in the plan, and
‘‘(ii) such employer (and not the plan with respect to which the failure occurred or any other employer in such plan) shall, except to the extent provided by the Secretary, be liable for any liabilities with respect to such plan attributable to employees of such employer (or beneficiaries of such employees).
‘‘(B) FAILURES BY POOLED PLAN PROVIDERS.—If the
pooled plan provider of a plan described in paragraph (1)(B) does not perform substantially all of the administrative duties which are required of the provider under paragraph (3)(A)(i) for any plan year, the Secretary may provide that the determination as to whether the plan meets the requirements under this title applicable to a plan described in section 401(a) or to a plan that consists of individual retirement accounts described in section 408 (including by reason of subsection (c) thereof), whichever is applicable, shall be made in the same manner as would be made without regard to paragraph (1).
‘‘(3) POOLED PLAN PROVIDER.—
‘‘(A) IN GENERAL.—For purposes of this subsection, the term ‘pooled plan provider’ means, with respect to any plan, a person who—
‘‘(i) is designated by the terms of the plan as a named fiduciary (within the meaning of section 402(a)(2) of the Employee Retirement Income Security Act of 1974), as the plan administrator, and as the person responsible to perform all administrative duties (including conducting proper testing with respect to the plan and the employees of each employer in the plan) which are reasonably necessary to ensure that— ‘‘(I) the plan meets any requirement applicable
under the Employee Retirement Income Security Act of 1974 or this title to a plan described in section 401(a) or to a plan that consists of individual retirement accounts described in section 408 (including by reason of subsection (c) thereof), whichever is applicable, and
‘‘(II) each employer in the plan takes such actions as the Secretary or such person determines are necessary for the plan to meet the requirements described in subclause (I), including providing to such person any disclosures or other information which the Secretary may require or which such person otherwise determines are necessary to administer the plan or to allow the plan to meet such requirements,
‘‘(ii) registers as a pooled plan provider with the Secretary, and provides such other information to the Secretary as the Secretary may require, before beginning operations as a pooled plan provider,
‘‘(iii) acknowledges in writing that such person is a named fiduciary (within the meaning of section 402(a)(2) of the Employee Retirement Income Security

Act of 1974), and the plan administrator, with respect to the plan, and
‘‘(iv) is responsible for ensuring that all persons who handle assets of, or who are fiduciaries of, the plan are bonded in accordance with section 412 of the Employee Retirement Income Security Act of 1974. ‘‘(B) AUDITS, EXAMINATIONS AND INVESTIGATIONS.—The
Secretary may perform audits, examinations, and investigations of pooled plan providers as may be necessary to enforce and carry out the purposes of this subsection.
‘‘(C) AGGREGATION RULES.—For purposes of this para- graph, in determining whether a person meets the requirements of this paragraph to be a pooled plan provider with respect to any plan, all persons who perform services for the plan and who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as one person.
‘‘(D) TREATMENT OF EMPLOYERS AS PLAN SPONSORS.—
Except with respect to the administrative duties of the pooled plan provider described in subparagraph (A)(i), each employer in a plan which has a pooled plan provider shall be treated as the plan sponsor with respect to the portion of the plan attributable to employees of such employer (or beneficiaries of such employees).
‘‘(4) GUIDANCE.—
‘‘(A) IN GENERAL.—The Secretary shall issue such guid- ance as the Secretary determines appropriate to carry out this subsection, including guidance—
‘‘(i) to identify the administrative duties and other actions required to be performed by a pooled plan provider under this subsection,
‘‘(ii) which describes the procedures to be taken to terminate a plan which fails to meet the require- ments to be a plan described in paragraph (1), including the proper treatment of, and actions needed to be taken by, any employer in the plan and the assets and liabilities of the plan attributable to employees of such employer (or beneficiaries of such employees), and
‘‘(iii) identifying appropriate cases to which the rules of paragraph (2)(A) will apply to employers in the plan failing to take the actions described in para- graph (1).
The Secretary shall take into account under clause (iii) whether the failure of an employer or pooled plan provider to provide any disclosures or other information, or to take any other action, necessary to administer a plan or to allow a plan to meet requirements applicable to the plan under section 401(a) or 408, whichever is applicable, has continued over a period of time that demonstrates a lack of commitment to compliance.
‘‘(B) GOOD FAITH COMPLIANCE WITH LAW BEFORE GUID-
ANCE.—An employer or pooled plan provider shall not be treated as failing to meet a requirement of guidance issued by the Secretary under this paragraph if, before the issuance of such guidance, the employer or pooled plan provider complies in good faith with a reasonable

interpretation of the provisions of this subsection to which such guidance relates.
‘‘(5) MODEL PLAN.—The Secretary shall publish model plan language which meets the requirements of this subsection and of paragraphs (43) and (44) of section 3 of the Employee Retirement Income Security Act of 1974 and which may be adopted in order for a plan to be treated as a plan described in para- graph (1)(B).’’.
(2) CONFORMING AMENDMENT.—Section 413(c)(2) of such Code is amended by striking ‘‘section 401(a)’’ and inserting ‘‘sections 401(a) and 408(c)’’.
(3) TECHNICAL AMENDMENT.—Section 408(c) of such Code is amended by inserting after paragraph (2) the following new paragraph:
‘‘(3) There is a separate accounting for any interest of an employee or member (or spouse of an employee or member) in a Roth IRA.’’.
(b) NO COMMON INTEREST REQUIRED FOR POOLED EMPLOYER PLANS.—Section 3(2) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)) is amended by adding at the end the following:
‘‘(C) A pooled employer plan shall be treated as—
‘‘(i) a single employee pension benefit plan or single pension plan; and
‘‘(ii) a plan to which section 210(a) applies.’’.
(c) POOLED EMPLOYER PLAN AND PROVIDER DEFINED.—
(1) IN GENERAL.—Section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) is amended by adding at the end the following:
‘‘(43) POOLED EMPLOYER PLAN.—
‘‘(A) IN GENERAL.—The term ‘pooled employer plan’ means a plan—
‘‘(i) which is an individual account plan established or maintained for the purpose of providing benefits to the employees of 2 or more employers;
‘‘(ii) which is a plan described in section 401(a) of the Internal Revenue Code of 1986 which includes a trust exempt from tax under section 501(a) of such Code or a plan that consists of individual retirement accounts described in section 408 of such Code (including by reason of subsection (c) thereof); and ‘‘(iii) the terms of which meet the requirements
of subparagraph (B).
Such term shall not include a plan maintained by employers which have a common interest other than having adopted the plan.
‘‘(B) REQUIREMENTS FOR PLAN TERMS.—The require-
ments of this subparagraph are met with respect to any plan if the terms of the plan—
‘‘(i) designate a pooled plan provider and provide that the pooled plan provider is a named fiduciary of the plan;
‘‘(ii) designate one or more trustees meeting the requirements of section 408(a)(2) of the Internal Rev- enue Code of 1986 (other than an employer in the plan) to be responsible for collecting contributions to, and holding the assets of, the plan and require such

trustees to implement written contribution collection procedures that are reasonable, diligent, and systematic;
‘‘(iii) provide that each employer in the plan retains fiduciary responsibility for—
‘‘(I) the selection and monitoring in accordance with section 404(a) of the person designated as the pooled plan provider and any other person who, in addition to the pooled plan provider, is designated as a named fiduciary of the plan; and ‘‘(II) to the extent not otherwise delegated to another fiduciary by the pooled plan provider and subject to the provisions of section 404(c), the investment and management of the portion of the plan’s assets attributable to the employees of the
employer (or beneficiaries of such employees);
‘‘(iv) provide that employers in the plan, and participants and beneficiaries, are not subject to unreasonable restrictions, fees, or penalties with regard to ceasing participation, receipt of distributions, or otherwise transferring assets of the plan in accordance with section 208 or paragraph (44)(C)(i)(II);
‘‘(v) require—
‘‘(I) the pooled plan provider to provide to employers in the plan any disclosures or other information which the Secretary may require, including any disclosures or other information to facilitate the selection or any monitoring of the pooled plan provider by employers in the plan; and
‘‘(II) each employer in the plan to take such actions as the Secretary or the pooled plan provider determines are necessary to administer the plan or for the plan to meet any requirement applicable under this Act or the Internal Revenue Code of 1986 to a plan described in section 401(a) of such Code or to a plan that consists of individual retirement accounts described in section 408 of such Code (including by reason of subsection (c) thereof), whichever is applicable, including providing any disclosures or other information which the Secretary may require or which the pooled plan pro- vider otherwise determines are necessary to administer the plan or to allow the plan to meet such requirements; and
‘‘(vi) provide that any disclosure or other information required to be provided under clause (v) may be provided in electronic form and will be designed to ensure only reasonable costs are imposed on pooled plan providers and employers in the plan.
‘‘(C) EXCEPTIONS.—The term ‘pooled employer plan’ does not include—
‘‘(i) a multiemployer plan; or
‘‘(ii) a plan established before the date of the enactment of the Setting Every Community Up for Retirement Enhancement Act of 2019 unless the plan administrator elects that the plan will be treated as

a pooled employer plan and the plan meets the requirements of this title applicable to a pooled employer plan established on or after such date.
‘‘(D) TREATMENT OF EMPLOYERS AS PLAN SPONSORS.—
Except with respect to the administrative duties of the pooled plan provider described in paragraph (44)(A)(i), each employer in a pooled employer plan shall be treated as the plan sponsor with respect to the portion of the plan attributable to employees of such employer (or beneficiaries of such employees).
‘‘(44) POOLED PLAN PROVIDER.—
‘‘(A) IN GENERAL.—The term ‘pooled plan provider’ means a person who—
‘‘(i) is designated by the terms of a pooled employer plan as a named fiduciary, as the plan administrator, and as the person responsible for the performance of all administrative duties (including conducting proper testing with respect to the plan and the employees of each employer in the plan) which are reasonably necessary to ensure that—
‘‘(I) the plan meets any requirement applicable under this Act or the Internal Revenue Code of 1986 to a plan described in section 401(a) of such Code or to a plan that consists of individual retirement accounts described in section 408 of such Code (including by reason of subsection (c) thereof), whichever is applicable; and
‘‘(II) each employer in the plan takes such actions as the Secretary or pooled plan provider determines are necessary for the plan to meet the requirements described in subclause (I), including providing the disclosures and information described in paragraph (43)(B)(v)(II);
‘‘(ii) registers as a pooled plan provider with the Secretary, and provides to the Secretary such other information as the Secretary may require, before beginning operations as a pooled plan provider;
‘‘(iii) acknowledges in writing that such person is a named fiduciary, and the plan administrator, with respect to the pooled employer plan; and
‘‘(iv) is responsible for ensuring that all persons who handle assets of, or who are fiduciaries of, the pooled employer plan are bonded in accordance with section 412.
‘‘(B) AUDITS, EXAMINATIONS AND INVESTIGATIONS.—The
Secretary may perform audits, examinations, and investigations of pooled plan providers as may be necessary to enforce and carry out the purposes of this paragraph and paragraph (43).
‘‘(C) GUIDANCE.—The Secretary shall issue such guidance as the Secretary determines appropriate to carry out this paragraph and paragraph (43), including guidance— ‘‘(i) to identify the administrative duties and other
actions required to be performed by a pooled plan provider under either such paragraph; and

‘‘(ii) which requires in appropriate cases that if an employer in the plan fails to take the actions required under subparagraph (A)(i)(II)—
‘‘(I) the assets of the plan attributable to employees of such employer (or beneficiaries of such employees) are transferred to a plan main- tained only by such employer (or its successor), to an eligible retirement plan as defined in section 402(c)(8)(B) of the Internal Revenue Code of 1986 for each individual whose account is transferred, or to any other arrangement that the Secretary determines is appropriate in such guidance; and ‘‘(II) such employer (and not the plan with respect to which the failure occurred or any other employer in such plan) shall, except to the extent provided in such guidance, be liable for any liabilities with respect to such plan attributable to employees of such employer (or beneficiaries of
such employees).
The Secretary shall take into account under clause
(ii) whether the failure of an employer or pooled plan provider to provide any disclosures or other information, or to take any other action, necessary to admin- ister a plan or to allow a plan to meet requirements described in subparagraph (A)(i)(II) has continued over a period of time that demonstrates a lack of commitment to compliance. The Secretary may waive the requirements of subclause (ii)(I) in appropriate cir- cumstances if the Secretary determines it is in the best interests of the employees of the employer referred to in such clause (and the beneficiaries of such employees) to retain the assets in the plan with respect to which the employer’s failure occurred.
‘‘(D) GOOD FAITH COMPLIANCE WITH LAW BEFORE GUID-
ANCE.—An employer or pooled plan provider shall not be treated as failing to meet a requirement of guidance issued by the Secretary under subparagraph (C) if, before the issuance of such guidance, the employer or pooled plan provider complies in good faith with a reasonable interpretation of the provisions of this paragraph, or para- graph (43), to which such guidance relates.
‘‘(E) AGGREGATION RULES.—For purposes of this para- graph, in determining whether a person meets the require- ments of this paragraph to be a pooled plan provider with respect to any plan, all persons who perform services for the plan and who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated as one person.’’.
(2) BONDING REQUIREMENTS FOR POOLED EMPLOYER PLANS.—The last sentence of section 412(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1112(a)) is amended by inserting ‘‘or in the case of a pooled employer plan (as defined in section 3(43))’’ after ‘‘section 407(d)(1))’’.
(3) CONFORMING AND TECHNICAL AMENDMENTS.—Section 3 of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1002) is amended—
(A) in paragraph (16)(B)—

(i) by striking ‘‘or’’ at the end of clause (ii); and
(ii) by striking the period at the end and inserting ‘‘, or (iv) in the case of a pooled employer plan, the pooled plan provider.’’; and
(B) by striking the second paragraph (41).
(d) POOLED EMPLOYER AND MULTIPLE EMPLOYER PLAN REPORTING.—
(1) ADDITIONAL INFORMATION.—Section 103 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023) is amended—
(A) in subsection (a)(1)(B), by striking ‘‘applicable sub- sections (d), (e), and (f)’’ and inserting ‘‘applicable sub- sections (d), (e), (f), and (g)’’; and
(B) by amending subsection (g) to read as follows: ‘‘(g) ADDITIONAL INFORMATION WITH RESPECT TO POOLED EMPLOYER AND MULTIPLE EMPLOYER PLANS.—An annual report
under this section for a plan year shall include—
‘‘(1) with respect to any plan to which section 210(a) applies (including a pooled employer plan), a list of employers in the plan and a good faith estimate of the percentage of total con- tributions made by such employers during the plan year and the aggregate account balances attributable to each employer in the plan (determined as the sum of the account balances of the employees of such employer (and the beneficiaries of such employees)); and
‘‘(2) with respect to a pooled employer plan, the identifying information for the person designated under the terms of the plan as the pooled plan provider.’’.
(2) SIMPLIFIED ANNUAL REPORTS.—Section 104(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1024(a)) is amended by striking paragraph (2)(A) and inserting the following:
‘‘(2)(A) With respect to annual reports required to be filed with the Secretary under this part, the Secretary may by regulation prescribe simplified annual reports for any pension plan that—
‘‘(i) covers fewer than 100 participants; or
‘‘(ii) is a plan described in section 210(a) that covers fewer than 1,000 participants, but only if no single employer in the plan has 100 or more participants covered by the plan.’’.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section shall apply to plan years beginning after December 31, 2020.
(2) RULE OF CONSTRUCTION.—Nothing in the amendments made by subsection (a) shall be construed as limiting the authority of the Secretary of the Treasury or the Secretary’s delegate (determined without regard to such amendment) to provide for the proper treatment of a failure to meet any requirement applicable under the Internal Revenue Code of 1986 with respect to one employer (and its employees) in a multiple employer plan.
SEC. 102. INCREASE IN 10 PERCENT CAP FOR AUTOMATIC ENROLL- MENT SAFE HARBOR AFTER 1ST PLAN YEAR.
(a) IN GENERAL.—Section 401(k)(13)(C)(iii) of the Internal Rev- enue Code of 1986 is amended by striking ‘‘does not exceed 10 percent’’ and inserting ‘‘does not exceed 15 percent (10 percent during the period described in subclause (I))’’.

(b) EFFECTIVE DATE.—The amendments made by this section shall apply to plan years beginning after December 31, 2019.
SEC. 103. RULES RELATING TO ELECTION OF SAFE HARBOR 401(k) STATUS.
(a) LIMITATION OF ANNUAL SAFE HARBOR NOTICE TO MATCHING CONTRIBUTION PLANS.—
(1) IN GENERAL.—Subparagraph (A) of section 401(k)(12) of the Internal Revenue Code of 1986 is amended by striking ‘‘if such arrangement’’ and all that follows and inserting ‘‘if such arrangement—
‘‘(i) meets the contribution requirements of subparagraph (B) and the notice requirements of subparagraph (D), or
‘‘(ii) meets the contribution requirements of subparagraph (C).’’.
(2) AUTOMATIC CONTRIBUTION ARRANGEMENTS.—Subpara- graph (B) of section 401(k)(13) of such Code is amended by striking ‘‘means’’ and all that follows and inserting ‘‘means a cash or deferred arrangement—
‘‘(i) which is described in subparagraph (D)(i)(I) and meets the applicable requirements of subparagraphs (C) through (E), or
‘‘(ii) which is described in subparagraph (D)(i)(II) and meets the applicable requirements of subparagraphs (C) and (D).’’.
(b) NONELECTIVE CONTRIBUTIONS.—Section 401(k)(12) of the Internal Revenue Code of 1986 is amended by redesignating subparagraph (F) as subparagraph (G), and by inserting after subparagraph (E) the following new subparagraph:
‘‘(F) TIMING OF PLAN AMENDMENT FOR EMPLOYER MAKING NONELECTIVE CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—Except as provided in clause (ii), a plan may be amended after the beginning of a plan year to provide that the requirements of subparagraph (C) shall apply to the arrangement for the plan year, but only if the amendment is adopted— ‘‘(I) at any time before the 30th day before
the close of the plan year, or
‘‘(II) at any time before the last day under paragraph (8)(A) for distributing excess contributions for the plan year.
‘‘(ii) EXCEPTION WHERE PLAN PROVIDED FOR
MATCHING CONTRIBUTIONS.—Clause (i) shall not apply to any plan year if the plan provided at any time during the plan year that the requirements of subparagraph (B) or paragraph (13)(D)(i)(I) applied to the plan year.
‘‘(iii) 4-PERCENT CONTRIBUTION REQUIREMENT.—
Clause (i)(II) shall not apply to an arrangement unless the amount of the contributions described in subpara- graph (C) which the employer is required to make under the arrangement for the plan year with respect to any employee is an amount equal to at least 4 percent of the employee’s compensation.’’.

(c) AUTOMATIC CONTRIBUTION ARRANGEMENTS.—Section 401(k)(13) of the Internal Revenue Code of 1986 is amended by adding at the end the following:
‘‘(F) TIMING OF PLAN AMENDMENT FOR EMPLOYER MAKING NONELECTIVE CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—Except as provided in clause (ii), a plan may be amended after the beginning of a plan year to provide that the requirements of subparagraph (D)(i)(II) shall apply to the arrangement for the plan year, but only if the amendment is adopted—
‘‘(I) at any time before the 30th day before the close of the plan year, or
‘‘(II) at any time before the last day under paragraph (8)(A) for distributing excess contributions for the plan year.
‘‘(ii) EXCEPTION WHERE PLAN PROVIDED FOR
MATCHING CONTRIBUTIONS.—Clause (i) shall not apply to any plan year if the plan provided at any time during the plan year that the requirements of subparagraph (D)(i)(I) or paragraph (12)(B) applied to the plan year.
‘‘(iii) 4-PERCENT CONTRIBUTION REQUIREMENT.—
Clause (i)(II) shall not apply to an arrangement unless the amount of the contributions described in subpara- graph (D)(i)(II) which the employer is required to make under the arrangement for the plan year with respect to any employee is an amount equal to at least 4 percent of the employee’s compensation.’’.
(d) EFFECTIVE DATE.—The amendments made by this section shall apply to plan years beginning after December 31, 2019.
SEC. 104. INCREASE IN CREDIT LIMITATION FOR SMALL EMPLOYER PENSION PLAN STARTUP COSTS.
(a) IN GENERAL.—Paragraph (1) of section 45E(b) of the Internal Revenue Code of 1986 is amended to read as follows:
‘‘(1) for the first credit year and each of the 2 taxable years immediately following the first credit year, the greater of—
‘‘(A) $500, or
‘‘(B) the lesser of—
‘‘(i) $250 for each employee of the eligible employer who is not a highly compensated employee (as defined in section 414(q)) and who is eligible to participate in the eligible employer plan maintained by the eligible employer, or
‘‘(ii) $5,000, and’’.
(b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable years beginning after December 31, 2019.
SEC. 105. SMALL EMPLOYER AUTOMATIC ENROLLMENT CREDIT.
(a) IN GENERAL.—Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

‘‘SEC. 45T. AUTO-ENROLLMENT OPTION FOR RETIREMENT SAVINGS OPTIONS PROVIDED BY SMALL EMPLOYERS.
‘‘(a) IN GENERAL.—For purposes of section 38, in the case of an eligible employer, the retirement auto-enrollment credit determined under this section for any taxable year is an amount equal to—
‘‘(1) $500 for any taxable year occurring during the credit period, and
‘‘(2) zero for any other taxable year.
‘‘(b) CREDIT PERIOD.—For purposes of subsection (a)—
‘‘(1) IN GENERAL.—The credit period with respect to any eligible employer is the 3-taxable-year period beginning with the first taxable year for which the employer includes an eligible automatic contribution arrangement (as defined in section 414(w)(3)) in a qualified employer plan (as defined in section 4972(d)) sponsored by the employer.
‘‘(2) MAINTENANCE OF ARRANGEMENT.—No taxable year
with respect to an employer shall be treated as occurring within the credit period unless the arrangement described in para- graph (1) is included in the plan for such year.
‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this section, the term ‘eligible employer’ has the meaning given such term in section 408(p)(2)(C)(i).’’.
(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT.—Sub- section (b) of section 38 of the Internal Revenue Code of 1986 is amended by striking ‘‘plus’’ at the end of paragraph (31), by striking the period at the end of paragraph (32) and inserting ‘‘, plus’’, and by adding at the end the following new paragraph: ‘‘(33) in the case of an eligible employer (as defined in
section 45T(c)), the retirement auto-enrollment credit determined under section 45T(a).’’.
(c) CLERICAL AMENDMENT.—The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 45S the following new item:

‘‘Sec. 45T. Auto-enrollment option for retirement savings options provided by small employers.’’.
(d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2019.
SEC. 106. CERTAIN TAXABLE NON-TUITION FELLOWSHIP AND STIPEND PAYMENTS TREATED AS COMPENSATION FOR IRA PURPOSES.
(a) IN GENERAL.—Paragraph (1) of section 219(f) of the Internal Revenue Code of 1986 is amended by adding at the end the fol- lowing: ‘‘The term ‘compensation’ shall include any amount which is included in the individual’s gross income and paid to the individual to aid the individual in the pursuit of graduate or postdoctoral study.’’.
(b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable years beginning after December 31, 2019.
SEC. 107. REPEAL OF MAXIMUM AGE FOR TRADITIONAL IRA CONTRIBUTIONS.
(a) IN GENERAL.—Paragraph (1) of section 219(d) of the Internal Revenue Code of 1986 is repealed.

(b) COORDINATION WITH QUALIFIED CHARITABLE DISTRIBUTIONS.—Add at the end of section 408(d)(8)(A) of such Code the following: ‘‘The amount of distributions not includible in gross income by reason of the preceding sentence for a taxable year (determined without regard to this sentence) shall be reduced (but not below zero) by an amount equal to the excess of—
‘‘(i) the aggregate amount of deductions allowed to the taxpayer under section 219 for all taxable years ending on or after the date the taxpayer attains age 701?2, over
‘‘(ii) the aggregate amount of reductions under this sentence for all taxable years preceding the current taxable year.’’.
(c) CONFORMING AMENDMENT.—Subsection (c) of section 408A of the Internal Revenue Code of 1986 is amended by striking paragraph (4) and by redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5), and (6), respectively.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to contributions made for taxable years beginning after December 31, 2019.
(2) SUBSECTION (b).—The amendment made by subsection
(b) shall apply to distributions made for taxable years beginning after December 31, 2019.
SEC. 108. QUALIFIED EMPLOYER PLANS PROHIBITED FROM MAKING LOANS THROUGH CREDIT CARDS AND OTHER SIMILAR ARRANGEMENTS.
(a) IN GENERAL.—Paragraph (2) of section 72(p) of the Internal Revenue Code of 1986 is amended by redesignating subparagraph
(D) as subparagraph (E) and by inserting after subparagraph (C) the following new subparagraph:
‘‘(D) PROHIBITION OF LOANS THROUGH CREDIT CARDS AND OTHER SIMILAR ARRANGEMENTS.—Subparagraph (A)
shall not apply to any loan which is made through the use of any credit card or any other similar arrangement.’’.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) shall apply to loans made after the date of the enactment of this Act.
SEC. 109. PORTABILITY OF LIFETIME INCOME OPTIONS.
(a) IN GENERAL.—Subsection (a) of section 401 of the Internal Revenue Code of 1986 is amended by inserting after paragraph
(37) the following new paragraph:
‘‘(38) PORTABILITY OF LIFETIME INCOME.—
‘‘(A) IN GENERAL.—Except as may be otherwise provided by regulations, a trust forming part of a defined contribution plan shall not be treated as failing to constitute a qualified trust under this section solely by reason of allowing—
‘‘(i) qualified distributions of a lifetime income investment, or
‘‘(ii) distributions of a lifetime income investment in the form of a qualified plan distribution annuity contract,
on or after the date that is 90 days prior to the date on which such lifetime income investment is no longer

authorized to be held as an investment option under the plan.
‘‘(B) DEFINITIONS.—For purposes of this subsection— ‘‘(i) the term ‘qualified distribution’ means a direct trustee-to-trustee transfer described in paragraph (31)(A) to an eligible retirement plan (as defined in
section 402(c)(8)(B)),
‘‘(ii) the term ‘lifetime income investment’ means an investment option which is designed to provide an employee with election rights—
‘‘(I) which are not uniformly available with respect to other investment options under the plan, and
‘‘(II) which are to a lifetime income feature available through a contract or other arrangement offered under the plan (or under another eligible retirement plan (as so defined), if paid by means of a direct trustee-to-trustee transfer described in paragraph (31)(A) to such other eligible retirement plan),
‘‘(iii) the term ‘lifetime income feature’ means— ‘‘(I) a feature which guarantees a minimum level of income annually (or more frequently) for at least the remainder of the life of the employee or the joint lives of the employee and the
employee’s designated beneficiary, or
‘‘(II) an annuity payable on behalf of the employee under which payments are made in substantially equal periodic payments (not less frequently than annually) over the life of the employee or the joint lives of the employee and the employee’s designated beneficiary, and
‘‘(iv) the term ‘qualified plan distribution annuity contract’ means an annuity contract purchased for a participant and distributed to the participant by a plan or contract described in subparagraph (B) of section 402(c)(8) (without regard to clauses (i) and (ii) thereof).’’.
(b) CASH OR DEFERRED ARRANGEMENT.—
(1) IN GENERAL.—Clause (i) of section 401(k)(2)(B) of the Internal Revenue Code of 1986 is amended by striking ‘‘or’’ at the end of subclause (IV), by striking ‘‘and’’ at the end of subclause (V) and inserting ‘‘or’’, and by adding at the end the following new subclause:
‘‘(VI) except as may be otherwise provided by regulations, with respect to amounts invested in a lifetime income investment (as defined in sub- section (a)(38)(B)(ii)), the date that is 90 days prior to the date that such lifetime income investment may no longer be held as an investment option under the arrangement, and’’.
(2) DISTRIBUTION REQUIREMENT.—Subparagraph (B) of section 401(k)(2) of such Code, as amended by paragraph (1), is amended by striking ‘‘and’’ at the end of clause (i), by striking the semicolon at the end of clause (ii) and inserting ‘‘, and’’, and by adding at the end the following new clause:

‘‘(iii) except as may be otherwise provided by regulations, in the case of amounts described in clause (i)(VI), will be distributed only in the form of a qualified distribution (as defined in subsection (a)(38)(B)(i)) or a qualified plan distribution annuity contract (as defined in subsection (a)(38)(B)(iv)),’’.
(c) SECTION 403(b) PLANS.—
(1) ANNUITY CONTRACTS.—Paragraph (11) of section 403(b) of the Internal Revenue Code of 1986 is amended by striking ‘‘or’’ at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting ‘‘, or’’, and by inserting after subparagraph (C) the following new subparagraph:
‘‘(D) except as may be otherwise provided by regula- tions, with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii))—
‘‘(i) on or after the date that is 90 days prior to the date that such lifetime income investment may no longer be held as an investment option under the contract, and
‘‘(ii) in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)).’’.
(2) CUSTODIAL ACCOUNTS.—Subparagraph (A) of section 403(b)(7) of such Code is amended by striking ‘‘if—’’ and all that follows and inserting ‘‘if the amounts are to be invested in regulated investment company stock to be held in that custodial account, and under the custodial account—
‘‘(i) no such amounts may be paid or made available to any distributee (unless such amount is a distribution to which section 72(t)(2)(G) applies) before—
‘‘(I) the employee dies,
‘‘(II) the employee attains age 59 1/2,
‘‘(III) the employee has a severance from employment,
‘‘(IV) the employee becomes disabled (within the meaning of section 72(m)(7)),
‘‘(V) in the case of contributions made pursuant to a salary reduction agreement (within the meaning of section 3121(a)(5)(D)), the employee encounters financial hardship, or
‘‘(VI) except as may be otherwise provided by regulations, with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)), the date that is 90 days prior to the date that such lifetime income investment may no longer be held as an investment option under the contract, and
‘‘(ii) in the case of amounts described in clause (i)(VI), such amounts will be distributed only in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)).’’.
(d) ELIGIBLE DEFERRED COMPENSATION PLANS.—
(1) IN GENERAL.—Subparagraph (A) of section 457(d)(1) of the Internal Revenue Code of 1986 is amended by striking

‘‘or’’ at the end of clause (ii), by inserting ‘‘or’’ at the end of clause (iii), and by adding after clause (iii) the following: ‘‘(iv) except as may be otherwise provided by regu-
lations, in the case of a plan maintained by an employer described in subsection (e)(1)(A), with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)), the date that is 90 days prior to the date that such lifetime income investment may no longer be held as an investment option under the plan,’’.
(2) DISTRIBUTION REQUIREMENT.—Paragraph (1) of section 457(d) of such Code is amended by striking ‘‘and’’ at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting ‘‘, and’’, and by inserting after subparagraph (C) the following new subparagraph:
‘‘(D) except as may be otherwise provided by regulations, in the case of amounts described in subparagraph (A)(iv), such amounts will be distributed only in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)).’’.
(e) EFFECTIVE DATE.—The amendments made by this section shall apply to plan years beginning after December 31, 2019.
SEC. 110. TREATMENT OF CUSTODIAL ACCOUNTS ON TERMINATION OF SECTION 403(b) PLANS.
Not later than six months after the date of enactment of this Act, the Secretary of the Treasury shall issue guidance to provide that, if an employer terminates the plan under which amounts are contributed to a custodial account under subparagraph (A) of section 403(b)(7), the plan administrator or custodian may dis- tribute an individual custodial account in kind to a participant or beneficiary of the plan and the distributed custodial account shall be maintained by the custodian on a tax-deferred basis as a section 403(b)(7) custodial account, similar to the treatment of fully-paid individual annuity contracts under Revenue Ruling 2011– 7, until amounts are actually paid to the participant or beneficiary. The guidance shall provide further (i) that the section 403(b)(7) status of the distributed custodial account is generally maintained if the custodial account thereafter adheres to the requirements of section 403(b) that are in effect at the time of the distribution of the account and (ii) that a custodial account would not be consid- ered distributed to the participant or beneficiary if the employer has any material retained rights under the account (but the employer would not be treated as retaining material rights simply because the custodial account was originally opened under a group contract). Such guidance shall be retroactively effective for taxable years beginning after December 31, 2008.
SEC. 111. CLARIFICATION OF RETIREMENT INCOME ACCOUNT RULES RELATING TO CHURCH-CONTROLLED ORGANIZATIONS.
(a) IN GENERAL.—Subparagraph (B) of section 403(b)(9) of the Internal Revenue Code of 1986 is amended by inserting ‘‘(including an employee described in section 414(e)(3)(B))’’ after ‘‘employee described in paragraph (1)’’.
(b) EFFECTIVE DATE.—The amendment made by this section shall apply to years beginning before, on, or after the date of the enactment of this Act.

SEC. 112. QUALIFIED CASH OR DEFERRED ARRANGEMENTS MUST ALLOW LONG-TERM EMPLOYEES WORKING MORE THAN 500 BUT LESS THAN 1,000 HOURS PER YEAR TO PARTICIPATE.
(a) PARTICIPATION REQUIREMENT.—
(1) IN GENERAL.—Section 401(k)(2)(D) of the Internal Rev- enue Code of 1986 is amended to read as follows:
‘‘(D) which does not require, as a condition of participation in the arrangement, that an employee complete a period of service with the employer (or employers) maintaining the plan extending beyond the close of the earlier of—
‘‘(i) the period permitted under section 410(a)(1) (determined without regard to subparagraph (B)(i) thereof), or
‘‘(ii) subject to the provisions of paragraph (15), the first period of 3 consecutive 12-month periods during each of which the employee has at least 500 hours of service.’’.
(2) SPECIAL RULES.—Section 401(k) of such Code is amended by adding at the end the following new paragraph: ‘‘(15) SPECIAL RULES FOR PARTICIPATION REQUIREMENT FOR LONG-TERM, PART-TIME WORKERS.—For purposes of paragraph
(2)(D)(ii)—
‘‘(A) AGE REQUIREMENT MUST BE MET.—Paragraph
(2)(D)(ii) shall not apply to an employee unless the employee has met the requirement of section 410(a)(1)(A)(i) by the close of the last of the 12-month periods described in such paragraph.
‘‘(B) NONDISCRIMINATION AND TOP-HEAVY RULES NOT TO APPLY.—
‘‘(i) NONDISCRIMINATION RULES.—In the case of
employees who are eligible to participate in the arrangement solely by reason of paragraph (2)(D)(ii)— ‘‘(I) notwithstanding subsection (a)(4), an employer shall not be required to make nonelective
or matching contributions on behalf of such employees even if such contributions are made on behalf of other employees eligible to participate in the arrangement, and
‘‘(II) an employer may elect to exclude such employees from the application of subsection (a)(4), paragraphs (3), (12), and (13), subsection (m)(2), and section 410(b).
‘‘(ii) TOP-HEAVY RULES.—An employer may elect to exclude all employees who are eligible to participate in a plan maintained by the employer solely by reason of paragraph (2)(D)(ii) from the application of the vesting and benefit requirements under subsections
(b) and (c) of section 416.
‘‘(iii) VESTING.—For purposes of determining whether an employee described in clause (i) has a nonforfeitable right to employer contributions (other than contributions described in paragraph (3)(D)(i)) under the arrangement, each 12-month period for which the employee has at least 500 hours of service shall be treated as a year of service, and section

411(a)(6) shall be applied by substituting ‘at least 500 hours of service’ for ‘more than 500 hours of service’ in subparagraph (A) thereof.
‘‘(iv) EMPLOYEES WHO BECOME FULL-TIME
EMPLOYEES.—This subparagraph (other than clause (iii)) shall cease to apply to any employee as of the first plan year beginning after the plan year in which the employee meets the requirements of section 410(a)(1)(A)(ii) without regard to paragraph (2)(D)(ii). ‘‘(C) EXCEPTION FOR EMPLOYEES UNDER COLLECTIVELY
BARGAINED PLANS, ETC.—Paragraph (2)(D)(ii) shall not apply to employees described in section 410(b)(3).
‘‘(D) SPECIAL RULES.—
‘‘(i) TIME OF PARTICIPATION.—The rules of section 410(a)(4) shall apply to an employee eligible to partici- pate in an arrangement solely by reason of paragraph (2)(D)(ii).
‘‘(ii) 12-MONTH PERIODS.—12-month periods shall be determined in the same manner as under the last sentence of section 410(a)(3)(A).’’.
(b) EFFECTIVE DATE.—The amendments made by this section shall apply to plan years beginning after December 31, 2020, except that, for purposes of section 401(k)(2)(D)(ii) of the Internal Revenue Code of 1986 (as added by such amendments), 12-month periods beginning before January 1, 2021, shall not be taken into account.
SEC. 113. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR INDIVIDUALS IN CASE OF BIRTH OF CHILD OR ADOP- TION.
(a) IN GENERAL.—Section 72(t)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subpara- graph:
‘‘(H) DISTRIBUTIONS FROM RETIREMENT PLANS IN CASE OF BIRTH OF CHILD OR ADOPTION.—
‘‘(i) IN GENERAL.—Any qualified birth or adoption distribution.
‘‘(ii) LIMITATION.—The aggregate amount which may be treated as qualified birth or adoption distribu- tions by any individual with respect to any birth or adoption shall not exceed $5,000.
‘‘(iii) QUALIFIED BIRTH OR ADOPTION DISTRIBU-
TION.—For purposes of this subparagraph—
‘‘(I) IN GENERAL.—The term ‘qualified birth or adoption distribution’ means any distribution from an applicable eligible retirement plan to an individual if made during the 1-year period begin- ning on the date on which a child of the individual is born or on which the legal adoption by the individual of an eligible adoptee is finalized.
‘‘(II) ELIGIBLE ADOPTEE.—The term ‘eligible adoptee’ means any individual (other than a child of the taxpayer’s spouse) who has not attained age 18 or is physically or mentally incapable of self-support.
‘‘(iv) TREATMENT OF PLAN DISTRIBUTIONS.—
‘‘(I) IN GENERAL.—If a distribution to an indi- vidual would (without regard to clause (ii)) be a

qualified birth or adoption distribution, a plan shall not be treated as failing to meet any require- ment of this title merely because the plan treats the distribution as a qualified birth or adoption distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $5,000.
‘‘(II) CONTROLLED GROUP.—For purposes of subclause (I), the term ‘controlled group’ means any group treated as a single employer under sub- section (b), (c), (m), or (o) of section 414.
‘‘(v) AMOUNT DISTRIBUTED MAY BE REPAID.—
‘‘(I) IN GENERAL.—Any individual who receives a qualified birth or adoption distribution may make one or more contributions in an aggregate amount not to exceed the amount of such distribu- tion to an applicable eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), as the case may be.
‘‘(II) LIMITATION ON CONTRIBUTIONS TO APPLICABLE ELIGIBLE RETIREMENT PLANS OTHER
THAN IRAS.—The aggregate amount of contribu- tions made by an individual under subclause (I) to any applicable eligible retirement plan which is not an individual retirement plan shall not exceed the aggregate amount of qualified birth or adoption distributions which are made from such plan to such individual. Subclause (I) shall not apply to contributions to any applicable eligible retirement plan which is not an individual retire- ment plan unless the individual is eligible to make contributions (other than those described in sub- clause (I)) to such applicable eligible retirement plan.
‘‘(III) TREATMENT OF REPAYMENTS OF DISTRIBU- TIONS FROM APPLICABLE ELIGIBLE RETIREMENT
PLANS OTHER THAN IRAs.—If a contribution is made under subclause (I) with respect to a quali- fied birth or adoption distribution from an applicable eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribu- tion, be treated as having received such distribu- tion in an eligible rollover distribution (as defined in section 402(c)(4)) and as having transferred the amount to the applicable eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
‘‘(IV) TREATMENT OF REPAYMENTS FOR DIS-
TRIBUTIONS FROM IRAS.—If a contribution is made under subclause (I) with respect to a qualified birth or adoption distribution from an individual retirement plan, then, to the extent of the amount

of the contribution, such distribution shall be treated as a distribution described in section 408(d)(3) and as having been transferred to the applicable eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
‘‘(vi) DEFINITION AND SPECIAL RULES.—For pur-
poses of this subparagraph—
‘‘(I) APPLICABLE ELIGIBLE RETIREMENT PLAN.—
The term ‘applicable eligible retirement plan’ means an eligible retirement plan (as defined in section 402(c)(8)(B)) other than a defined benefit plan.
‘‘(II) EXEMPTION OF DISTRIBUTIONS FROM TRUSTEE TO TRUSTEE TRANSFER AND WITHHOLDING
RULES.—For purposes of sections 401(a)(31), 402(f), and 3405, a qualified birth or adoption distribution shall not be treated as an eligible rollover distribu- tion.
‘‘(III) TAXPAYER MUST INCLUDE TIN.—A dis-
tribution shall not be treated as a qualified birth or adoption distribution with respect to any child or eligible adoptee unless the taxpayer includes the name, age, and TIN of such child or eligible adoptee on the taxpayer’s return of tax for the taxable year.
‘‘(IV) DISTRIBUTIONS TREATED AS MEETING PLAN DISTRIBUTION REQUIREMENTS.—Any qualified
birth or adoption distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and
457(d)(1)(A).’’.
(b) EFFECTIVE DATE.—The amendments made by this section shall apply to distributions made after December 31, 2019.
SEC. 114. INCREASE IN AGE FOR REQUIRED BEGINNING DATE FOR MANDATORY DISTRIBUTIONS.
(a) IN GENERAL.—Section 401(a)(9)(C)(i)(I) of the Internal Rev- enue Code of 1986 is amended by striking ‘‘age 701?2’’ and inserting ‘‘age 72’’.
(b) SPOUSE BENEFICIARIES; SPECIAL RULE FOR OWNERS.—Sub- paragraphs (B)(iv)(I) and (C)(ii)(I) of section 401(a)(9) of such Code are each amended by striking ‘‘age 701?2’’ and inserting ‘‘age 72’’.
(c) CONFORMING AMENDMENTS.—The last sentence of section 408(b) of such Code is amended by striking ‘‘age 701?2’’ and inserting ‘‘age 72’’.
(d) EFFECTIVE DATE.—The amendments made by this section shall apply to distributions required to be made after December 31, 2019, with respect to individuals who attain age 701?2 after such date.
SEC. 115. SPECIAL RULES FOR MINIMUM FUNDING STANDARDS FOR COMMUNITY NEWSPAPER PLANS.
(a) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.—Section 430 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
‘‘(m) SPECIAL RULES FOR COMMUNITY NEWSPAPER PLANS.—

‘‘(1) IN GENERAL.—The plan sponsor of a community news- paper plan under which no participant has had the participant’s accrued benefit increased (whether because of service or com- pensation) after December 31, 2017, may elect to have the alternative standards described in paragraph (3) apply to such plan, and any plan sponsored by any member of the same controlled group.
‘‘(2) ELECTION.—An election under paragraph (1) shall be made at such time and in such manner as prescribed by the Secretary. Such election, once made with respect to a plan year, shall apply to all subsequent plan years unless revoked with the consent of the Secretary.
‘‘(3) ALTERNATIVE MINIMUM FUNDING STANDARDS.—The
alternative standards described in this paragraph are the fol- lowing:
‘‘(A) INTEREST RATES.—
‘‘(i) IN GENERAL.—Notwithstanding subsection (h)(2)(C) and except as provided in clause (ii), the first, second, and third segment rates in effect for any month for purposes of this section shall be 8 percent.
‘‘(ii) NEW BENEFIT ACCRUALS.—Notwithstanding subsection (h)(2), for purposes of determining the funding target and normal cost of a plan for any plan year, the present value of any benefits accrued or earned under the plan for a plan year with respect to which an election under paragraph (1) is in effect shall be determined on the basis of the United States Treasury obligation yield curve for the day that is the valuation date of such plan for such plan year. ‘‘(iii) UNITED STATES TREASURY OBLIGATION YIELD
CURVE.—For purposes of this subsection, the term ‘United States Treasury obligation yield curve’ means, with respect to any day, a yield curve which shall be prescribed by the Secretary for such day on interest- bearing obligations of the United States.
‘‘(B) SHORTFALL AMORTIZATION BASE.—
‘‘(i) PREVIOUS SHORTFALL AMORTIZATION BASES.—
The shortfall amortization bases determined under subsection (c)(3) for all plan years preceding the first plan year to which the election under paragraph (1) applies (and all shortfall amortization installments determined with respect to such bases) shall be reduced to zero under rules similar to the rules of subsection (c)(6).
‘‘(ii) NEW SHORTFALL AMORTIZATION BASE.—Not-
withstanding subsection (c)(3), the shortfall amortiza- tion base for the first plan year to which the election under paragraph (1) applies shall be the funding short- fall of such plan for such plan year (determined using the interest rates as modified under subparagraph (A)). ‘‘(C) DETERMINATION OF SHORTFALL AMORTIZATION
INSTALLMENTS.—
‘‘(i) 30-YEAR PERIOD.—Subparagraphs (A) and (B) of subsection (c)(2) shall be applied by substituting ‘30-plan-year’ for ‘7-plan-year’ each place it appears. ‘‘(ii) NO SPECIAL ELECTION.—The election under subparagraph (D) of subsection (c)(2) shall not apply

to any plan year to which the election under paragraph
(1) applies.
‘‘(D) EXEMPTION FROM AT-RISK TREATMENT.—Sub-
section (i) shall not apply.
‘‘(4) COMMUNITY NEWSPAPER PLAN.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘community newspaper plan’ means a plan to which this section applies maintained by an employer which, as of December 31, 2017—
‘‘(i) publishes and distributes daily, either elec- tronically or in printed form, 1 or more community newspapers in a single State,
‘‘(ii) is not a company the stock of which is publicly traded (on a stock exchange or in an over-the-counter market), and is not controlled, directly or indirectly, by such a company,
‘‘(iii) is controlled, directly or indirectly—
‘‘(I) by 1 or more persons residing primarily in the State in which the community newspaper is published,
‘‘(II) for not less than 30 years by individuals who are members of the same family,
‘‘(III) by a trust created or organized in the State in which the community newspaper is pub- lished, the sole trustees of which are persons described in subclause (I) or (II),
‘‘(IV) by an entity which is described in section 501(c)(3) and exempt from taxation under section 501(a), which is organized and operated in the State in which the community newspaper is pub- lished, and the primary purpose of which is to benefit communities in such State, or
‘‘(V) by a combination of persons described in subclause (I), (III), or (IV), and
‘‘(iv) does not control, directly or indirectly, any newspaper in any other State.
‘‘(B) COMMUNITY NEWSPAPER.—The term ‘community newspaper’ means a newspaper which primarily serves a metropolitan statistical area, as determined by the Office of Management and Budget, with a population of not less than 100,000.
‘‘(C) CONTROL.—A person shall be treated as controlled by another person if such other person possesses, directly or indirectly, the power to direct or cause the direction and management of such person (including the power to elect a majority of the members of the board of directors of such person) through the ownership of voting securities. ‘‘(5) CONTROLLED GROUP.—For purposes of this subsection,
the term ‘controlled group’ means all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 as of the date of the enactment of this subsection.’’.
(b) AMENDMENT TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—Section 303 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1083) is amended by adding at the end the following new subsection:
‘‘(m) SPECIAL RULES FOR COMMUNITY NEWSPAPER PLANS.—

‘‘(1) IN GENERAL.—The plan sponsor of a community news- paper plan under which no participant has had the participant’s accrued benefit increased (whether because of service or com- pensation) after December 31, 2017, may elect to have the alternative standards described in paragraph (3) apply to such plan, and any plan sponsored by any member of the same controlled group.
‘‘(2) ELECTION.—An election under paragraph (1) shall be made at such time and in such manner as prescribed by the Secretary of the Treasury. Such election, once made with respect to a plan year, shall apply to all subsequent plan years unless revoked with the consent of the Secretary of the Treasury.
‘‘(3) ALTERNATIVE MINIMUM FUNDING STANDARDS.—The
alternative standards described in this paragraph are the fol- lowing:
‘‘(A) INTEREST RATES.—
‘‘(i) IN GENERAL.—Notwithstanding subsection (h)(2)(C) and except as provided in clause (ii), the first, second, and third segment rates in effect for any month for purposes of this section shall be 8 percent.
‘‘(ii) NEW BENEFIT ACCRUALS.—Notwithstanding subsection (h)(2), for purposes of determining the funding target and normal cost of a plan for any plan year, the present value of any benefits accrued or earned under the plan for a plan year with respect to which an election under paragraph (1) is in effect shall be determined on the basis of the United States Treasury obligation yield curve for the day that is the valuation date of such plan for such plan year. ‘‘(iii) UNITED STATES TREASURY OBLIGATION YIELD
CURVE.—For purposes of this subsection, the term ‘United States Treasury obligation yield curve’ means, with respect to any day, a yield curve which shall be prescribed by the Secretary of the Treasury for such day on interest-bearing obligations of the United States.
‘‘(B) SHORTFALL AMORTIZATION BASE.—
‘‘(i) PREVIOUS SHORTFALL AMORTIZATION BASES.—
The shortfall amortization bases determined under subsection (c)(3) for all plan years preceding the first plan year to which the election under paragraph (1) applies (and all shortfall amortization installments determined with respect to such bases) shall be reduced to zero under rules similar to the rules of subsection (c)(6).
‘‘(ii) NEW SHORTFALL AMORTIZATION BASE.—Not-
withstanding subsection (c)(3), the shortfall amortiza- tion base for the first plan year to which the election under paragraph (1) applies shall be the funding short- fall of such plan for such plan year (determined using the interest rates as modified under subparagraph (A)). ‘‘(C) DETERMINATION OF SHORTFALL AMORTIZATION
INSTALLMENTS.—
‘‘(i) 30-YEAR PERIOD.—Subparagraphs (A) and (B) of subsection (c)(2) shall be applied by substituting ‘30-plan-year’ for ‘7-plan-year’ each place it appears.

‘‘(ii) NO SPECIAL ELECTION.—The election under subparagraph (D) of subsection (c)(2) shall not apply to any plan year to which the election under paragraph
(1) applies.
‘‘(D) EXEMPTION FROM AT-RISK TREATMENT.—Sub-
section (i) shall not apply.
‘‘(4) COMMUNITY NEWSPAPER PLAN.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘community newspaper plan’ means a plan to which this section applies maintained by an employer which, as of December 31, 2017—
‘‘(i) publishes and distributes daily, either elec- tronically or in printed form—
‘‘(I) a community newspaper, or
‘‘(II) 1 or more community newspapers in the same State,
‘‘(ii) is not a company the stock of which is publicly traded (on a stock exchange or in an over-the-counter market), and is not controlled, directly or indirectly, by such a company,
‘‘(iii) is controlled, directly or indirectly—
‘‘(I) by 1 or more persons residing primarily in the State in which the community newspaper is published,
‘‘(II) for not less than 30 years by individuals who are members of the same family,
‘‘(III) by a trust created or organized in the State in which the community newspaper is pub- lished, the sole trustees of which are persons described in subclause (I) or (II),
‘‘(IV) by an entity which is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code, which is organized and operated in the State in which the community newspaper is published, and the primary purpose of which is to benefit communities in such State, or
‘‘(V) by a combination of persons described in subclause (I), (III), or (IV), and
‘‘(iv) does not control, directly or indirectly, any newspaper in any other State.
‘‘(B) COMMUNITY NEWSPAPER.—The term ‘community newspaper’ means a newspaper which primarily serves a metropolitan statistical area, as determined by the Office of Management and Budget, with a population of not less than 100,000.
‘‘(C) CONTROL.—A person shall be treated as controlled by another person if such other person possesses, directly or indirectly, the power to direct or cause the direction and management of such person (including the power to elect a majority of the members of the board of directors of such person) through the ownership of voting securities. ‘‘(5) CONTROLLED GROUP.—For purposes of this subsection,
the term ‘controlled group’ means all persons treated as a single employer under subsection (b), (c), (m), or (o) of section
414 of the Internal Revenue Code of 1986 as of the date of the enactment of this subsection.

‘‘(6) EFFECT ON PREMIUM RATE CALCULATION.—Notwith-
standing any other provision of law or any regulation issued by the Pension Benefit Guaranty Corporation, in the case of a plan for which an election is made to apply the alternative standards described in paragraph (3), the additional premium under section 4006(a)(3)(E) shall be determined as if such elec- tion had not been made.’’.
(c) EFFECTIVE DATE.—The amendments made by this section shall apply to plan years ending after December 31, 2017.
SEC. 116. TREATING EXCLUDED DIFFICULTY OF CARE PAYMENTS AS COMPENSATION FOR DETERMINING RETIREMENT CON- TRIBUTION LIMITATIONS.
(a) INDIVIDUAL RETIREMENT ACCOUNTS.—
(1) IN GENERAL.—Section 408(o) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
‘‘(5) SPECIAL RULE FOR DIFFICULTY OF CARE PAYMENTS
EXCLUDED FROM GROSS INCOME.—In the case of an individual who for a taxable year excludes from gross income under section
131 a qualified foster care payment which is a difficulty of care payment, if—
‘‘(A) the deductible amount in effect for the taxable year under subsection (b), exceeds
‘‘(B) the amount of compensation includible in the individual’s gross income for the taxable year,
the individual may elect to increase the nondeductible limit under paragraph (2) for the taxable year by an amount equal to the lesser of such excess or the amount so excluded.’’.
(2) EFFECTIVE DATE.—The amendments made by this sub- section shall apply to contributions after the date of the enact- ment of this Act.
(b) DEFINED CONTRIBUTION PLANS.—
(1) IN GENERAL.—Section 415(c) of such Code is amended by adding at the end the following new paragraph:
‘‘(8) SPECIAL RULE FOR DIFFICULTY OF CARE PAYMENTS EXCLUDED FROM GROSS INCOME.—
‘‘(A) IN GENERAL.—For purposes of paragraph (1)(B), in the case of an individual who for a taxable year excludes from gross income under section 131 a qualified foster care payment which is a difficulty of care payment, the participant’s compensation, or earned income, as the case may be, shall be increased by the amount so excluded. ‘‘(B) CONTRIBUTIONS ALLOCABLE TO DIFFICULTY OF CARE
PAYMENTS TREATED AS AFTER-TAX.—Any contribution by the participant which is allowable due to such increase— ‘‘(i) shall be treated for purposes of this title as
investment in the contract, and
‘‘(ii) shall not cause a plan (and any arrangement which is part of such plan) to be treated as failing to meet any requirements of this chapter solely by reason of allowing any such contributions.’’.
(2) EFFECTIVE DATE.—The amendment made by this sub- section shall apply to plan years beginning after December 31, 2015.

TITLE II—ADMINISTRATIVE IMPROVEMENTS
SEC. 201. PLAN ADOPTED BY FILING DUE DATE FOR YEAR MAY BE TREATED AS IN EFFECT AS OF CLOSE OF YEAR.
(a) IN GENERAL.—Subsection (b) of section 401 of the Internal Revenue Code of 1986 is amended—
(1) by striking ‘‘RETROACTIVE CHANGES IN PLAN.—A stock bonus’’ and inserting ‘‘PLAN AMENDMENTS.—
‘‘(1) CERTAIN RETROACTIVE CHANGES IN PLAN.—A stock
bonus’’; and
(2) by adding at the end the following new paragraph: ‘‘(2) ADOPTION OF PLAN.—If an employer adopts a stock bonus, pension, profit-sharing, or annuity plan after the close of a taxable year but before the time prescribed by law for filing the return of the employer for the taxable year (including extensions thereof), the employer may elect to treat the plan as having been adopted as of the last day of the taxable year.’’.
(b) EFFECTIVE DATE.—The amendments made by this section shall apply to plans adopted for taxable years beginning after December 31, 2019.
SEC. 202. COMBINED ANNUAL REPORT FOR GROUP OF PLANS.
(a) IN GENERAL.—The Secretary of the Treasury and the Sec- retary of Labor shall, in cooperation, modify the returns required under section 6058 of the Internal Revenue Code of 1986 and the reports required by section 104 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1024) so that all members of a group of plans described in subsection (c) may file a single aggregated annual return or report satisfying the requirements of both such sections.
(b) ADMINISTRATIVE REQUIREMENTS.—In developing the consoli- dated return or report under subsection (a), the Secretary of the Treasury and the Secretary of Labor may require such return or report to include any information regarding each plan in the group as such Secretaries determine is necessary or appropriate for the enforcement and administration of the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 and shall require such information as will enable a partici- pant in a plan to identify any aggregated return or report filed with respect to the plan.
(c) PLANS DESCRIBED.—A group of plans is described in this subsection if all plans in the group—
(1) are individual account plans or defined contribution plans (as defined in section 3(34) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(34)) or in section 414(i) of the Internal Revenue Code of 1986);
(2) have—
(A) the same trustee (as described in section 403(a) of such Act (29 U.S.C. 1103(a)));
(B) the same one or more named fiduciaries (as described in section 402(a) of such Act (29 U.S.C. 1102(a)));
(C) the same administrator (as defined in section 3(16)(A) of such Act (29 U.S.C. 1002(16)(A))) and plan administrator (as defined in section 414(g) of the Internal Revenue Code of 1986); and

(D) plan years beginning on the same date; and
(3) provide the same investments or investment options to participants and beneficiaries.
A plan not subject to title I of the Employee Retirement Income Security Act of 1974 shall be treated as meeting the requirements of paragraph (2) as part of a group of plans if the same person that performs each of the functions described in such paragraph, as applicable, for all other plans in such group performs each of such functions for such plan.
(d) CLARIFICATION RELATING TO ELECTRONIC FILING OF
RETURNS FOR DEFERRED COMPENSATION PLANS.—
(1) IN GENERAL.—Section 6011(e) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
‘‘(6) APPLICATION OF NUMERICAL LIMITATION TO RETURNS RELATING TO DEFERRED COMPENSATION PLANS.—For purposes
of applying the numerical limitation under paragraph (2)(A) to any return required under section 6058, information regarding each plan for which information is provided on such return shall be treated as a separate return.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to returns required to be filed with respect to plan years beginning after December 31, 2019.
(e) EFFECTIVE DATE.—The modification required by subsection
(a) shall be implemented not later than January 1, 2022, and shall apply to returns and reports for plan years beginning after December 31, 2021.
SEC. 203. DISCLOSURE REGARDING LIFETIME INCOME.
(a) IN GENERAL.—Subparagraph (B) of section 105(a)(2) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1025(a)(2)) is amended—
(1) in clause (i), by striking ‘‘and’’ at the end;
(2) in clause (ii), by striking ‘‘diversification.’’ and inserting ‘‘diversification, and’’; and
(3) by inserting at the end the following:
‘‘(iii) the lifetime income disclosure described in subparagraph (D)(i).
In the case of pension benefit statements described in clause (i) of paragraph (1)(A), a lifetime income disclosure under clause (iii) of this subparagraph shall be required to be included in only one pension benefit statement during any one 12-month period.’’.
(b) LIFETIME INCOME.—Paragraph (2) of section 105(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1025(a)) is amended by adding at the end the following new subparagraph:
‘‘(D) LIFETIME INCOME DISCLOSURE.— ‘‘(i) IN GENERAL.—
‘‘(I) DISCLOSURE.—A lifetime income disclosure shall set forth the lifetime income stream equiva- lent of the total benefits accrued with respect to the participant or beneficiary.
‘‘(II) LIFETIME INCOME STREAM EQUIVALENT OF
THE TOTAL BENEFITS ACCRUED.—For purposes of this subparagraph, the term ‘lifetime income stream equivalent of the total benefits accrued’

means the amount of monthly payments the participant or beneficiary would receive if the total accrued benefits of such participant or beneficiary were used to provide lifetime income streams described in subclause (III), based on assumptions specified in rules prescribed by the Secretary.
‘‘(III) LIFETIME INCOME STREAMS.—The life-
time income streams described in this subclause are a qualified joint and survivor annuity (as defined in section 205(d)), based on assumptions specified in rules prescribed by the Secretary, including the assumption that the participant or beneficiary has a spouse of equal age, and a single life annuity. Such lifetime income streams may have a term certain or other features to the extent permitted under rules prescribed by the Secretary. ‘‘(ii) MODEL DISCLOSURE.—Not later than 1 year
after the date of the enactment of the Setting Every Community Up for Retirement Enhancement Act of 2019, the Secretary shall issue a model lifetime income disclosure, written in a manner so as to be understood by the average plan participant, which—
‘‘(I) explains that the lifetime income stream equivalent is only provided as an illustration;
‘‘(II) explains that the actual payments under the lifetime income stream described in clause (i)(III) which may be purchased with the total benefits accrued will depend on numerous factors and may vary substantially from the lifetime income stream equivalent in the disclosures;
‘‘(III) explains the assumptions upon which the lifetime income stream equivalent was deter- mined; and
‘‘(IV) provides such other similar explanations as the Secretary considers appropriate.
‘‘(iii) ASSUMPTIONS AND RULES.—Not later than 1 year after the date of the enactment of the Setting Every Community Up for Retirement Enhancement Act of 2019, the Secretary shall—
‘‘(I) prescribe assumptions which administra- tors of individual account plans may use in con- verting total accrued benefits into lifetime income stream equivalents for purposes of this subpara- graph; and
‘‘(II) issue interim final rules under clause (i). In prescribing assumptions under subclause (I), the Secretary may prescribe a single set of specific assump- tions (in which case the Secretary may issue tables or factors which facilitate such conversions), or ranges of permissible assumptions. To the extent that an accrued benefit is or may be invested in a lifetime income stream described in clause (i)(III), the assump- tions prescribed under subclause (I) shall, to the extent appropriate, permit administrators of individual account plans to use the amounts payable under such lifetime income stream as a lifetime income stream equivalent.

‘‘(iv) LIMITATION ON LIABILITY.—No plan fiduciary, plan sponsor, or other person shall have any liability under this title solely by reason of the provision of lifetime income stream equivalents which are derived in accordance with the assumptions and rules described in clause (iii) and which include the explanations con- tained in the model lifetime income disclosure described in clause (ii). This clause shall apply without regard to whether the provision of such lifetime income stream equivalent is required by subparagraph (B)(iii). ‘‘(v) EFFECTIVE DATE.—The requirement in subparagraph (B)(iii) shall apply to pension benefit statements furnished more than 12 months after the
latest of the issuance by the Secretary of—
‘‘(I) interim final rules under clause (i);
‘‘(II) the model disclosure under clause (ii);
or
‘‘(III) the assumptions under clause (iii).’’.
SEC. 204. FIDUCIARY SAFE HARBOR FOR SELECTION OF LIFETIME INCOME PROVIDER.
Section 404 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104) is amended by adding at the end the following:
‘‘(e) SAFE HARBOR FOR ANNUITY SELECTION.—
‘‘(1) IN GENERAL.—With respect to the selection of an insurer for a guaranteed retirement income contract, the requirements of subsection (a)(1)(B) will be deemed to be satis- fied if a fiduciary—
‘‘(A) engages in an objective, thorough, and analytical search for the purpose of identifying insurers from which to purchase such contracts;
‘‘(B) with respect to each insurer identified under subparagraph (A)—
‘‘(i) considers the financial capability of such insurer to satisfy its obligations under the guaranteed retirement income contract; and
‘‘(ii) considers the cost (including fees and commis- sions) of the guaranteed retirement income contract offered by the insurer in relation to the benefits and product features of the contract and administrative services to be provided under such contract; and
‘‘(C) on the basis of such consideration, concludes that—
‘‘(i) at the time of the selection, the insurer is financially capable of satisfying its obligations under the guaranteed retirement income contract; and
‘‘(ii) the relative cost of the selected guaranteed retirement income contract as described in subpara- graph (B)(ii) is reasonable.
‘‘(2) FINANCIAL CAPABILITY OF THE INSURER.—A fiduciary
will be deemed to satisfy the requirements of paragraphs (1)(B)(i) and (1)(C)(i) if—
‘‘(A) the fiduciary obtains written representations from the insurer that—
‘‘(i) the insurer is licensed to offer guaranteed retirement income contracts;

‘‘(ii) the insurer, at the time of selection and for each of the immediately preceding 7 plan years—
‘‘(I) operates under a certificate of authority from the insurance commissioner of its domiciliary State which has not been revoked or suspended; ‘‘(II) has filed audited financial statements in accordance with the laws of its domiciliary State under applicable statutory accounting principles; ‘‘(III) maintains (and has maintained) reserves which satisfies all the statutory requirements of all States where the insurer does business; and ‘‘(IV) is not operating under an order of super-
vision, rehabilitation, or liquidation;
‘‘(iii) the insurer undergoes, at least every 5 years, a financial examination (within the meaning of the law of its domiciliary State) by the insurance commis- sioner of the domiciliary State (or representative, des- ignee, or other party approved by such commissioner); and
‘‘(iv) the insurer will notify the fiduciary of any change in circumstances occurring after the provision of the representations in clauses (i), (ii), and (iii) which would preclude the insurer from making such represen- tations at the time of issuance of the guaranteed retire- ment income contract; and
‘‘(B) after receiving such representations and as of the time of selection, the fiduciary has not received any notice described in subparagraph (A)(iv) and is in posses- sion of no other information which would cause the fidu- ciary to question the representations provided.
‘‘(3) NO REQUIREMENT TO SELECT LOWEST COST.—Nothing
in this subsection shall be construed to require a fiduciary to select the lowest cost contract. A fiduciary may consider the value of a contract, including features and benefits of the contract and attributes of the insurer (including, without limita- tion, the insurer’s financial strength) in conjunction with the cost of the contract.
‘‘(4) TIME OF SELECTION.—
‘‘(A) IN GENERAL.—For purposes of this subsection, the time of selection is—
‘‘(i) the time that the insurer and the contract are selected for distribution of benefits to a specific participant or beneficiary; or
‘‘(ii) if the fiduciary periodically reviews the con- tinuing appropriateness of the conclusion described in paragraph (1)(C) with respect to a selected insurer, taking into account the considerations described in such paragraph, the time that the insurer and the contract are selected to provide benefits at future dates to participants or beneficiaries under the plan.
Nothing in the preceding sentence shall be construed to require the fiduciary to review the appropriateness of a selection after the purchase of a contract for a participant or beneficiary.

‘‘(B) PERIODIC REVIEW.—A fiduciary will be deemed to have conducted the periodic review described in subpara- graph (A)(ii) if the fiduciary obtains the written representa- tions described in clauses (i), (ii), and (iii) of paragraph (2)(A) from the insurer on an annual basis, unless the fiduciary receives any notice described in paragraph (2)(A)(iv) or otherwise becomes aware of facts that would cause the fiduciary to question such representations.
‘‘(5) LIMITED LIABILITY.—A fiduciary which satisfies the requirements of this subsection shall not be liable following the distribution of any benefit, or the investment by or on behalf of a participant or beneficiary pursuant to the selected guaranteed retirement income contract, for any losses that may result to the participant or beneficiary due to an insurer’s inability to satisfy its financial obligations under the terms of such contract.
‘‘(6) DEFINITIONS.—For purposes of this subsection—
‘‘(A) INSURER.—The term ‘insurer’ means an insurance company, insurance service, or insurance organization, including affiliates of such companies.
‘‘(B) GUARANTEED RETIREMENT INCOME CONTRACT.—
The term ‘guaranteed retirement income contract’ means an annuity contract for a fixed term or a contract (or provision or feature thereof) which provides guaranteed benefits annually (or more frequently) for at least the remainder of the life of the participant or the joint lives of the participant and the participant’s designated bene- ficiary as part of an individual account plan.’’.
SEC. 205. MODIFICATION OF NONDISCRIMINATION RULES TO PROTECT OLDER, LONGER SERVICE PARTICIPANTS.
(a) IN GENERAL.—Section 401 of the Internal Revenue Code of 1986 is amended—
(1) by redesignating subsection (o) as subsection (p); and
(2) by inserting after subsection (n) the following new sub- section:
‘‘(o) SPECIAL RULES FOR APPLYING NONDISCRIMINATION RULES TO PROTECT OLDER, LONGER SERVICE AND GRANDFATHERED PARTICI- PANTS.—
‘‘(1) TESTING OF DEFINED BENEFIT PLANS WITH CLOSED CLASSES OF PARTICIPANTS.—
‘‘(A) BENEFITS, RIGHTS, OR FEATURES PROVIDED TO
CLOSED CLASSES.—A defined benefit plan which provides benefits, rights, or features to a closed class of participants shall not fail to satisfy the requirements of subsection (a)(4) by reason of the composition of such closed class or the benefits, rights, or features provided to such closed class, if—
‘‘(i) for the plan year as of which the class closes and the 2 succeeding plan years, such benefits, rights, and features satisfy the requirements of subsection (a)(4) (without regard to this subparagraph but taking into account the rules of subparagraph (I)),
‘‘(ii) after the date as of which the class was closed, any plan amendment which modifies the closed class or the benefits, rights, and features provided to such

closed class does not discriminate significantly in favor of highly compensated employees, and
‘‘(iii) the class was closed before April 5, 2017, or the plan is described in subparagraph (C).
‘‘(B) AGGREGATE TESTING WITH DEFINED CONTRIBUTION PLANS PERMITTED ON A BENEFITS BASIS.—
‘‘(i) IN GENERAL.—For purposes of determining compliance with subsection (a)(4) and section 410(b), a defined benefit plan described in clause (iii) may be aggregated and tested on a benefits basis with 1 or more defined contribution plans, including with the portion of 1 or more defined contribution plans which— ‘‘(I) provides matching contributions (as
defined in subsection (m)(4)(A)),
‘‘(II) provides annuity contracts described in section 403(b) which are purchased with matching contributions or nonelective contributions, or
‘‘(III) consists of an employee stock ownership plan (within the meaning of section 4975(e)(7)) or a tax credit employee stock ownership plan (within the meaning of section 409(a)).
‘‘(ii) SPECIAL RULES FOR MATCHING CONTRIBU-
TIONS.—For purposes of clause (i), if a defined benefit plan is aggregated with a portion of a defined contribu- tion plan providing matching contributions—
‘‘(I) such defined benefit plan must also be aggregated with any portion of such defined con- tribution plan which provides elective deferrals described in subparagraph (A) or (C) of section 402(g)(3), and
‘‘(II) such matching contributions shall be treated in the same manner as nonelective con- tributions, including for purposes of applying the rules of subsection (l).
‘‘(iii) PLANS DESCRIBED.—A defined benefit plan is described in this clause if—
‘‘(I) the plan provides benefits to a closed class of participants,
‘‘(II) for the plan year as of which the class closes and the 2 succeeding plan years, the plan satisfies the requirements of section 410(b) and subsection (a)(4) (without regard to this subpara- graph but taking into account the rules of subpara- graph (I)),
‘‘(III) after the date as of which the class was closed, any plan amendment which modifies the closed class or the benefits provided to such closed class does not discriminate significantly in favor of highly compensated employees, and
‘‘(IV) the class was closed before April 5, 2017, or the plan is described in subparagraph (C).
‘‘(C) PLANS DESCRIBED.—A plan is described in this subparagraph if, taking into account any predecessor plan—
‘‘(i) such plan has been in effect for at least 5 years as of the date the class is closed, and

‘‘(ii) during the 5-year period preceding the date the class is closed, there has not been a substantial increase in the coverage or value of the benefits, rights, or features described in subparagraph (A) or in the coverage or benefits under the plan described in subparagraph (B)(iii) (whichever is applicable).
‘‘(D) DETERMINATION OF SUBSTANTIAL INCREASE FOR
BENEFITS, RIGHTS, AND FEATURES.—In applying subpara- graph (C)(ii) for purposes of subparagraph (A)(iii), a plan shall be treated as having had a substantial increase in coverage or value of the benefits, rights, or features described in subparagraph (A) during the applicable 5- year period only if, during such period—
‘‘(i) the number of participants covered by such benefits, rights, or features on the date such period ends is more than 50 percent greater than the number of such participants on the first day of the plan year in which such period began, or
‘‘(ii) such benefits, rights, and features have been modified by 1 or more plan amendments in such a way that, as of the date the class is closed, the value of such benefits, rights, and features to the closed class as a whole is substantially greater than the value as of the first day of such 5-year period, solely as a result of such amendments.
‘‘(E) DETERMINATION OF SUBSTANTIAL INCREASE FOR AGGREGATE TESTING ON BENEFITS BASIS.—In applying
subparagraph (C)(ii) for purposes of subparagraph (B)(iii)(IV), a plan shall be treated as having had a substan- tial increase in coverage or benefits during the applicable 5-year period only if, during such period—
‘‘(i) the number of participants benefitting under the plan on the date such period ends is more than
50 percent greater than the number of such partici- pants on the first day of the plan year in which such period began, or
‘‘(ii) the average benefit provided to such partici- pants on the date such period ends is more than 50 percent greater than the average benefit provided on the first day of the plan year in which such period began.
‘‘(F) CERTAIN EMPLOYEES DISREGARDED.—For purposes
of subparagraphs (D) and (E), any increase in coverage or value or in coverage or benefits, whichever is applicable, which is attributable to such coverage and value or cov- erage and benefits provided to employees—
‘‘(i) who became participants as a result of a merger, acquisition, or similar event which occurred during the 7-year period preceding the date the class is closed, or
‘‘(ii) who became participants by reason of a merger of the plan with another plan which had been in effect for at least 5 years as of the date of the merger,
shall be disregarded, except that clause (ii) shall apply for purposes of subparagraph (D) only if, under the merger, the benefits, rights, or features under 1 plan are conformed

to the benefits, rights, or features of the other plan prospec- tively.
‘‘(G) RULES RELATING TO AVERAGE BENEFIT.—For pur-
poses of subparagraph (E)—
‘‘(i) the average benefit provided to participants under the plan will be treated as having remained the same between the 2 dates described in subpara- graph (E)(ii) if the benefit formula applicable to such participants has not changed between such dates, and ‘‘(ii) if the benefit formula applicable to 1 or more participants under the plan has changed between such 2 dates, then the average benefit under the plan shall be considered to have increased by more than 50 per-
cent only if—
‘‘(I) the total amount determined under section 430(b)(1)(A)(i) for all participants benefitting under the plan for the plan year in which the 5-year period described in subparagraph (E) ends, exceeds ‘‘(II) the total amount determined under sec- tion 430(b)(1)(A)(i) for all such participants for such plan year, by using the benefit formula in effect for each such participant for the first plan
year in such 5-year period,
by more than 50 percent. In the case of a CSEC plan (as defined in section 414(y)), the normal cost of the plan (as determined under section 433(j)(1)(B)) shall be used in lieu of the amount determined under section 430(b)(1)(A)(i).
‘‘(H) TREATMENT AS SINGLE PLAN.—For purposes of sub- paragraphs (E) and (G), a plan described in section 413(c) shall be treated as a single plan rather than as separate plans maintained by each employer in the plan.
‘‘(I) SPECIAL RULES.—For purposes of subparagraphs (A)(i) and (B)(iii)(II), the following rules shall apply:
‘‘(i) In applying section 410(b)(6)(C), the closing of the class of participants shall not be treated as a significant change in coverage under section 410(b)(6)(C)(i)(II).
‘‘(ii) 2 or more plans shall not fail to be eligible to be aggregated and treated as a single plan solely by reason of having different plan years.
‘‘(iii) Changes in the employee population shall be disregarded to the extent attributable to individuals who become employees or cease to be employees, after the date the class is closed, by reason of a merger, acquisition, divestiture, or similar event.
‘‘(iv) Aggregation and all other testing methodolo- gies otherwise applicable under subsection (a)(4) and section 410(b) may be taken into account.
The rule of clause (ii) shall also apply for purposes of determining whether plans to which subparagraph (B)(i) applies may be aggregated and treated as 1 plan for pur- poses of determining whether such plans meet the require- ments of subsection (a)(4) and section 410(b).
‘‘(J) SPUN-OFF PLANS.—For purposes of this paragraph, if a portion of a defined benefit plan described in subpara- graph (A) or (B)(iii) is spun off to another employer and

the spun-off plan continues to satisfy the requirements of—
‘‘(i) subparagraph (A)(i) or (B)(iii)(II), whichever is applicable, if the original plan was still within the 3-year period described in such subparagraph at the time of the spin off, and
‘‘(ii) subparagraph (A)(ii) or (B)(iii)(III), whichever is applicable,
the treatment under subparagraph (A) or (B) of the spun- off plan shall continue with respect to such other employer. ‘‘(2) TESTING OF DEFINED CONTRIBUTION PLANS.—
‘‘(A) TESTING ON A BENEFITS BASIS.—A defined con-
tribution plan shall be permitted to be tested on a benefits basis if—
‘‘(i) such defined contribution plan provides make- whole contributions to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated,
‘‘(ii) for the plan year of the defined contribution plan as of which the class eligible to receive such make-whole contributions closes and the 2 succeeding plan years, such closed class of participants satisfies the requirements of section 410(b)(2)(A)(i) (determined by applying the rules of paragraph (1)(I)),
‘‘(iii) after the date as of which the class was closed, any plan amendment to the defined contribution plan which modifies the closed class or the allocations, benefits, rights, and features provided to such closed class does not discriminate significantly in favor of highly compensated employees, and
‘‘(iv) the class was closed before April 5, 2017, or the defined benefit plan under clause (i) is described in paragraph (1)(C) (as applied for purposes of para- graph (1)(B)(iii)(IV)).
‘‘(B) AGGREGATION WITH PLANS INCLUDING MATCHING CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—With respect to 1 or more defined contribution plans described in subparagraph (A), for purposes of determining compliance with subsection (a)(4) and section 410(b), the portion of such plans which provides make-whole contributions or other non- elective contributions may be aggregated and tested on a benefits basis with the portion of 1 or more other defined contribution plans which—
‘‘(I) provides matching contributions (as defined in subsection (m)(4)(A)),
‘‘(II) provides annuity contracts described in section 403(b) which are purchased with matching contributions or nonelective contributions, or
‘‘(III) consists of an employee stock ownership plan (within the meaning of section 4975(e)(7)) or a tax credit employee stock ownership plan (within the meaning of section 409(a)).
‘‘(ii) SPECIAL RULES FOR MATCHING CONTRIBU-
TIONS.—Rules similar to the rules of paragraph (1)(B)(ii) shall apply for purposes of clause (i).

‘‘(C) SPECIAL RULES FOR TESTING DEFINED CONTRIBU- TION PLAN FEATURES PROVIDING MATCHING CONTRIBUTIONS TO CERTAIN OLDER, LONGER SERVICE PARTICIPANTS.—In the
case of a defined contribution plan which provides benefits, rights, or features to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated, the plan shall not fail to satisfy the require- ments of subsection (a)(4) solely by reason of the composi- tion of the closed class or the benefits, rights, or features provided to such closed class if the defined contribution plan and defined benefit plan otherwise meet the require- ments of subparagraph (A) but for the fact that the make- whole contributions under the defined contribution plan are made in whole or in part through matching contribu- tions.
‘‘(D) SPUN-OFF PLANS.—For purposes of this paragraph, if a portion of a defined contribution plan described in subparagraph (A) or (C) is spun off to another employer, the treatment under subparagraph (A) or (C) of the spun- off plan shall continue with respect to the other employer if such plan continues to comply with the requirements of clauses (ii) (if the original plan was still within the 3-year period described in such clause at the time of the spin off) and (iii) of subparagraph (A), as determined for purposes of subparagraph (A) or (C), whichever is applicable.
‘‘(3) DEFINITIONS AND SPECIAL RULE.—For purposes of this subsection—
‘‘(A) MAKE-WHOLE CONTRIBUTIONS.—Except as other-
wise provided in paragraph (2)(C), the term ‘make-whole contributions’ means nonelective allocations for each employee in the class which are reasonably calculated, in a consistent manner, to replace some or all of the retire- ment benefits which the employee would have received under the defined benefit plan and any other plan or quali- fied cash or deferred arrangement under subsection (k)(2) if no change had been made to such defined benefit plan and such other plan or arrangement. For purposes of the preceding sentence, consistency shall not be required with respect to employees who were subject to different benefit formulas under the defined benefit plan.
‘‘(B) REFERENCES TO CLOSED CLASS OF PARTICIPANTS.—
References to a closed class of participants and similar references to a closed class shall include arrangements under which 1 or more classes of participants are closed, except that 1 or more classes of participants closed on different dates shall not be aggregated for purposes of determining the date any such class was closed.
‘‘(C) HIGHLY COMPENSATED EMPLOYEE.—The term
‘highly compensated employee’ has the meaning given such term in section 414(q).’’.
(b) PARTICIPATION REQUIREMENTS.—Paragraph (26) of section 401(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
‘‘(I) PROTECTED PARTICIPANTS.—
‘‘(i) IN GENERAL.—A plan shall be deemed to satisfy the requirements of subparagraph (A) if—

‘‘(I) the plan is amended—
‘‘(aa) to cease all benefit accruals, or
‘‘(bb) to provide future benefit accruals only to a closed class of participants,
‘‘(II) the plan satisfies subparagraph (A) (with- out regard to this subparagraph) as of the effective date of the amendment, and
‘‘(III) the amendment was adopted before April 5, 2017, or the plan is described in clause (ii). ‘‘(ii) PLANS DESCRIBED.—A plan is described in this
clause if the plan would be described in subsection (o)(1)(C), as applied for purposes of subsection (o)(1)(B)(iii)(IV) and by treating the effective date of the amendment as the date the class was closed for purposes of subsection (o)(1)(C).
‘‘(iii) SPECIAL RULES.—For purposes of clause (i)(II), in applying section 410(b)(6)(C), the amendments described in clause (i) shall not be treated as a signifi- cant change in coverage under section 410(b)(6)(C)(i)(II).
‘‘(iv) SPUN-OFF PLANS.—For purposes of this subparagraph, if a portion of a plan described in clause
(i) is spun off to another employer, the treatment under clause (i) of the spun-off plan shall continue with respect to the other employer.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act, without regard to whether any plan modifications referred to in such amendments are adopted or effective before, on, or after such date of enactment.
(2) SPECIAL RULES.—
(A) ELECTION OF EARLIER APPLICATION.—At the election of the plan sponsor, the amendments made by this section shall apply to plan years beginning after December 31, 2013.
(B) CLOSED CLASSES OF PARTICIPANTS.—For purposes of paragraphs (1)(A)(iii), (1)(B)(iii)(IV), and (2)(A)(iv) of sec- tion 401(o) of the Internal Revenue Code of 1986 (as added by this section), a closed class of participants shall be treated as being closed before April 5, 2017, if the plan sponsor’s intention to create such closed class is reflected in formal written documents and communicated to partici- pants before such date.
(C) CERTAIN POST-ENACTMENT PLAN AMENDMENTS.—A plan shall not be treated as failing to be eligible for the application of section 401(o)(1)(A), 401(o)(1)(B)(iii), or 401(a)(26) of such Code (as added by this section) to such plan solely because in the case of—
(i) such section 401(o)(1)(A), the plan was amended before the date of the enactment of this Act to eliminate 1 or more benefits, rights, or features, and is further amended after such date of enactment to provide such previously eliminated benefits, rights, or features to a closed class of participants, or
(ii) such section 401(o)(1)(B)(iii) or section 401(a)(26), the plan was amended before the date of

the enactment of this Act to cease all benefit accruals, and is further amended after such date of enactment to provide benefit accruals to a closed class of partici- pants.
Any such section shall only apply if the plan otherwise meets the requirements of such section and in applying such section, the date the class of participants is closed shall be the effective date of the later amendment.
SEC. 206. MODIFICATION OF PBGC PREMIUMS FOR CSEC PLANS.
(a) FLAT RATE PREMIUM.—Subparagraph (A) of section 4006(a)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is amended—
(1) in clause (i), by striking ‘‘plan,’’ and inserting ‘‘plan other than a CSEC plan (as defined in section 210(f)(1))’’;
(2) in clause (v), by striking ‘‘or’’ at the end;
(3) in clause (vi), by striking the period at the end and inserting ‘‘, or’’; and
(4) by adding at the end the following new clause:
‘‘(vii) in the case of a CSEC plan (as defined in section 210(f)(1)), for plan years beginning after December 31, 2018, for each individual who is a partici- pant in such plan during the plan year an amount equal to the sum of—
‘‘(I) the additional premium (if any) deter- mined under subparagraph (E), and
‘‘(II) $19.’’.
(b) VARIABLE RATE PREMIUM.—
(1) UNFUNDED VESTED BENEFITS.—
(A) IN GENERAL.—Subparagraph (E) of section 4006(a)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end the following new clause:
‘‘(v) For purposes of clause (ii), in the case of a CSEC plan (as defined in section 210(f)(1)), the term ‘unfunded vested benefits’ means, for plan years beginning after December 31, 2018, the excess (if any) of—
‘‘(I) the funding liability of the plan as determined under section 306(j)(5)(C) for the plan year by only taking into account vested benefits, over
‘‘(II) the fair market value of plan assets for the plan year which are held by the plan on the valuation date.’’.
(B) CONFORMING AMENDMENT.—Clause (iii) of section 4006(a)(3)(E) of such Act (29 U.S.C. 1306(a)(3)(E)) is amended by striking ‘‘For purposes’’ and inserting ‘‘Except as provided in clause (v), for purposes’’.
(2) APPLICABLE DOLLAR AMOUNT.—
(A) IN GENERAL.—Paragraph (8) of section 4006(a) of such Act (29 U.S.C. 1306(a)) is amended by adding at the end the following new subparagraph:
‘‘(E) CSEC PLANS.—In the case of a CSEC plan (as defined in section 210(f)(1)), the applicable dollar amount shall be $9.’’.
(B) CONFORMING AMENDMENT.—Subparagraph (A) of section 4006(a)(8) of such Act (29 U.S.C. 1306(a)(8)) is

amended by striking ‘‘(B) and (C)’’ and inserting ‘‘(B), (C), and (E)’’.

TITLE III—OTHER BENEFITS
SEC. 301. BENEFITS PROVIDED TO VOLUNTEER FIREFIGHTERS AND EMERGENCY MEDICAL RESPONDERS.
(a) INCREASE IN DOLLAR LIMITATION ON QUALIFIED PAY- MENTS.—Subparagraph (B) of section 139B(c)(2) of the Internal Revenue Code of 1986 is amended by striking ‘‘$30’’ and inserting ‘‘$50’’.
(b) EXTENSION.—Section 139B(d) of the Internal Revenue Code of 1986 is amended by striking ‘‘beginning after December 31, 2010.’’ and inserting ‘‘beginning—
‘‘(1) after December 31, 2010, and before January 1, 2020,
or
‘‘(2) after December 31, 2020.’’.
(c) TECHNICAL CORRECTION.—Section 3121(a)(23) of such Code is amended by striking ‘‘139B(b)’’ and inserting ‘‘section 139B(a)’’.
(d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2019.
SEC. 302. EXPANSION OF SECTION 529 PLANS.
(a) DISTRIBUTIONS FOR CERTAIN EXPENSES ASSOCIATED WITH REGISTERED APPRENTICESHIP PROGRAMS.—Section 529(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
‘‘(8) TREATMENT OF CERTAIN EXPENSES ASSOCIATED WITH
REGISTERED APPRENTICESHIP PROGRAMS.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses for fees, books, supplies, and equipment required for the participation of a designated bene- ficiary in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act (29 U.S.C. 50).’’.
(b) DISTRIBUTIONS FOR QUALIFIED EDUCATION LOAN REPAY-
MENTS.—
(1) IN GENERAL.—Section 529(c) of such Code, as amended by subsection (a), is amended by adding at the end the following new paragraph:
‘‘(9) TREATMENT OF QUALIFIED EDUCATION LOAN REPAY- MENTS.—
‘‘(A) IN GENERAL.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to amounts paid as principal or interest on any qualified education loan (as defined in section 221(d)) of the designated beneficiary or a sibling of the designated beneficiary.
‘‘(B) LIMITATION.—The amount of distributions treated as a qualified higher education expense under this para- graph with respect to the loans of any individual shall not exceed $10,000 (reduced by the amount of distributions so treated for all prior taxable years).
‘‘(C) SPECIAL RULES FOR SIBLINGS OF THE DESIGNATED BENEFICIARY.—

‘‘(i) SEPARATE ACCOUNTING.—For purposes of subparagraph (B) and subsection (d), amounts treated as a qualified higher education expense with respect to the loans of a sibling of the designated beneficiary shall be taken into account with respect to such sibling and not with respect to such designated beneficiary. ‘‘(ii) SIBLING DEFINED.—For purposes of this para- graph, the term ‘sibling’ means an individual who bears a relationship to the designated beneficiary which is
described in section 152(d)(2)(B).’’.
(2) COORDINATION WITH DEDUCTION FOR STUDENT LOAN INTEREST.—Section 221(e)(1) of such Code is amended by adding at the end the following: ‘‘The deduction otherwise allowable under subsection (a) (prior to the application of subsection (b)) to the taxpayer for any taxable year shall be reduced (but not below zero) by so much of the distributions treated as a qualified higher education expense under section 529(c)(9) with respect to loans of the taxpayer as would be includible in gross income under section 529(c)(3)(A) for such taxable year but for such treatment.’’.
(c) EFFECTIVE DATE.—The amendments made by this section shall apply to distributions made after December 31, 2018.
TITLE IV—REVENUE PROVISIONS
SEC. 401. MODIFICATION OF REQUIRED DISTRIBUTION RULES FOR DESIGNATED BENEFICIARIES.
(a) MODIFICATION OF RULES WHERE EMPLOYEE DIES BEFORE ENTIRE DISTRIBUTION.—
(1) IN GENERAL.—Section 401(a)(9) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
‘‘(H) SPECIAL RULES FOR CERTAIN DEFINED CONTRIBU-
TION PLANS.—In the case of a defined contribution plan, if an employee dies before the distribution of the employee’s entire interest—
‘‘(i) IN GENERAL.—Except in the case of a bene- ficiary who is not a designated beneficiary, subpara- graph (B)(ii)—
‘‘(I) shall be applied by substituting ‘10 years’ for ‘5 years’, and
‘‘(II) shall apply whether or not distributions of the employee’s interests have begun in accord- ance with subparagraph (A).
‘‘(ii) EXCEPTION FOR ELIGIBLE DESIGNATED BENE-
FICIARIES.—Subparagraph (B)(iii) shall apply only in the case of an eligible designated beneficiary.
‘‘(iii) RULES UPON DEATH OF ELIGIBLE DESIGNATED
BENEFICIARY.—If an eligible designated beneficiary dies before the portion of the employee’s interest to which this subparagraph applies is entirely distributed, the exception under clause (ii) shall not apply to any bene- ficiary of such eligible designated beneficiary and the remainder of such portion shall be distributed within
10 years after the death of such eligible designated beneficiary.

‘‘(iv) SPECIAL RULE IN CASE OF CERTAIN TRUSTS FOR DISABLED OR CHRONICALLY ILL BENEFICIARIES.—
In the case of an applicable multi-beneficiary trust, if under the terms of the trust—
‘‘(I) it is to be divided immediately upon the death of the employee into separate trusts for each beneficiary, or
‘‘(II) no individual (other than a eligible des- ignated beneficiary described in subclause (III) or
(IV) of subparagraph (E)(ii)) has any right to the employee’s interest in the plan until the death of all such eligible designated beneficiaries with respect to the trust,
for purposes of a trust described in subclause (I), clause
(ii) shall be applied separately with respect to the portion of the employee’s interest that is payable to any eligible designated beneficiary described in sub- clause (III) or (IV) of subparagraph (E)(ii); and, for purposes of a trust described in subclause (II), subpara- graph (B)(iii) shall apply to the distribution of the employee’s interest and any beneficiary who is not such an eligible designated beneficiary shall be treated as a beneficiary of the eligible designated beneficiary upon the death of such eligible designated beneficiary. ‘‘(v) APPLICABLE MULTI-BENEFICIARY TRUST.—For purposes of this subparagraph, the term ‘applicable
multi-beneficiary trust’ means a trust—
‘‘(I) which has more than one beneficiary,
‘‘(II) all of the beneficiaries of which are treated as designated beneficiaries for purposes of determining the distribution period pursuant to this paragraph, and
‘‘(III) at least one of the beneficiaries of which is an eligible designated beneficiary described in subclause (III) or (IV) of subparagraph (E)(ii).
‘‘(vi) APPLICATION TO CERTAIN ELIGIBLE RETIRE-
MENT PLANS.—For purposes of applying the provisions of this subparagraph in determining amounts required to be distributed pursuant to this paragraph, all eligible retirement plans (as defined in section 402(c)(8)(B), other than a defined benefit plan described in clause (iv) or (v) thereof or a qualified trust which is a part of a defined benefit plan) shall be treated as a defined contribution plan.’’.
(2) DEFINITION OF ELIGIBLE DESIGNATED BENEFICIARY.— Section 401(a)(9)(E) of such Code is amended to read as follows: ‘‘(E) DEFINITIONS AND RULES RELATING TO DESIGNATED
BENEFICIARIES.—For purposes of this paragraph—
‘‘(i) DESIGNATED BENEFICIARY.—The term ‘des-
ignated beneficiary’ means any individual designated as a beneficiary by the employee.
‘‘(ii) ELIGIBLE DESIGNATED BENEFICIARY.—The term
‘eligible designated beneficiary’ means, with respect to any employee, any designated beneficiary who is—
‘‘(I) the surviving spouse of the employee,

‘‘(II) subject to clause (iii), a child of the employee who has not reached majority (within the meaning of subparagraph (F)),
‘‘(III) disabled (within the meaning of section 72(m)(7)),
‘‘(IV) a chronically ill individual (within the meaning of section 7702B(c)(2), except that the requirements of subparagraph (A)(i) thereof shall only be treated as met if there is a certification that, as of such date, the period of inability described in such subparagraph with respect to the individual is an indefinite one which is reason- ably expected to be lengthy in nature), or
‘‘(V) an individual not described in any of the preceding subclauses who is not more than 10 years younger than the employee.
The determination of whether a designated beneficiary is an eligible designated beneficiary shall be made as of the date of death of the employee.
‘‘(iii) SPECIAL RULE FOR CHILDREN.—Subject to
subparagraph (F), an individual described in clause (ii)(II) shall cease to be an eligible designated bene- ficiary as of the date the individual reaches majority and any remainder of the portion of the individual’s interest to which subparagraph (H)(ii) applies shall be distributed within 10 years after such date.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in this subsection, the amendments made by this section shall apply to distribu- tions with respect to employees who die after December 31, 2019.
(2) COLLECTIVE BARGAINING EXCEPTION.—In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before the date of enactment of this Act, the amendments made by this section shall apply to distribu- tions with respect to employees who die in calendar years beginning after the earlier of—
(A) the later of—
(i) the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof agreed to on or after the date of the enactment of this Act), or
(ii) December 31, 2019, or
(B) December 31, 2021.
For purposes of subparagraph (A)(i), any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any require- ment added by this section shall not be treated as a termination of such collective bargaining agreement.
(3) GOVERNMENTAL PLANS.—In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), paragraph (1) shall be applied by substituting ‘‘December 31, 2021’’ for ‘‘December 31, 2019’’.
(4) EXCEPTION FOR CERTAIN EXISTING ANNUITY CON- TRACTS.—

(A) IN GENERAL.—The amendments made by this sec- tion shall not apply to a qualified annuity which is a binding annuity contract in effect on the date of enactment of this Act and at all times thereafter.
(B) QUALIFIED ANNUITY.—For purposes of this para- graph, the term ‘‘qualified annuity’’ means, with respect to an employee, an annuity—
(i) which is a commercial annuity (as defined in section 3405(e)(6) of the Internal Revenue Code of 1986);
(ii) under which the annuity payments are made over the life of the employee or over the joint lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the joint life expectancy of such employee and a designated beneficiary) in accordance with the regulations described in section 401(a)(9)(A)(ii) of such Code (as in effect before such amendments) and which meets the other requirements of section 401(a)(9) of such Code (as so in effect) with respect to such payments; and
(iii) with respect to which—
(I) annuity payments to the employee have begun before the date of enactment of this Act, and the employee has made an irrevocable election before such date as to the method and amount of the annuity payments to the employee or any designated beneficiaries; or
(II) if subclause (I) does not apply, the employee has made an irrevocable election before the date of enactment of this Act as to the method and amount of the annuity payments to the employee or any designated beneficiaries.
(5) EXCEPTION FOR CERTAIN BENEFICIARIES.—
(A) IN GENERAL.—If an employee dies before the effec- tive date, then, in applying the amendments made by this section to such employee’s designated beneficiary who dies after such date—
(i) such amendments shall apply to any beneficiary of such designated beneficiary; and
(ii) the designated beneficiary shall be treated as an eligible designated beneficiary for purposes of applying section 401(a)(9)(H)(ii) of the Internal Rev- enue Code of 1986 (as in effect after such amendments).
(B) EFFECTIVE DATE.—For purposes of this paragraph, the term ‘‘effective date’’ means the first day of the first calendar year to which the amendments made by this section apply to a plan with respect to employees dying on or after such date.
SEC. 402. INCREASE IN PENALTY FOR FAILURE TO FILE.
(a) IN GENERAL.—The second sentence of subsection (a) of sec- tion 6651 of the Internal Revenue Code of 1986 is amended by striking ‘‘$330’’ and inserting ‘‘$435’’.
(b) INFLATION ADJUSTMENT.—Section 6651(j)(1) of such Code is amended by striking ‘‘$330’’ and inserting ‘‘$435’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to returns the due date for which (including extensions) is after December 31, 2019.
SEC. 403. INCREASED PENALTIES FOR FAILURE TO FILE RETIREMENT PLAN RETURNS.
(a) IN GENERAL.—Subsection (e) of section 6652 of the Internal Revenue Code of 1986 is amended—
(1) by striking ‘‘$25’’ and inserting ‘‘$250’’; and
(2) by striking ‘‘$15,000’’ and inserting ‘‘$150,000’’.
(b) ANNUAL REGISTRATION STATEMENT AND NOTIFICATION OF CHANGES.—Subsection (d) of section 6652 of the Internal Revenue Code of 1986 is amended—
(1) by striking ‘‘$1’’ both places it appears in paragraphs
(1) and (2) and inserting ‘‘$10’’;
(2) by striking ‘‘$5,000’’ in paragraph (1) and inserting ‘‘$50,000’’; and
(3) by striking ‘‘$1,000’’ in paragraph (2) and inserting ‘‘$10,000’’.
(c) FAILURE TO PROVIDE NOTICE.—Subsection (h) of section 6652 of the Internal Revenue Code of 1986 is amended—
(1) by striking ‘‘$10’’ and inserting ‘‘$100’’; and
(2) by striking ‘‘$5,000’’ and inserting ‘‘$50,000’’.
(d) EFFECTIVE DATE.—The amendments made by this section shall apply to returns, statements, and notifications required to be filed, and notices required to be provided, after December 31, 2019.
SEC. 404. INCREASE INFORMATION SHARING TO ADMINISTER EXCISE TAXES.
(a) IN GENERAL.—Section 6103(o) of the Internal Revenue Code of 1986 is amended by adding at the end the following new para- graph:
‘‘(3) TAXES IMPOSED BY SECTION 4481.—Returns and return information with respect to taxes imposed by section 4481 shall be open to inspection by or disclosure to officers and employees of United States Customs and Border Protection of the Department of Homeland Security whose official duties require such inspection or disclosure for purposes of admin- istering such section.’’.
(b) CONFORMING AMENDMENTS.—Paragraph (4) of section 6103(p) of the Internal Revenue Code of 1986 is amended by striking ‘‘or (o)(1)(A)’’ each place it appears and inserting ‘‘, (o)(1)(A), or (o)(3)’’.

TITLE V—TAX RELIEF FOR CERTAIN CHILDREN
SEC. 501. MODIFICATION OF RULES RELATING TO THE TAXATION OF UNEARNED INCOME OF CERTAIN CHILDREN.
(a) IN GENERAL.—Section 1(j) of the Internal Revenue Code of 1986 is amended by striking paragraph (4).
(b) COORDINATION WITH ALTERNATIVE MINIMUM TAX.—Section 55(d)(4)(A) of the Internal Revenue Code of 1986 is amended by striking ‘‘and’’ at the end of clause (i)(II), by striking the period

at the end of clause (ii)(III) and inserting ‘‘, and’’, and by adding at the end the following new clause:
‘‘(iii) subsection (j) of section 59 shall not apply.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as otherwise provided in this sub- section, the amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2019.
(2) COORDINATION WITH ALTERNATIVE MINIMUM TAX.—The amendment made by subsection (b) shall apply to taxable years beginning after December 31, 2017.
(3) ELECTIVE RETROACTIVE APPLICATION.—A taxpayer may elect (at such time and in such manner as the Secretary of the Treasury (or the Secretary’s designee) may provide) for the amendment made by subsection (a) to also apply to taxable years of the taxpayer which begin in 2018, 2019, or both (as specified by the taxpayer in such election).
TITLE VI—ADMINISTRATIVE PROVISIONS
SEC. 601. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any retirement plan or contract amendment—
(1) such retirement plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in subsection (b)(2)(A); and
(2) except as provided by the Secretary of the Treasury (or the Secretary’s delegate), such retirement plan shall not fail to meet the requirements of section 411(d)(6) of the Internal Revenue Code of 1986 and section 204(g) of the Employee Retirement Income Security Act of 1974 by reason of such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to any amend- ment to any retirement plan or annuity contract which is made—
(A) pursuant to any amendment made by this Act or pursuant to any regulation issued by the Secretary of the Treasury or the Secretary of Labor (or a delegate of either such Secretary) under this Act; and
(B) on or before the last day of the first plan year beginning on or after January 1, 2022, or such later date as the Secretary of the Treasury may prescribe.
In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), or an applicable collectively bargained plan in the case of section 401 (and the amendments made thereby), this paragraph shall be applied by substituting ‘‘2024’’ for ‘‘2022’’. For purposes of the preceding sentence, the term ‘‘applicable collectively bargained plan’’ means a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and
1 or more employers ratified before the date of enactment of this Act.
(2) CONDITIONS.—This section shall not apply to any amendment unless—
(A) during the period—

(i) beginning on the date the legislative or regu- latory amendment described in paragraph (1)(A) takes effect (or in the case of a plan or contract amendment not required by such legislative or regulatory amend- ment, the effective date specified by the plan); and
(ii) ending on the date described in paragraph (1)(B) (as modified by the second sentence of paragraph (1)) (or, if earlier, the date the plan or contract amend- ment is adopted),
the plan or contract is operated as if such plan or contract amendment were in effect; and
(B) such plan or contract amendment applies retro- actively for such period.

One sheet summary of Freedom Benefits

Yesterday an inspiring business adviser Sara Rosenberg of Powermatch, wrote a social media post that said that every business should have a one page summary that answers four questions:

  1. The problem you solve
  2. A very brief description of your process
  3. How you are different than everyone else that does what you do
  4. The results that happen when someone hires you

This is a powerful idea but one that I have not ever considered, So I spent some time and came up with this document that flows exactly in the 4 part format she suggests.

Update: This post was originally published in January 2018 and is now updated for 2020. The 2020 version expanded to two 8 1/2″ x 11″ pages of formatted print so I’m calling it a “one sheet summary”.

Here is the draft of the one sheet summary:

freedom benefits page 2020

Tax-free employee benefits

One of the primary goals of small business employee benefit plans is to provide tax-free compensation to employees.

Employer-provided employee benefits are generally taxable in the same way as regular wages. There are exceptions, however, that allow tax-free treatment. Freedom Benefits focuses on allowing employers to maximize those nontaxable benefits that are selected by individual employees. The savings can add up to thousands of dollars in tax savings to both the employer and each individual employee.

Nontaxable benefits include:

Accident and health benefits.
Achievement awards.
Adoption assistance.
Athletic facilities.
De minimis (minimal) benefits.
Dependent care assistance.
Educational assistance.
Employee discounts.
Employee stock options.
Employer-provided cell phones.
Group-term life insurance coverage.
Health savings accounts (HSAs).
Lodging on your business premises.
Meals.
No-additional-cost services.
Retirement planning services.
Transportation (commuting) benefits.
Tuition reduction.
Working condition benefits

Employers  must meet other additional administrative requirements to keep each of these listed benefits free of federal income taxes1 to employees. That’s where Freedom Benefits come in. These benefits are tax-deductible by the employer and not taxable to the employee when provided under a Freedom Benefits small business employee benefit plan.

Employee contributions

Employees typically elect to receive compensation in the form of tax-free benefits instead of cash compensation,

Employer contributions

We generally recommend that employers allocate a minimum of 2% of total payroll of eligible employees to this type of employee benefit plan. When this funding requirement is met, the employer meets the requirements for non-discriminatory benefits. when this amount is allocated to benefits provided by us then no additional fees are charged by Freedom Benefits 2.

Ask for a proposal on the tax savings that can be offered to your firm’s employees.

 


1 In some cases the taxation under state laws varies from the federal tax treatment. Freedom Benefits does not provide tax advice except when included as part of a separate payroll services agreement or other tax services agreement.
2 Freedom Benefits charges a $300 initial consultation and proposal fee that is applied to the amount of available employer-paid benefits if the plan is started with the proposed amount of employer funding.

Where we stand on tax cuts and bigger paychecks

It is one thing for Congress to pass a tax bill but it is quite another to see increases in the paychecks of employees – especially the paychecks of America’s small businesses. The mechanical process of increasing paychecks is dependent of the system of controls used by employers and their payroll contractors. The IRS recently issued statements saying that might happen by the end of February 2018 thanks to the independent efforts of payroll companies acting more quickly than the IRS. But for small businesses the process of boosting employee paychecks may take longer.

As of today. February 21, 2018 this is where small businesses stand on he issues:

  • Form W4 for 2017 is obsolete bu can be used until February 28, 2018 per IRS Notice 2018-14
  • IRS has not yet issued a new Form W4 for 2018. (A draft version published cannot actually be used yet because it is missing important information). Obviously employers will not have time to have the new forms. when issued, executed and in use by March 1, 2018.
  • Revised 2018 withholding tables are available so employers should be clear on their legal requirement to withhold payroll taxes.

Payroll accountants and their software platforms are generally proficient in these matters so the only problems I expect are among those relatively few ‘do-it-yourself’ manual payroll operations.


While this article focuses on employer actions and responsibilities, I  strongly recommend that individual taxpayers prepare an estimate of 2018 taxes based on the new law to accurately plan for payroll tax withholding.


I am pleased to discuss this issue as it relates to your small business.

Small Business Employee Benefits Made Easy!

Small business employee benefits are managed much more effectively when the business owner has a basic working knowledge of the components that make the plan successful. This bog post lists those basic components.

  1. Understand the purpose of the employee benefit plan – Usually the goal, at least the starting point goal, is to provide benefits that are tax-deductible as a business expense and tax-free to the employee. If not for this tax advantage, there would be little incentive for employers to be involved. Each employer has a unique and specific goal and so the employee benefit plan is designed to match that goal.
  2. Understand what is not the purpose of an employee benefit plan – No longer do employers provide a ‘one size fits all’ and ‘take it or leave it’ benefit plan design. Today’s employee benefits are designed to extract and maximize the benefits and efficiencies of consumer-driven choices.
  3. Communication – Good communication is the key to a successful employee benefit plan. All of the stakeholders – the employer, employees, spouses and dependents of employees, plan administrator, claim administrator, insurer, and payroll company must feel comfortable that they have a reliable source of information. A reputable benefit plan adviser makes all the difference.
  4. Documentation – Employer resolutions, Enrollment forms, Plan Documents and summary plan Descriptions are typically required. A non-attorney typically provides these sample documents but cannot provide legal advice. The employer is encouraged to seek independent legal advice on all business documents.
  5. Claim accounting – Nowadays this is typically handled via secure portal, email or text message, at the option of the employee. The result is an approved claim report that is sent to payroll processing.
  6. Payroll processing – Most employee benefit transactions between the employer and the employe are handled through a payroll processing service. Once the benefits accounts are set up properly within the payroll system, this process usually flows smoothly. Typically the payroll processor sends reports back to the employer for general accounting purposes.
  7. Tax filings – some employee benefit plans require year-end filings either singularly or as a data inclusion on another form like a W2. Again, this process flows effortlessly within a properly set up payroll and benefits administration system.

Freedom Benefits is prepared to make all the details flow effortlessly. Just give a call to discuss your own small business employee benefit plan. 

Summary of the Tax Cut and Jobs Act

(Reportedly by Kathy Pickering – Executive Director, The Tax Institute, December 20, 2017, reproduced here after it was widely circulated on social media where I found it). Some portions related to small business employee benefit plans are highlighted.

Three highlights you need to know:

Virtually all taxpayers are impacted by the changes in the tax reform legislation
Those who itemize will have fewer expenses to deduct and a higher standard to cross
Changes to child-related tax benefits impact families
In the weeks to come, we’ll dive into each of these sections and help you identify how you will be impacted on your 2018 return.

How does tax reform affect you?

Virtually all taxpayers are impacted by changes in the tax reform legislation. Find out what could be changing on your return.

Congress just passed the Tax Cuts and Jobs Act (TCJA). Next, it will go to President Trump to be signed into law. The TCJA makes changes that affect all kinds of taxes – individual, corporate, partnership and other “pass through” business entities, estate, and even tax-exempt organizations. This article looks at tax changes for individuals.

Most changes take effect on January 1, 2018. Tax returns filed during the spring of 2018 (for the 2017 tax year) are generally not affected. But knowing about these changes now will help taxpayers plan and understand how the TCJA could impact their take-home pay and their 2018 tax refund.

Tax brackets and tax rates change for most taxpayers

Most tax filers will pay tax using a new tax bracket and tax rate structure. However, the tax rates remain progressive, meaning tax rates rise as income increases.

In comparison to previous tax brackets and tax rates, the new rates due to the Tax Cuts and Jobs Act are slightly lower and the brackets are generally slightly broader.

Rates under the TCJA Pre-TCJA rates
10%, 12%, 22%, 24%, 32%, 35%, 37% 10%, 15%, 25%, 28%, 33%, 35%, 39.6%
View the 2018 tax rates and brackets for each filing status

Under the 2017 tax brackets and rates, a single taxpayer with $40,000 of taxable income would be in the 25% tax bracket and would have a tax liability of $5,739.

Under the 2018 tax brackets and rates, a single taxpayer with $40,000 of taxable income would be in the 22% tax bracket and would have a tax liability of $4,740.

Going forward, the brackets will be adjusted based on a different inflation measure – the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) – that is expected to grow more slowly than the previous inflation measure.

While most taxpayers will pay less, some taxpayers will pay a slightly higher tax rate under the TCJA. This is most likely to impact an upper-middle class individual with a marginal tax rate of 35%, up from 33%.

Tip: Tax brackets, rates and credits play a big part in how much tax a taxpayer will pay, but the amount of taxable income plays perhaps an even bigger role.

Personal and dependent exemptions are eliminated

In 2017, taxpayers claimed a personal exemption for themselves, their spouse (if married filing jointly) and each qualifying child or qualifying relative. Each exemption reduced taxable income by over $4,000 in 2017. Under the TCJA, personal and dependent exemptions are eliminated from 2018 through 2025.

In 2026, taxpayers can claim personal and dependent exemptions again.

Child tax credit increased through 2025

Through 2025, the TCJA increases the maximum child tax credit from $1,000 to $2,000 per qualifying child. The refundable portion of the credit increases from $1,000 to $1,400. That means taxpayers who don’t owe tax can still claim a credit of up to $1,400. The higher child tax credit will be available for qualifying children under age 17, as under current law.

Also, the child tax credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) of over $200,000 or $400,000 (MFJ). This phaseout more than doubles the phaseout range under current law. Taxpayers can’t claim a child tax credit for a child who does not have a Social Security Number (SSN) by the due date of the return.

In 2026, the child tax credit will change to the rules used in 2017, with a maximum credit of $1,000 per qualifying child, and lower phaseouts.

New credit for non-child dependents available through 2025

The TCJA allows a new $500 nonrefundable credit for dependents who do not qualify for the child tax credit. Taxpayers can claim this credit for children who are too old for the child tax credit, as well as for non-child dependents. There is no SSN requirement to claim this credit, so taxpayers can claim the credit for children with an Individual Tax Identification Number (ITIN) or an Adoption Tax Identification Number (ATIN) if they otherwise qualify.

Taxpayers cannot claim the credit for themselves or their spouse (if MFJ).

In 2026, the credit for non-child dependents will no longer be available.

Standard deduction increases through 2025

The standard deduction will increase. In 2018, the standard deduction amounts will be:

$12,000 (single)
$18,000 (head of household)
$24,000 (married filing jointly)
Because of the increase and because of changes to the rules for itemized deductions, many taxpayers who previously itemized deductions will now claim the standard deduction instead. This means they may not have to file Schedule A. However, taxpayers may want to continue to track their expenses so they have the information to make the comparison and choose the tax benefit with the bigger value.

Many itemized deductions eliminated, limited or modified

 

Before the tax reform bill takes effect, about 30% of taxpayers itemized deductions on Schedule A, instead of taking the standard deduction associated with their filing status. However, the TCJA has a large impact on itemized deductions, as several itemized deductions have been eliminated or modified.

 

Fully eliminated

Miscellaneous itemized deductions subject to the 2-percent floor
Employee business expenses
Tax preparation fees
Investment interest expenses
Personal casualty and theft losses (except for certain losses in certain federally declared disaster areas)
Limited

State and local income taxes (SALT) or state and local sales tax, plus real property taxes, may be deducted, but only up to a combined total limit of $10,000 ($5,000 if MFS)
Home mortgage interest has several modifications:
Interest on a home equity loan is no longer deductible
Interest on a new home mortgage is limited to interest paid on a maximum of $750,000 ($375,000 if MFS) of a new mortgage taken out after December 14, 2017.
Taxpayers with a mortgage taken out before December 15, 2017 can continue to claim home mortgage interest on up to $1 million ($500,000 if MFS) going forward; the $1 million ($500,000 if MFS) limit continues to apply to a refinanced mortgage incurred before December 15, 2017.
Modified

Charitable contributions: The deduction for charitable contributions is expanded so that taxpayers may contribute up to 60% of their adjusted gross income, rather than up to 50%.
Gambling losses remain deductible, but only to the extent of gambling winnings. The definition of losses from wagering transactions is modified.
Medical expenses remain deductible. For 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5% of AGI. In 2019, the threshold will increase to 10% of AGI.
The overall limit on itemized deductions (often called the Pease limit) is also eliminated by tax reform under President Trump.

Most of the changes to itemized deductions will remain in place through 2025. In 2026, itemized deductions will generally follow the rules in place before the TCJA.

Many “Above-the-line” deductions eliminated, limited or modified

 

As with itemized deductions, many “above-the-line” adjustments have also been eliminated or limited:

Fully eliminated

Alimony deduction for payments made under orders executed after December 31, 2018. For new orders, the TCJA no longer allows payors to deduct alimony payments or requires the recipient to report income for alimony received. (Payments under existing orders are grandfathered and may continue to be deducted by the payor and should be reported as income by the recipient.)
Tuition and fees deduction expired under previous law and was not renewed by the TCJA.
Domestic production activities deduction (DPAD)
Mostly eliminated

Moving expenses are disallowed (except for the expenses of active members of the military who relocate pursuant to military orders).

Stays the same

Educator expense deduction (K-12 educators can deduct up to $250 per year for unreimbursed classroom supplies.)
Student loan interest of up to $2,500 can be deducted by qualifying taxpayers for interest paid on student loans.
Health savings account (HSA) deduction
IRA deduction
Deductions for self-employed taxpayers (SE tax, SE health insurance, SE qualified retirement plan contributions)
Some education benefits remain the same, others modified

Taxpayers can continue to claim the American Opportunity Credit, a credit of up to $2,500 per year for the first four years of college education, and the lifetime learning credit, a credit of up to $2,000 per year for qualifying education expenses.

 

Taxpayers can continue to use savings bonds for education, educational assistance programs provided by employers, 529 plans and Coverdell education savings plans to save for college. Some scholarships and tuition waivers can continue to be treated as tax-free if certain conditions are met.

 

529 plans can now be used for K-12 expenses.

Plans can distribute up to $10,000 each year for tuition incurred for enrollment or attendance at a public, private, or religious elementary or secondary school.
The $10,000 limit for elementary and secondary school is applied on a per-student limit.

Taxpayers whose student loans are cancelled because death or total and permanent disability may be eligible to treat the cancellation of debt as tax-free.

Health care penalty eliminated

The penalty for failure to obtain health insurance coverage (the “individual mandate”) will be eliminated beginning in 2019. Taxpayers who did not have coverage in 2017 or 2018 will continue to owe a penalty for those years, unless they qualify for an exemption.

Self-employed taxpayers may claim a new deduction for qualified business income

Self-employed taxpayers can deduct up to 20% of qualified business income from a sole proprietorship, partnership, or S corporation. There are a few limitations placed on the deductions, but many small businesses will be able to benefit.

Example: A self-employed taxpayer has taxable income of $60,000. All of the income is from the business. The qualified business income deduction is $12,000 ($60,000 × 20%).

Taxpayers may benefit by adjusting withholding and estimated taxes

Because of all the changes made by the TCJA, taxpayers should consult their tax professionals for next steps.

Tax professionals can help with Form W-4 planning by verifying they have the correct income tax withholding set up with their employer.

Taxpayers who are self-employed and others who make quarterly estimated tax payments should check with a tax professional and determine whether they need to adjust their estimated payments.

Taking the time to make changes now will help ensure a smooth transition from year to year and eliminate refund surprises.

The new world of financial planning for small businesses

Financial planning has turned upside down this week for small business owners and most are still spinning to get a grip on the topic. Details of the new Republican road map will emerge over time but it t already clear that unprecedented opportunity to save money through proactive financial planning.

The most immediate areas of change and opportunity are:

  1. federal income taxes – significant tax reductions will be available for the most profitable businesses. These whose tax planning was restricted by the Alternate Minimum Tax will get a new lease on possible tax savings.
  2. employee benefits – fewer regulations will lead to more opportunity for creativity and savings. Freedom Benefits expects to re-introduce a wide range of cost-saving options that were retired with the passage of the Affordable Care Act in 2010.
  3. payroll taxes – adjustments will be needed for most firms and their employees. Fortunately today’s online tools reduce the cost while simultaneously improving the reliability of payroll services.

Tax free treatment of amounts received through health plans

The tax treatment of amounts received through accident and health plans is governed by Section 105 of the Internal Revenue Code. The treatment is relatively simple; the only common difficulty comes from the distinctions in treatment between insured and uninsured health plans. The tax code is reproduced below.

There is a minor typographical error in this section of the tax code. The text in (h)(7)(b) is missing a closing parentheses,

26 USC § 105 – Amounts received under accident and health plans

(a) Amounts attributable to employer contributions
Except as otherwise provided in this section, amounts received by an employee through accident or health insurance for personal injuries or sickness shall be included in gross income to the extent such amounts
(1) are attributable to contributions by the employer which were not includible in the gross income of the employee, or
(2) are paid by the employer.
(b) Amounts expended for medical care
Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include amounts referred to in subsection (a) if such amounts are paid, directly or indirectly, to the taxpayer to reimburse the taxpayer for expenses incurred by him for the medical care (as defined in section 213(d)) of the taxpayer, his spouse, his dependents (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), and any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27. Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this subsection.
(c) Payments unrelated to absence from work
Gross income does not include amounts referred to in subsection (a) to the extent such amounts—
(1)constitute payment for the permanent loss or loss of use of a member or function of the body, or the permanent disfigurement, of the taxpayer, his spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), and
(2)are computed with reference to the nature of the injury without regard to the period the employee is absent from work.
[(d) Repealed. Pub. L. 98–21, title I, § 122(b),Apr. 20, 1983, 97 Stat. 87]
(e) Accident and health plans
For purposes of this section and section 104—
(1)amounts received under an accident or health plan for employees, and
(2)amounts received from a sickness and disability fund for employees maintained under the law of a State or the District of Columbia,
shall be treated as amounts received through accident or health insurance.
(f) Rules for application of section 213
For purposes of section 213(a) (relating to medical, dental, etc., expenses) amounts excluded from gross income under subsection (c) or (d) shall not be considered as compensation (by insurance or otherwise) for expenses paid for medical care.
(g) Self-employed individual not considered an employee
For purposes of this section, the term “employee” does not include an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals).
(h) Amount paid to highly compensated individuals under a discriminatory self-insured medical expense reimbursement plan
(1) In general
In the case of amounts paid to a highly compensated individual under a self-insured medical reimbursement plan which does not satisfy the requirements of paragraph (2) for a plan year, subsection (b) shall not apply to such amounts to the extent they constitute an excess reimbursement of such highly compensated individual.
(2) Prohibition of discrimination
A self-insured medical reimbursement plan satisfies the requirements of this paragraph only if—
(A)the plan does not discriminate in favor of highly compensated individuals as to eligibility to participate; and
(B)the benefits provided under the plan do not discriminate in favor of participants who are highly compensated individuals.
(3) Nondiscriminatory eligibility classifications
(A) In general
A self-insured medical reimbursement plan does not satisfy the requirements of subparagraph (A) of paragraph (2) unless such plan benefits—
(i)70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan; or
(ii)such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of highly compensated individuals.
(B) Exclusion of certain employees
For purposes of subparagraph (A), there may be excluded from consideration—
(i)employees who have not completed 3 years of service;
(ii)employees who have not attained age 25;
(iii)part-time or seasonal employees;
(iv)employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if accident and health benefits were the subject of good faith bargaining between such employee representatives and such employer or employers; and
(v)employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).
(4) Nondiscriminatory benefits
A self-insured medical reimbursement plan does not meet the requirements of subparagraph (B) of paragraph (2) unless all benefits provided for participants who are highly compensated individuals are provided for all other participants.
(5) Highly compensated individual defined
For purposes of this subsection, the term “highly compensated individual” means an individual who is—
(A)one of the 5 highest paid officers,
(B)a shareholder who owns (with the application of section 318) more than 10 percent in value of the stock of the employer, or
(C)among the highest paid 25 percent of all employees (other than employees described in paragraph (3)(B) who are not participants).
(6) Self-insured medical reimbursement plan
The term “self-insured medical reimbursement plan” means a plan of an employer to reimburse employees for expenses referred to in subsection (b) for which reimbursement is not provided under a policy of accident and health insurance.
(7) Excess reimbursement of highly compensated individual
For purposes of this section, the excess reimbursement of a highly compensated individual which is attributable to a self-insured medical reimbursement plan is—
(A)in the case of a benefit available to highly compensated individuals but not to all other participants (or which otherwise fails to satisfy the requirements of paragraph (2)(B)), the amount reimbursed under the plan to the employee with respect to such benefit, and
(B)in the case of benefits (other than benefits described in subparagraph (A) paid to a highly compensated individual by a plan which fails to satisfy the requirements of paragraph (2), the total amount reimbursed to the highly compensated individual for the plan year multiplied by a fraction—
(i)the numerator of which is the total amount reimbursed to all participants who are highly compensated individuals under the plan for the plan year, and
(ii)the denominator of which is the total amount reimbursed to all employees under the plan for such plan year.
In determining the fraction under subparagraph (B), there shall not be taken into account any reimbursement which is attributable to a benefit described in subparagraph (A).
(8) Certain controlled groups, etc.
All employees who are treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section.
(9) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section.
(10) Time of inclusion
Any amount paid for a plan year that is included in income by reason of this subsection shall be treated as received or accrued in the taxable year of the participant in which the plan year ends.
(i) Sick pay under Railroad Unemployment Insurance Act
Notwithstanding any other provision of law, gross income includes benefits paid under section 2(a) of the Railroad Unemployment Insurance Act for days of sickness; except to the extent such sickness (as determined in accordance with standards prescribed by the Railroad Retirement Board) is the result of on-the-job injury.
(j) Special rule for certain governmental plans
(1) In general
For purposes of subsection (b), amounts paid (directly or indirectly) to the taxpayer from an accident or health plan described in paragraph (2) shall not fail to be excluded from gross income solely because such plan, on or before January 1, 2008, provides for reimbursements of health care expenses of a deceased plan participant’s beneficiary.
(2) Plan described
An accident or health plan is described in this paragraph if such plan is funded by a medical trust that is established in connection with a public retirement system and that—
(A)has been authorized by a State legislature, or
(B)has received a favorable ruling from the Internal Revenue Service that the trust’s income is not includible in gross income under section 115.

Other resources:

Tax changes triggered by federal health reform law

 

A summary of tax issues related to employer-provided health benefits

Taxation of employer-provided health benefits is often a misunderstood topic especially in the years after implementation of the Affordable Care Act market reform provisions. Yet the fundamental tax treatment of health plans and health benefits has not changed in decades.

Four key factual issues now control the tax treatment of employer-provided health benefits under U.S. law:

  1. Whether the health benefit was provided through insurance or outside of insurance,
  2. If provided through insurance, whether the insurance was ACA compliant, exempted, or non-compliant,
  3. Whether the employer’s health plan meets legal requirements. (I used to write “whether an employer plan exists” but now presume that all employer-provided health benefits are part of a “plan” for tax purposes,
  4. Whether the benefit involved employee contributions as a salary reduction.

There are different components of tax law to consider that affect employer-provided health benefits including:

  1. Deductibility of the expense by the employer under IRC Section 162 (ordinary business expenses). Almost all employee health plan expenses do qualify as an ordinary tax-deductible business expense for the employer.
  2. Taxability of benefits to the employee, as determined by IRC Section 3121 (definition of wages). In the past almost all employer-provided health benefits were received tax-free by the employee but this is no longer presumed to be the case following implementation of the Affordable Care Act.
  3. Excise taxes imposed on non-compliant employer health plans under IRC Section 4980D. This is the new ‘hot issue’ for employers in 2014 following implementation of the Affordable Care Act. Many employer health plans are subject to a new 10% excise penalty, a few will be subject to much higher penalty amounts.
  4. Taxation for FICA and FUTA and state income taxes. This tax treatment may be different than the tax treatment for federal income taxes.

There are many resources available for tax advisers and business owners. A few are listed here:

IRS – Publication 15-B

IRS – Employer Health Care Arrangements

Freedom Benefits – Small business health plan compliance checklist 

Novak, Tony – Taxation of health insurance

Novak. Tony – 18 Things Small Businesses Must Know About Health Reimbursement Arrangements (HRAs)