Employers need help implementing SECURE 2.0: Advocacy group asks IRS for guidance

Decisions made in Washington, D.C., this year will have far-reaching implications for Americans’ health-care coverage and retirement savings. The ERISA Industry Committee (ERIC) is helping make sure the industry’s voice is being heard.

“ERIC recognizes the important role the Department of Treasury and IRS play in providing large health-care and retirement plan sponsors the guidance needed to most effectively provide benefits to millions of American workers and their families,” President and CEO James Gelfand wrote in a letter to both agencies. “The agencies have opportunities to provide guidance and regulations that make plan administration less burdensome, improve efficiency and drive better benefits for plan participants.”

Since the IRS’ last Priority Guidance Plan was published, “the SECURE 2.0 Act was enacted. ERIC supported this comprehensive legislation … However, the implementation of its provisions … will be crucial to its success,” ERIC wrote in the letter.

Therefore, ERIC urges Treasury/IRS to include the following on its 2023-2024 priority guidance plan:

Retirement recommendations

ERIC’s retirement recommendations, which all are mostly related to SECURE 2.0 implementation, include:

 Matching contributions for student loan payments. The Treasury Department and IRS should clarify the “reasonable procedures” plan that sponsors may establish under the statute for employees to claim the match and address the certification of loan payments permitted or required and the implications of fraud.

Catch-up contributions. The significant operational challenges posed by this provision argue for transition relief so plan sponsors can work with recordkeepers to develop and update systems to implement these requirements. ERIC urges the IRS and Treasury Department to prioritize this guidance and relief.

Emergency savings for working Americans. Allowing participants access to savings for emergencies will encourage participation in retirement programs, particularly for those who may be hesitant to “lock away” money in case they need it later.

Clarify the automatic enrollment mandate exemption for existing plans. The Treasury Department and IRS should clarify that this mandate does not apply to plans that can trace their lineage to a grandfathered plan and that plan design changes or switching service providers does not affect grandfathered status.

Overpayments and self-correction. .Although many aspects of this provision are in the interpretive jurisdiction of the Department of Labor, close coordination with the Treasury Department and IRS will be needed.

Optional Roth match. Roth urges agencies to permit as much employer flexibility as possible, especially if there is a desire for sponsors to seriously consider this option.

Notice and disclosure. ERIC recommends reducing unneeded notices and simplifying current disclosures while still providing important information regarding plan costs and financial literacy.

Missing participants. The IRS should coordinate with the Pension Benefit Guaranty Corporation and the Department of Labor to harmonize guidance and provide direction to plans and employers, recognizing the unique circumstances of each employer.

Remote witnessing. During the pandemic, the IRS extended relief from its requirement that permitted certain participant elections to be witnessed in the physical presence of a notary public or plan representative and proposed a regulation last December to extend this relief. ERIC supported the proposal and urges the IRS to finalize the regulation.

In-service distributions. The IRS asked for stakeholder input on this question but has not issued guidance. This issue should be addressed so employers considering offering this option have clarity.

Paid leave. Guidance should be provided on the federal tax treatment of contributions to — and benefits from — paid family and medical leave programs.

Related: Employer advocacy group urges Congress to improve employee health care and retirement

Recommendations for health policy

ERIC’s recommendations for health policy include:

Improve high-deductible health plans. The Treasury Department should provide technical guidance to eliminate the spousal flexible spending account glitch; give employers flexibility to offer first-dollar coverage of high-value services; and allow the coordination of HSA-eligible HDHPs with supplemental benefits such as direct primary care, TRICARE benefits, Medicare (in the case of working seniors) and other appropriate benefits.

Streamline employer reporting requirements under the Affordable Care Act. Congress currently is working to pass the Commonsense Reporting Act that would enable employers to report employer-sponsored health plan information to the IRS immediately before the open enrollment in the state and federal exchanges. ERIC encourages the IRS to issue best practices for how the agency can improve and simplify the current reporting process.

Promulgate regulations updating electronic delivery rules. ERIC supported the 2020 Department of Labor regulation permitting plan sponsors to provide electronic delivery as the default option for sending retirement plan notices and welcomes further efforts by IRS and Treasury to facilitate electronic delivery.

 Improve high-deductible health plans. The Treasury Department should provide technical guidance to eliminate the spousal flexible spending account glitch; give employers flexibility to offer first-dollar coverage of high-value services; and allow the coordination of HSA-eligible HDHPs with supplemental benefits such as direct primary care, TRICARE benefits, Medicare (in the case of working seniors) and other appropriate benefits.

Streamline employer reporting requirements under the Affordable Care Act. Congress currently is working to pass the Commonsense Reporting Act that would enable employers to report employer-sponsored health plan information to the IRS immediately before the open enrollment in the state and federal exchanges. ERIC encourages the IRS to issue best practices for how the agency can improve and simplify the current reporting process.

Promulgate regulations updating electronic delivery rules. ERIC supported the 2020 Department of Labor regulation permitting plan sponsors to provide electronic delivery as the default option for sending retirement plan notices and welcomes further efforts by IRS and Treasury to facilitate electronic delivery.

“ERIC believes that the guidance requested above would resolve issues affecting broad classes of taxpayers, including employee benefit plans, plan sponsors and plan participants,” Gelfand concluded in the letter. “The recommended guidance would address several unanswered questions and also reduce burdens. The requested guidance would modernize and streamline current requirements, could be administered in a uniform manner and would not require extraordinarily complicated regulatory drafting.”