The Bipartisan Budget Act of 2018 recently passed by Congress and signed by the President includes certain provisions that impact retirement plans. Most notable are certain changes to Hardship Withdrawal rules in defined contribution retirement plans and, as to underfunded multiemployer pension plan, the formation of a committee to review the issues and propose solutions.
The bill expands the ability of participants to take hardship withdrawals from all sources of contributions to defined contribution plans, not just employee deferrals made to a retirement plan. The bill calls for the Secretary of Treasury to amend regulations to be effective for plan years after December 31, 2018 to achieve the following:
– To delete the six-month prohibition on employee deferral contributions to any retirement plan sponsored by the employer following a hardship withdrawal.
– To allow of hardship withdrawals from employer contributions to a profit sharing or stock bonus plan, qualified non-elective contributions (QNECs) and qualified matching contributions (QMACs) and earnings on the contributions.
– To allow hardship withdrawals where the only reason the distribution would fail as a hardship is that the employee did not take any available loan under the plan.
Underfunded Multiemployer Pension Plans
While many multiemployer pension plans are well-funded, there are many struggling multiemployer pension plans, such as the Central States plan, that are grossly underfunded. The new law seeks to create a Joint Select Committee to Solve the Multiemployer Pension Crisis which will introduce bipartisan legislation to address the multiemployer pension crisis by December this year.
Last, the bill mandates the creation of a Form 1040SR, a special tax form for taxpayers over 65, to allow for simpler reporting of Social Security and retirement distributions.
We expect more changes in the coming year. We will be watching for them.