Setting Every Community Up for Retirement Enhancement Act of 2019

II 116TH CONGRESS 1ST SESSION H. R. 1994 IN THE SENATE OF THE UNITED STATES JUNE 3, 2019 Received AN ACT To amend the Internal Revenue Code of 1986 to encourage retirement savings, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 2 HR 1994 RDS SECTION 1. SHORT TITLE, ETC. 1 (a) SHORT TITLE.—This Act may be cited as the 2 ‘‘Setting Every Community Up for Retirement Enhance- 3 ment Act of 2019’’. 4 (b) TABLE OF CONTENTS.—The table of contents of 5 this Act is as follows: 6 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 em- ployees 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 distribu- tions. Sec. 115. Special rules for minimum funding standards for community news- paper plans. Sec. 116. Treating excluded difficulty of care payments as compensation for de- termining 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 serv- ice participants. Sec. 206. Modification of PBGC premiums for CSEC plans. VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 3 HR 1994 RDS TITLE III—OTHER BENEFITS Sec. 301. Benefits provided to volunteer firefighters and emergency medical re- sponders. Sec. 302. Expansion of section 529 plans. TITLE IV—REVENUE PROVISIONS Sec. 401. Modification of required distribution rules for designated bene- ficiaries. 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 I—EXPANDING AND PRE- 1 SERVING RETIREMENT SAV- 2 INGS 3 SEC. 101. MULTIPLE EMPLOYER PLANS; POOLED EM- 4 PLOYER PLANS. 5 (a) QUALIFICATION REQUIREMENTS.— 6 (1) IN GENERAL.—Section 413 of the Internal 7 Revenue Code of 1986 is amended by adding at the 8 end the following new subsection: 9 ‘‘(e) APPLICATION OF QUALIFICATION REQUIRE- 10 MENTS FOR CERTAIN MULTIPLE EMPLOYER PLANS WITH 11 POOLED PLAN PROVIDERS.— 12 ‘‘(1) IN GENERAL.—Except as provided in para- 13 graph (2), if a defined contribution plan to which 14 subsection (c) applies— 15 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 4 HR 1994 RDS ‘‘(A) is maintained by employers which 1 have a common interest other than having 2 adopted the plan, or 3 ‘‘(B) in the case of a plan not described in 4 subparagraph (A), has a pooled plan provider, 5 then the plan shall not be treated as failing to meet 6 the requirements under this title applicable to a plan 7 described in section 401(a) or to a plan that consists 8 of individual retirement accounts described in sec- 9 tion 408 (including by reason of subsection (c) 10 thereof), whichever is applicable, merely because one 11 or more employers of employees covered by the plan 12 fail to take such actions as are required of such em- 13 ployers for the plan to meet such requirements. 14 ‘‘(2) LIMITATIONS.— 15 ‘‘(A) IN GENERAL.—Paragraph (1) shall 16 not apply to any plan unless the terms of the 17 plan provide that in the case of any employer 18 in the plan failing to take the actions described 19 in paragraph (1)— 20 ‘‘(i) the assets of the plan attributable 21 to employees of such employer (or bene- 22 ficiaries of such employees) will be trans- 23 ferred to a plan maintained only by such 24 employer (or its successor), to an eligible 25 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 5 HR 1994 RDS retirement plan as defined in section 1 402(c)(8)(B) for each individual whose ac- 2 count is transferred, or to any other ar- 3 rangement that the Secretary determines is 4 appropriate, unless the Secretary deter- 5 mines it is in the best interests of the em- 6 ployees of such employer (and the bene- 7 ficiaries of such employees) to retain the 8 assets in the plan, and 9 ‘‘(ii) such employer (and not the plan 10 with respect to which the failure occurred 11 or any other employer in such plan) shall, 12 except to the extent provided by the Sec- 13 retary, be liable for any liabilities with re- 14 spect to such plan attributable to employ- 15 ees of such employer (or beneficiaries of 16 such employees). 17 ‘‘(B) FAILURES BY POOLED PLAN PRO- 18 VIDERS.—If the pooled plan provider of a plan 19 described in paragraph (1)(B) does not perform 20 substantially all of the administrative duties 21 which are required of the provider under para- 22 graph (3)(A)(i) for any plan year, the Secretary 23 may provide that the determination as to 24 whether the plan meets the requirements under 25 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 6 HR 1994 RDS this title applicable to a plan described in sec- 1 tion 401(a) or to a plan that consists of indi- 2 vidual retirement accounts described in section 3 408 (including by reason of subsection (c) 4 thereof), whichever is applicable, shall be made 5 in the same manner as would be made without 6 regard to paragraph (1). 7 ‘‘(3) POOLED PLAN PROVIDER.— 8 ‘‘(A) IN GENERAL.—For purposes of this 9 subsection, the term ‘pooled plan provider’ 10 means, with respect to any plan, a person 11 who— 12 ‘‘(i) is designated by the terms of the 13 plan as a named fiduciary (within the 14 meaning of section 402(a)(2) of the Em- 15 ployee Retirement Income Security Act of 16 1974), as the plan administrator, and as 17 the person responsible to perform all ad- 18 ministrative duties (including conducting 19 proper testing with respect to the plan and 20 the employees of each employer in the 21 plan) which are reasonably necessary to 22 ensure that— 23 ‘‘(I) the plan meets any require- 24 ment applicable under the Employee 25 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 7 HR 1994 RDS Retirement Income Security Act of 1 1974 or this title to a plan described 2 in section 401(a) or to a plan that 3 consists of individual retirement ac- 4 counts described in section 408 (in- 5 cluding by reason of subsection (c) 6 thereof), whichever is applicable, and 7 ‘‘(II) each employer in the plan 8 takes such actions as the Secretary or 9 such person determines are necessary 10 for the plan to meet the requirements 11 described in subclause (I), including 12 providing to such person any disclo- 13 sures or other information which the 14 Secretary may require or which such 15 person otherwise determines are nec- 16 essary to administer the plan or to 17 allow the plan to meet such require- 18 ments, 19 ‘‘(ii) registers as a pooled plan pro- 20 vider with the Secretary, and provides such 21 other information to the Secretary as the 22 Secretary may require, before beginning 23 operations as a pooled plan provider, 24 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 8 HR 1994 RDS ‘‘(iii) acknowledges in writing that 1 such person is a named fiduciary (within 2 the meaning of section 402(a)(2) of the 3 Employee Retirement Income Security Act 4 of 1974), and the plan administrator, with 5 respect to the plan, and 6 ‘‘(iv) is responsible for ensuring that 7 all persons who handle assets of, or who 8 are fiduciaries of, the plan are bonded in 9 accordance with section 412 of the Em- 10 ployee Retirement Income Security Act of 11 1974. 12 ‘‘(B) AUDITS, EXAMINATIONS AND INVES- 13 TIGATIONS.—The Secretary may perform au- 14 dits, examinations, and investigations of pooled 15 plan providers as may be necessary to enforce 16 and carry out the purposes of this subsection. 17 ‘‘(C) AGGREGATION RULES.—For purposes 18 of this paragraph, in determining whether a 19 person meets the requirements of this para- 20 graph to be a pooled plan provider with respect 21 to any plan, all persons who perform services 22 for the plan and who are treated as a single 23 employer under subsection (b), (c), (m), or (o) 24 of section 414 shall be treated as one person. 25 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 9 HR 1994 RDS ‘‘(D) TREATMENT OF EMPLOYERS AS PLAN 1 SPONSORS.—Except with respect to the admin- 2 istrative duties of the pooled plan provider de- 3 scribed in subparagraph (A)(i), each employer 4 in a plan which has a pooled plan provider shall 5 be treated as the plan sponsor with respect to 6 the portion of the plan attributable to employ- 7 ees of such employer (or beneficiaries of such 8 employees). 9 ‘‘(4) GUIDANCE.— 10 ‘‘(A) IN GENERAL.—The Secretary shall 11 issue such guidance as the Secretary determines 12 appropriate to carry out this subsection, includ- 13 ing guidance— 14 ‘‘(i) to identify the administrative du- 15 ties and other actions required to be per- 16 formed by a pooled plan provider under 17 this subsection, 18 ‘‘(ii) which describes the procedures to 19 be taken to terminate a plan which fails to 20 meet the requirements to be a plan de- 21 scribed in paragraph (1), including the 22 proper treatment of, and actions needed to 23 be taken by, any employer in the plan and 24 the assets and liabilities of the plan attrib- 25 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 10 HR 1994 RDS utable to employees of such employer (or 1 beneficiaries of such employees), and 2 ‘‘(iii) identifying appropriate cases to 3 which the rules of paragraph (2)(A) will 4 apply to employers in the plan failing to 5 take the actions described in paragraph 6 (1). 7 The Secretary shall take into account under 8 clause (iii) whether the failure of an employer 9 or pooled plan provider to provide any disclo- 10 sures or other information, or to take any other 11 action, necessary to administer a plan or to 12 allow a plan to meet requirements applicable to 13 the plan under section 401(a) or 408, whichever 14 is applicable, has continued over a period of 15 time that demonstrates a lack of commitment 16 to compliance. 17 ‘‘(B) GOOD FAITH COMPLIANCE WITH LAW 18 BEFORE GUIDANCE.—An employer or pooled 19 plan provider shall not be treated as failing to 20 meet a requirement of guidance issued by the 21 Secretary under this paragraph if, before the 22 issuance of such guidance, the employer or 23 pooled plan provider complies in good faith with 24 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 11 HR 1994 RDS a reasonable interpretation of the provisions of 1 this subsection to which such guidance relates. 2 ‘‘(5) MODEL PLAN.—The Secretary shall pub- 3 lish model plan language which meets the require- 4 ments of this subsection and of paragraphs (43) and 5 (44) of section 3 of the Employee Retirement In- 6 come Security Act of 1974 and which may be adopt- 7 ed in order for a plan to be treated as a plan de- 8 scribed in paragraph (1)(B).’’. 9 (2) CONFORMING AMENDMENT.—Section 10 413(c)(2) of such Code is amended by striking ‘‘sec- 11 tion 401(a)’’ and inserting ‘‘sections 401(a) and 12 408(c)’’. 13 (3) TECHNICAL AMENDMENT.—Section 408(c) 14 of such Code is amended by inserting after para- 15 graph (2) the following new paragraph: 16 ‘‘(3) There is a separate accounting for any in- 17 terest of an employee or member (or spouse of an 18 employee or member) in a Roth IRA.’’. 19 (b) NO COMMON INTEREST REQUIRED FOR POOLED 20 EMPLOYER PLANS.—Section 3(2) of the Employee Retire- 21 ment Income Security Act of 1974 (29 U.S.C. 1002(2)) 22 is amended by adding at the end the following: 23 ‘‘(C) A pooled employer plan shall be treat- 24 ed as— 25 VerDate Sep 11 2014 23:22 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.RDS H1994 pamtmann on DSKBFK8HB2PROD with BILLS 12 HR 1994 RDS ‘‘(i) a single employee pension benefit 1 plan or single pension plan; and 2 ‘‘(ii) a plan to which section 210(a) 3 applies.’’. 4 (c) POOLED EMPLOYER PLAN AND PROVIDER DE- 5 FINED.— 6 (1) IN GENERAL.—Section 3 of the Employee 7 Retirement Income Security Act of 1974 (29 U.S.C. 8 1002) is amended by adding at the end the fol- 9 lowing: 10 ‘‘(43) POOLED EMPLOYER PLAN.— 11 ‘‘(A) IN GENERAL.—The term ‘pooled em- 12 ployer plan’ means a plan— 13 ‘‘(i) which is an individual account 14 plan established or maintained for the pur- 15 pose of providing benefits to the employees 16 of 2 or more employers; 17 ‘‘(ii) which is a plan described in sec- 18 tion 401(a) of th [Text truncated for display. 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