The Washington Report
September 5, 2018
President Signs Executive Order Focusing on Retirement; Multiple Employer Plans
On August 31, 2018, President Trump signed an Executive Order (EO) directing the Departments of Labor and Treasury (the Departments) to consider issuing regulations and guidance that would make it easier for private-sector employers to offer retirement plans. The EO asks the Departments to consider changes to make it “easier for businesses to join together to offer Association Retirement Plans (ARPs), also known as Multiple Employer Plans.” Additionally, the EO directs the Departments to consider ways to improve notice requirements to reduce paperwork and administrative burdens. According to a release from Secretary of Labor R. Alexander Acosta, the “order benefits small-business employees seeking easier ways to achieve greater retirement savings.”
The EO is available here.
A White House fact sheet is available here.
A release from the Secretary of Labor is available here.
Lawmakers Return to Hill
Both the House and Senate are back in session this week. There is a short amount of time available for legislative action, as lawmakers are tentatively scheduled to work a few weeks this month before taking another recess in October to campaign for the upcoming November midterm elections.
The chambers are expected to focus on budget legislation to avoid a government shutdown at the end of September. Additionally, Congress hopes to discuss the President’s nominees seeking Senate confirmation, as well as legislation addressing the opioid abuse epidemic.
IRS Releases Initial Guidance on Executive Compensation Grandfather Rule Related to Tax Cuts and Jobs Act of 2017
On August 21, 2018, the Internal Revenue Service (IRS) released Notice 2018-68, which provides initial guidance on applying Section 162(m) transition rules as amended by the Tax Cuts and Jobs Act of 2017 - P.L. 115-97 (Section 13601). Section 162(m)(1) generally limits the allowable deduction for a taxable year for remuneration paid by any publicly held corporation with respect to a covered employee. Section 13601 of the new tax law made significant amendments to Section 162(m) and provided a transition rule (commonly referred to as the grandfather rule) applicable to certain outstanding arrangements that were subject to a written binding contract in effect on November 2, 2017.
Briefly, the Notice uses numerous examples to provide guidance that primarily addresses three specific areas:
- Identification of “covered employees” (with particular attention to the three most highly compensated individuals);
- Operation of the grandfather rule; and
- Determining when a material modification of a written binding contract occurs (resulting in a loss of the grandfather rule).
The IRS anticipates the guidance in the Notice will be incorporated in future regulations that will also address other aspects of Section 162(m), and it has requested comments (by November 9, 2018) on certain additional issues outside the immediate scope of the Notice.
IRS Notice 2018-68 is available here.
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