A Number of Provisions Affect Governmental DC Plans

On December 20, 2019, President Trump signed H.R. 1865, a massive appropriations bill funding the federal government’s domestic programs for the rest of FY2020.

As we have reported, this “must-pass” bill provided the vehicle for advancing a number of unrelated congressional priorities, including the Setting Every Community up for Retirement Enhancement Act of 2019 (the SECURE Act) which had passed the House with overwhelming bipartisan support, but had been stalled in the Senate.

In addition to the SECURE Act, congressional leaders also included the Bipartisan American Miners Act of 2019 in the year-end package.  This compromise bill is aimed at providing relief for the troubled United Mine Workers of America defined contribution pension and health care plans. The cost of the measure is partially offset by a provision which permits in-service distributions from 457(b) plans at age 59 ½. Previously the age for in-service withdrawals from 457(b) plans was 70 ½. Similarly, for 401(a) money purchase pension plans the age for in-service distribution was 62. Now both plans may reduce the age to 59 ½.

Though the SECURE Act is largely aimed at increasing access to employer-sponsored retirement plans in the private sector, NAGDCA has been tracking some provisions that affect governmental defined contribution plans:

  • 114 increases the age for beginning RMDs to age 72.
  • 109 allows participants to take a distribution of a lifetime income investment and roll it into another plan, without the usual withdrawal restrictions, if their plan no longer offers that investment option.
  • 113 permits “qualified birth or adoption distributions” from a retirement plan, with certain conditions.
  • 401 requires distribution of inherited account assets within ten years of the death of the account owner, with a few exceptions. This change to “stretch IRAs” will raise around $15 billion in revenue over ten years. For governmental plans, the new rules apply after December 31, 2021

NAGDCA supported the enactment of the SECURE Act and looks forward to working with Members of Congress to craft another bipartisan, bicameral bill which would incorporate NAGDCA legislative priorities and to make additional improvements to the Nation’s retirement system.

The final enrolled text of H.R. 1865 can be accessed here.

  • The SECURE Act is designated as Division O, beginning on p. 604.
  • The Bipartisan American Mineworkers Act is designated as Division M, beginning on p. 558. The provision reducing the minimum age for allowable in-service distributions can be found on p. 562.