Pub. 11 2020 Issue 1

Spring 2020 17 West Virginia Banker Emily Lambright is an attorney, a certified public accountant, and a partner of Bowles Rice LLP. She focuses her practice on federal taxation, employee benefits and qualified retirement plans, estate and gift tax planning, and tax-exempt organizations and nonprofit law. She can be reached by e-mail at elambright@bowlesrice.com or by phone at (304) 347-1124. circumstances. This is not good news for companies and individuals in the wealth planning world. IRA bank, bro- kerage and trust accounts will terminate earlier. Wealthy customers may need to revise their estate plans. Many employers will need to amend their 401(k) plan docu- ments to reflect this change. • The Ugly: A Tax Upon Your House. Congress really wants everyone to comply with the Act and, to make sure they do, they have substantially increased IRS late filing penalties on income tax returns, retirement returns and other filings. For example, the old penalty for late filing retirement returns was $25 a day, not to exceed $15,000. The new penalty is $250 per day, not to exceed $150,000! There is no other way to describe this except as ugly, so filing on time is now absolutely critical. There are several other changes that the Act brought about, examples of which are listed below. For additional discussion of some of these changes, please go to www. bowlesrice.com/practices-Federal-Secure-Act.html. • Plan 402(f) notices requirements are eased • Has a mandatory expansion of 401(k) elective deferral coverage for part-time employees working more than 500 hours a year for three consecutive years • Has a new statement requirement for 401(k) plans to disclose lifetime income stream figures at least annually • Has an optional inclusion of an in-service withdrawal for birth and adoption • Has credits for small employers to encourage establish- ing new plans or plans with auto-enrollment features for employees • Prohibits 401(k) plan loans being made by credit card • Repeals the “Cadillac” tax on high cost employer-spon- sored health care plans • Expands Smart529 allowable education costs • Provides tax relief on the “Kiddie” tax • Expands what counts as income for contribution purposes Many of these changes are effective as of Jan. 1, 2020, except for governmental plans and collectively bargained plans. Although Plan Administrators, Trustees and IRA Custodians have time over the next year to amend their qualified retirement plans and/or associate ac- count agreements to comply, they must start com- plying in practice right away. Consequently, this is an “act now, not later” situation. If you have questions about the Secure Act changes or whether your plan or account agreements are compliant, please reach out to our Bowles Rice Benefits Team for assistance at (304) 347-1100.  Ugly