On Friday, August 31, 2018, President Trump signed an executive order which aims to make it easier for small businesses to join together and provide their employees with retirement plans. The order also directed the Labor and Treasury department to review the rules that require retirees to take Required Minimum Distributions (RMDs) once they turn 70 ½. These rules haven’t been updated since 2002.
The order was pushed forward by the White House with the intention to better prepare employees for retirement. By issuing these regulations, it should make it more efficient and less costly for small business owners to offer 401(k)-type plans to their workers. The order also urges the Treasury Department to review rules on RMDs, so investors can keep their money in their 401(k)s, IRAs, and other tax-sheltered savings plans for longer. A modernization of the life-expectancy tables used to determine the distributions would enable retirees to stretch their retirement savings out for longer, while continuing to take advantage of the tax deferral.
One focus of this initiative is to make multi-employer plans (MEPs) more understandable, affordable, beneficial for workers, and less burdensome on small business employers. MEPs are currently being made available, but only to employers with a connection to one another (such as members of the same industry or involved in the same association). Open MEPs have bipartisan support in Congress because changing this requirement could allow more firms to band together to offer retirement plans.
Far too many employees have been forced to rely solely on defined benefit and pension plans to fund their retirement, and now that companies have largely done away with pensions in the private sector, those in the workforce today aren’t accumulating enough to retire when they want to. This executive order is aimed at making 401(k)s more accessible for these folks while at the same time, gives the employers more of an incentive to offer them.
The bill also urges the Labor and Treasury departments to explore ways to reduce paperwork and administrative burdens that might prevent businesses from offering retirement savings plans.
If you have any questions about the bill, your retirement plan, or your investments, please don’t hesitate to contact us. We are happy to be your sounding board for any questions you might have!
The Libertas Team
Categories: Educational Articles, Market Commentary, Zak Leedom