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On Dec. 20, 2019, President Donald Trump signed into law the provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) which contains several provisions that will impact qualified retirement plans. Below is a high-level summary of some of the changes contained in the SECURE Act and the effective dates for these changes.  

Age-Related Required Minimum Distributions

For participants that attain age 70.5 after Dec. 31, 2019, required minimum distributions need not begin until April 1 of the year following the year they turn 72. Participants who are not 5% (or greater) owners may continue to delay beginning required minimum distributions until they retire.  

Post-death Required Minimum Distribution for Beneficiaries  

The SECURE Act eliminates the ability to “stretch” required minimum distributions over the life expectancy of a designated beneficiary. Under the new rules, a deceased participant’s plan account balance must generally be completely distributed (to a designated beneficiary) by the end of the tenth year following the year of the participant’s death. This new rule does not apply if the designated beneficiary is a surviving spouse, disabled, chronically ill, not more than 10 years younger than the participant, or a minor child of the participant. This new rule is effective for distributions related to participants who die after Dec. 31, 2019. 

Lifetime Income Disclosures Required on Participant Statements  

The SECURE Act mandates that participant statements include lifetime income estimates at least once per year. The SECURE Act further requires the Department of Labor (DOL) to issue model disclosures and appropriate assumptions. The lifetime income disclosure requirement will become effective 12 months after the DOL issues its guidance.  

Required Eligibility for Long-term Part-time Employees  

If an employer offers a 401(k) plan, effective for plan years beginning after Dec. 31, 2020, part-time employees that work at least 500 hours in three consecutive 12-month periods must be allowed to make deferrals into the 401(k) plan. As long as no employer contributions are required for these long-term part-time employees under the terms of the plan, they need not be included in the plan’s compliance testing.  

Penalty-free Withdrawal Allowed Upon Birth or Adoption

Effective for plan years beginning after Dec. 31, 2019, plans may allow participants to withdraw up to $5,000 penalty-free for expenses related to the birth or adoption of a child. The withdrawal must be made within one year of the birth or adoption. The withdrawal may be recontributed to the plan as a rollover contribution.

Increase in Maximum Auto-Increase Limit for Qualified Automatic Contribution Arrangement Plans

Effective for plan years beginning after Dec. 31, 2019, plans that use the 401(k) Qualified Automatic Contribution Arrangement Safe Harbor are permitted to automatically increase participants' deferral election percentage up to a maximum of 15%. The previous maximum auto-increase limit was 10%.

Nonelective 401(k) Safe Harbor Plan Changes

Effective for plan years beginning after Dec. 31, 2019, the SECURE Act makes the following changes for nonelective 401(k) safe harbor plans:  

  • The safe harbor notice requirement is eliminated. 
  • Plan sponsors may adopt the 3% nonelective safe harbor mid-year as long as the plan is amended at least 30 days prior to the end of the plan year. 
  • Plan sponsors may adopt a 4% nonelective safe harbor anytime prior to the due date for making Average Deferral Percentage (ADP) refunds (generally the last day of the following plan year). 

Pooled Employer Plans (Open Multiple Employer Plans)

Effective for plan years beginning after Dec. 31, 2020, the SECURE Act allows unrelated employers to participate in a single plan. Pooled employer plans are intended to allow small employers/plans to generate some economies of scale. 

Late 5500 Filing Penalties Increase 

Effective for forms due after Dec. 31, 2019, the IRS late filing fee for Forms 5500 increases from $25/day to $250/day with the maximum per form going from $15,000 to $150,000. If eligible, these late filing fees may be reduced by filing under the Delinquent Filer Voluntary Correction Program. 

There are many more changes made by this legislation. The focus of this update has been on the issues that will have the greatest impact on Associated Bank’s retirement plan clients.

Landon is Senior ERISA & Compliance Advisor | Wealth Management & Institutional Services, Associated Trust Company, N.A. 

By, Ally Bates

Q: Can an Account Be Put Into a Trust, LLC, or Other Entity?

A: It depends on what the customer means.

WBA has recently begun receiving questions as to whether a customer can put their accounts into an entity such as a trust or LLC. In most instances, this involves a situation where the customer has received advice from a third party. The customer has been told by a third party to put an account into an entity. The customer then approaches the bank with this request but is unable to provide further instruction on how to accomplish the task. An example would be a customer who asks to put their LLC account into their trust. Whether that is possible depends on what the customer means by “put into.”

As far as WBA is aware, there is currently no statutory mechanism by which “put into” has any legal significance. Meaning, when a customer asks to put an account into an entity, there is no law that governs what should occur. Thus, the customer will need to provide more information as to what they mean. For example, in the above example, the customer has asked to “put their LLC account into a trust.” The possibilities as to what this might mean are numerous. The customer might mean:

  • The trust is now a member/manager of the LLC, or
  • The trust is now an owner of the LLC, or
  • The LLC is a trustee of the trust, or
  • The LLC is a beneficiary of the trust, or
  • Any number of other possibilities.

The above possibilities may have bearing on the customer’s relationship with the bank. Without knowing which, if any, possibilities are true, the bank cannot know how the relationship is affected. When a customer asks to put an account into an entity, the bank will likely want to have a follow-up conversation with the customer. Depending on how well the customer understands what they intend to do, they may be able to explain and provide relevant documentation to support their request. If not, they may need to return to the third party who gave them the advice and ask for instruction on what is meant by “put in.”

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution's attorney for special legal advice or assistance.

By, Scott Birrenkott

Q: Can a power of attorney act on an IRA or Trust Account?

A: Yes, but only if the power of attorney (POA) agreement permits it.

The extent of an agent’s authority to act under a POA agreement will always depend on the language within the agreement.

Wisconsin’s Uniform Power of Attorney for Finances and Property Act under Chapter 244 governs POA agreements in Wisconsin. Chapter 244 provides for general authority with respect to banks and other financial institutions. One general power granted under statute permits an agent certain actions on an account. Account is a defined term under Wis. Stat. 705.01(1). That definition is broad enough to include an IRA.

For a trust account, an additional consideration to make is that of granting authority. A trust is a separate legal entity from an individual, meaning it has its own interests and authorities distinct from that of an individual person. A power of attorney agreement creates authority between a principal (the person granting authority) and an agent (the person granted authority). A POA agreement giving authority to act on the finances of a natural person principal does not automatically mean the agent can act on accounts owned by a trust, even if the principal is a trustee of the trust. Because a trust account has its own authority and ownership interests, the principal must grant an agent authority to act through their powers as trustee. Authority to do so is derived from the trust agreement.

If a financial institution is unsure about its interpretation of the scope of an agent’s authority within a POA agreement, WBA recommends working with an attorney to receive a legal opinion.

By, Scott Birrenkott

Q: Can a Deposit Account with a Payable on Death Beneficiary have a Contingent Beneficiary?

A: No. Wisconsin Section 705 covers non-probate transfers at death. WBA does not read section 705 to permit contingent beneficiaries.

The WBA payable on death beneficiary designation form was created in accordance with the below interpretation of Wisconsin Section 705 and thus does not permit contingent beneficiaries. It has been WBA’s longstanding opinion that the POD statute does not permit identification of contingent beneficiaries to accounts governed by Subchapter 1 of the Chapter 705. Accounts covered by this statute include most standard checking, savings and certificate of deposit accounts established by a standard deposit account agreement.

The POD statute specifies who is entitled to payment on a POD account on the death of the last surviving accountholder. Under 705.06(1)(c), the funds are paid to the beneficiaries who survive the death of the last surviving accountholder. If none of the beneficiaries survive, the funds are paid to the estate of the last surviving accountholder. This is the way the WBA form is drafted.

The statute provides a second option under 705.04(2)(d), under which funds otherwise payable to a beneficiary who predeceases the death of the last surviving accountholder, would pass to the beneficiary's issue who would take under 854.06(3).

When the option to pay the beneficiary's issue was added to the POD statute, it was WBA’s understanding that the decision was made not to draft for this option. We believe that not all persons would want the issue (without identification of specific children) to receive payment. Further, the bank would not have any easy way to identify all of the issue who would be entitled to the payment. The identity of a person's issue can change throughout the term of the account.

However, the statute does not permit any other payment of fund in a POD account. The statue does not authorize payment to named contingent beneficiaries.

The WBA POD beneficiary form was drafted to follow the above. Thus, if a bank wishes to contract in a way to appoint contingent beneficiaries for a customer's deposit account we recommend working with the bank's own counsel to either modify WBA's form or create a separate designation. If your bank does not use WBA forms we recommend consulting with your forms drafters to determine what their interpretation of Section 705 is with respect to contingent beneficiaries.

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution's attorney for special legal advice or assistance.

By, Scott Birrenkott

Events

A Probability Scorecard is like the yard markers on a football field. The yard markers give you a clear, definitive look at how much ground has to be covered before you score points; or in the case of defense, how much ground you have left to defend.

An effective Sales Probability Scorecard tells you almost exactly the information you have and might be missing and the likelihood of closing a specific opportunity. Wouldn’t that be helpful? You may already use a tool or system in your sales process that is meant to track the status of deals in your sales pipeline. But if the sales enablement tool you are using isn’t built around an effective selling system, then it will be not be predictive and will not help relationship managers close more business.

Covered Topics

A milestone-centric sales process that breaks down the specific steps required to effectively create, qualify and close business.
How to establish the factors important to qualify the prospect (can be industry specific)
How to create a baseline for what a “closeable opportunity” is (i.e. 70% score is considered closeable)

Who Should Attend?

RMS and MSRs in all lines of business, tellers, LOB leaders, supervisors and training managers.

Presenter

Dan Fischer, Sales Development Expert, has 28 years of financial sales and sales management experience working in the banking and insurance industries. During that time, he has developed a life-long passion for coaching along with an understanding of how to motivate salespeople. Using all the many tools and techniques from his past experience, Dan is focused on helping salespeople and sales leaders become top quartile in their efforts. When he is not at work, Dan can usually be found with his wife of 33 years and family. Dan’s “Why” gets him up every morning… “to inspire, motivate and have a positive impact on people through my passion to help them achieve beyond what they imagined.”

For 27 years, Anthony Cole Training Group has been helping banks and other financial service organizations close their sales opportunity gap by helping them sell better, coach better and hire better. Our Mission: Grow People, Grow Organizations.

Registration Options

“Live” Web connection – $265
6-month “OnDemand” website link only – $295
CD-ROM and e-materials only – $345
Live plus OnDemand website link – $365
Premier Package: Live, OnDemand link, and CD-ROM plus – $395