William Byrnes' Tax, Wealth, and Risk Intelligence

We’re still waiting for the exact parameters of any new government legislation on retirement plans.  However, one thing is certain: Congress isn’t forgetting about small business owners.  Multiple pieces of legislation focus on increasing access to retirement plans for employees of small businesses.  If your clients are worried about the cost, don’t forget to remind them about the expanded tax credits for plan startup costs.  This week, we also have reminders about the soon-to-be effective PTE 2020-02 and how to handle requests for COVID-19-related reasonable accommodation in the workplace.

By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

Establishing a Retirement Plan?  Don’t Forget Small Business Tax Breaks

Recent legislation has focused small business clients’ attention on retirement plans and their obligations to employees.  Some states already sponsor “auto IRAs” for workers without access to an employer-sponsored retirement plan. The Build Back Better Act would require employers who do not sponsor a retirement plan to automatically enroll employees in either an IRA or a 401(k)-type plan beginning in 2023. The “SECURE Act 2.0” also contains provisions designed to encourage more small businesses to offer retirement plans. Small business clients who are exploring their options in advance of government action should be reminded about valuable tax incentives designed to encourage workplace retirement savings options. The SECURE Act increased the tax credit for retirement plan startup costs so that employers can receive a $250 tax credit for every non-highly compensated employee (up to a maximum of $5,000 per year). The tax credit is available for up to three years and can be applied toward the administrative costs of maintaining the plan (and to participant education). Employers can also receive a $500 tax credit per year (for up to three years) if they add an auto-enrollment feature. For new plans, both tax credits are available. For more information on these tax credits, visit Tax Facts Online. Read More

Reminder: Conditions of New DOL Fiduciary PTE Becomes Fully Effective December 21

The DOL’s new prohibited transaction exemption (PTE) 2020-02 becomes fully effective December 21. Advisors who satisfy the “five prong test” must determine whether their recommendation would create a conflict of interest (for example, most IRAs would result in a prohibited transaction because of the compensation earned). The new PTE provides an exception for certain conflicted advice if the terms of the PTE are satisfied. To date, the DOL has only required a good faith compliance effort from firms and advisors that satisfy the impartial conduct standards. Effective December 21, the rule will be fully effective, meaning that fiduciaries must acknowledge fiduciary status and provide conflicts and services disclosures–and the firm must implement written policies and procedures to ensure compliance with the impartial conduct standards. For certain types of rollover transactions, advisors will also have to provide a written statement outlining the specific reasons why the rollover transaction is in the best interest of the participant or IRA holder. The new fiduciary PTE applies in the case of rollover transactions if the advice is provided in the context of an ongoing relationship or as the beginning of a future relationship between the client and advisor. For more information on PTE 2020-02, visit Tax Facts Online. Read More

Focus on Reasonable Accommodation for Employers Implementing Return-to-Work Policies

In the midst of the ongoing COVID-19 pandemic, employers are more focused than ever on the issue of what constitutes reasonable accommodation for disabilities or religious beliefs in the workplace. As employers re-open workspaces and bring employees back to work, many are facing requests for COVID-19-related “reasonable accommodation” that they’ve never handled before. A recent 10th Circuit case (Brown v. Austin) illustrates a key point: a work-from-home or modified schedule is not a “reasonable” accommodation if the employee is unable to perform essential job functions as a result. The case illustrates the general rule that reasonable accommodation is only required if it doesn’t present an undue hardship for the employer. Employers today should ensure that the essential job functions required of each role are well-documented–remembering that it’s important to evaluate whether the accommodation would truly prevent the employee from performing those job functions. For more information on employers’ options on return to work, visit Tax Facts Online. Read More

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