WASHINGTON, Nov. 20, 2019 /PRNewswire/ -- The Small Business Legislative Council is calling on Senators to remove two provisions in the House-passed SECURE Act (H.R. 1994) that would adversely affect small businesses and their employees. While the SBLC supports other provisions of the Act, particularly changes to 529 plans for apprenticeships, it strongly opposes the proposed elimination of the "Stretch IRA" and the increased penalties for the late filing of certain retirement plan forms. These two provisions will hurt small businesses which have retirement plans and their owners and employees -- all middle and upper middle income taxpayers --who saved for their retirement in those plans.
The elimination of the stretch IRA would create an unanticipated new tax which would dramatically reduce the value of the IRA. The SBLC is concerned that the unintended impact of the elimination of the stretch IRA will be to reduce the long term funding of small business retirement plans. It makes sense that owners will choose to save less in their plans and stop employer contributions prematurely so as to avoid the draconian tax treatment generated by the elimination of the stretch IRA. This change would cause small business employees to lose the meaningful employer contributions that they would have received, since the owners would no longer contribute to the retirement plans.
The SECURE Act's substantial increases in penalties for the late filing of certain retirement plan reporting forms will harm small businesses and eventually the plan participants. As Paula Calimafde, President and General Counsel of the SBLC, said, "It is small businesses, which do not have accounting or benefits departments to handle these types of filings, that will make mistakes and be hit with these excessive penalties. If a small business is hit with such a large penalty, expect future employer contributions to the plan to be cut back and possibly the plan to be terminated."
The SBLC has urged Senators to substitute their own provisions from the Retirement Enhancement and Savings Act (S.972), known as "RESA," for these two harmful SECURE Act provisions. At a minimum, the Senate should extend the 10 year period to at least 20 years for the stretch IRA provision and stay with their provision on the increased penalties for late filing of retirement plan forms. "Despite repeated claims by very large entities as to how good this legislation is for small businesses, make no mistake that these provisions will harm small businesses and their employees," said Ms. Calimafde.
Founded in 1976, the SBLC is an independent, permanent coalition of forty national trade and professional associations representing all sectors of the economy, whose goal is to maximize the advocacy and presence of small business on federal legislative and regulatory policy issues, and to disseminate information on the impact of public policy on small businesses and closely held businesses, including family owned businesses.
SOURCE The Small Business Legislative Council