SECURE Act Summary

On   December 20, 2019, the Setting Every Community Up For Retirement Act (SECURE   Act) was signed into law.  This is one of the most significant pieces of   retirement legislation created in quite some time.  In an effort to   improve a troubled retirement system, the SECURE Act attempts to increase   access to tax-advantaged retirement accounts while preventing older Americans   from outliving their assets.  

Though   the provisions of the law and what they cover can be quite complex and   lengthy, we have summarized some key items below:

• Required Minimum Distribution (RMD) Age   Increased - The age at which individuals must begin taking   distributions from certain retirement plans and traditional IRAs has been   increased from age 70 ½ to 72 for individuals who turn 70 ½ in the calendar   year 2020.

• Post 70 ½ IRA Contributions - The   limit prohibiting individuals who have attained age 70 ½ from making   contributions to traditional IRAs has been repealed.

• Non-Spouse “Stretch” IRAs - With   some notable exceptions, in general all funds from an inherited IRA must now   be distributed to non-spouse beneficiaries within 10 years of the IRA owner’s   death.

• Penalty-Free Withdrawals for Birth or   Adoption of Child - Individuals can withdraw up to $5,000 following the   birth or adoption of a child from retirement accounts without   the normal 10% early withdrawal penalty.   

• New Tax Credit for Small Employer Plans   with Automatic Enrollment - Small employers will be eligible to   receive a new tax credit to offset the costs of starting certain retirement   plans with auto-enrollment in addition to the start-up credit they already   receive. The cap on the existing start-up tax credit has also been increased.

• Qualified Automatic Contribution   Arrangements (QACA) - The automatic contribution rate   permitted to be set by employers has been increased from 10% to 15% of   compensation.

• 401(k) Plan Eligibility for Part-Time   Employees - Employees who have worked at least 500 hours per   year for the last three consecutive years are guaranteed plan eligibility   (down from the previous requirement of 1,000 hours).

• Annuities in 401(k) Plans - The   fiduciary responsibility to ensure that these products are appropriate for   employees’ portfolios has shifted from the employer to the insurance   companies. 

• 529 Funds Can Be Used to Pay Down Student   Loan Debt – Allows   parents to withdraw up to $10,000 from 529 plans to repay student loans.

Please   remember that these are only brief summaries and intended to provide you with   a general overview of key items included in the law.  Certain exceptions   and/or exclusions may apply to these descriptions.  As we have not   provided summaries of all provisions of this legislation, we certainly encourage you to explore any topics pertaining to your situation that may not   be included further.

Additional Resources:

• House Committee on Ways & Means – The        Secure Act
• NAPA – Key Secure Act Provisions and Effective        Dates 
• 5 Ways Advisors Can Take Advantage of the        SECURE Act 

Should you have additional questions regarding the information   above, please contact ­­­us!