Understanding the provisions of the SECURE Act

On December 20, 2019, President Trump signed the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) into law. This new legislation, which is part of a broad appropriations bill for fiscal year 2020 (known as the Further Consolidated Appropriations Act of 2020), makes several changes to tax laws that could have a significant and positive effect on retirement planning. Download a new comprehensive guide to understanding the provisions of the SECURE Act.

The changes made under the new law include the following for all retirement plan types:

An increase in the age when required minimum distributions must begin, from age 70½ to age 72.
Elimination of the “stretch” distribution option for beneficiaries (distribution of inherited assets must now be made within 10 years of the death of the participant/IRA account owner, unless an exception applies).
Penalty-free distributions for certain qualified birth or adoption expenses.

There are additional administrative improvements and safe harbors for qualified plans, including, but not limited to:

Safe harbor cap on auto enrollment and escalation increased from 10 to 15 percent.
Portability of lifetime income investments.
Long-term part-time employees included for deferrals.
Fiduciary safe harbor for selecting annuity providers.

A notable change for IRAs is the ability to continue contributions to traditional IRAs after age 70½.

The law includes some provisions that are effective January 1, 2020, and includes a remedial amendment period giving employers a transition period before they need to amend their plans.

Key takeaways

Download a new comprehensive guide to understanding the provisions of the SECURE Act.

Listen to a replay of our recent Legislative & Regulatory Insights webcast.