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.