The SECURE Act: Impacts on Retirement Planning

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019 and is the most significant retirement reform legislation in more than a decade. It was created to encourage individuals to save more for retirement and motivate businesses to offer retirement plans.

FEATURES THAT IMPACT INDIVIDUALS:

• Required Minimum Distributions: Delays the age for starting Required Minimum Distributions (RMDs) to age 72 if you are not currently required to take RMDs.
• Traditional IRA Contributions: Allows Traditional IRA contributions at any age if you have earned income and are eligible to contribute.
• Distribution for a birth or adoption of a child: Permits a distribution of up to $5,000 from a qualified plan or IRA for birth or adoption of a child without penalty.
• Expansion of 529 Expense Allowances: Expands qualified, tax-free distributions from a 529 Plan for apprenticeships and also allows up to a $10,000 distribution from a 529 Plan to repay student loan debt.
• “Stretch” Distribution Limitation: Limits life expectancy “Stretch” distribution to 10 years for the majority of nonspouse designated beneficiaries (some exceptions apply)

FEATURES THAT IMPACT BUSINESS OWNERS:

• Enhanced Tax Credits: To help offset start-up costs for retirement plans, tax credits for small businesses are enhanced.
• Annuities in Retirement Plans: Encourages including annuities in retirement plans by limiting fiduciary liability.
• Multiple Employer Plans (MEPs): Expands access to Multiple Employer Plans (MEPs) for unrelated small businesses.
• Plan Participation for Long-Term Part-Time Employees: Permits certain long-term part-time employees to participate in their employer’s retirement plan.
• Mandates a Lifetime Income Disclosure: Requires defined contribution plan sponsors to provide a lifetime income disclosure to plan participants annually.