President Trump signed the SECURE Act on December 20, 2019, as part of the federal government’s spending bill, and it will affect most retirement savers, as well as employers who offer retirement plans to their employees.
The SECURE Act legislation — which stands for “Setting Every Community Up for Retirement Enhancement” — puts into place numerous provisions intended to strengthen retirement security across the country. The Act includes a significant number of changes for both individuals with qualified retirement accounts, as well as employers who currently offer retirement plans to their employees.
Key provisions of the SECURE Act include:
- Stretch IRAs eliminated – all funds from an inherited IRA generally must now be distributed to non-spouse beneficiaries within ten years of the owner’s death, with some exceptions for specified circumstances. Beneficiaries may no longer stretch inherited IRAs out over their expected lifetime.
- Allows penalty-free withdrawals from qualified plans for the birth or adoption of a child.
- Required minimum distributions (RMDs) must now begin at age 72, not at 70½.
- No age restrictions on IRA contributions for taxpayers who continue to work into their 70s and have earned income.
- 401(k) eligibility for part-time employees who have worked at least 500 hours per year for at least three consecutive years and have attained age 21 by the end of the three years.
- Allows expansion of access to multi-employer plans, allowing unrelated businesses to provide defined contribution plans at lower costs.
- Section 529 plan distributions may now be used for costs associated with registered apprenticeships, and up to $10,000 of qualified student loan repayments (principal or interest).
Contact your Yeo & Yeo professional with questions about how these changes may impact your personal retirement and your business.