SECURE Act’s Impact on Retirement Accounts

Contained within the Consolidated Appropriations Act of 2020 passed in December 2019, is the Setting Every Community Up for Retirement (SECURE) Act.

Effective January 1, 2020, the SECURE Act establishes several new retirement plan provisions such as: 1) allowing long-term employees who work part time to participate in 401(k) plans; 2) penalty-free withdrawals [from 401(k) plans} for birth or adoption of a child; 3) increased tax credits against start-up costs of small business retirement plans; 4) extended the establishment date for solo defined benefit/defined contribution plans to the employer’s tax filing deadline, including extensions. The SECURE Act also modifies a number of IRS taxing requirements for qualified retirement plans and IRAs.

• Repeals the maximum age for traditional IRA contributions. The ability to make IRA contributions is now consistent with ERISA qualified retirement plans, which allow an employee to make contributions as long as he or she is still working.
• Raises from 70½ to 72 the age to begin minimum distributions. This applies to distributions after December 31, 2019, by individuals who attain age 70½ after that date, both for IRAs and for 401(k)’s if the employer permits.
• The payout period is limited to 10 years for many nonspouse beneficiaries of [IRA] account owners who die after 2019. The life expectancy distribution method can be used only by nonspouse beneficiaries who are: 1) minors; 2) disabled; 3) chronically ill; or 4) not more than 10 years younger than the deceased account owner. (For minors, the life expectancy exception rule only applies until the child reaches the age of majority; at that point, the 10-year rule applies.) The life expectancy distribution rule still applies to spouse beneficiaries.

If you would like more information about the impact of the SECURE Act on your retirement plan or IRA, please contact RetirementPlans@amgnational.com.