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Understanding the SECURE Act

We want to be a resource to help you understand the SECURE Act and its potential impact to your retirement. The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was signed into law as part of the omnibus spending bill to fund the government for fiscal year 2020. Some parts of the SECURE Act became effective on January 1, 2020, and we are in the process of updating our systems to align with these changes. Some changes may take a little more time to complete as we wait for additional guidance from the IRS.

Key Changes

RMDs will start at age 72, not 70½

Starting January 1, 2020, the age at which you need to start withdrawing money from your retirement accounts changed from age 70½ to age 72. If you turned age 70½ in 2019, you will still need to take your RMD for tax year 2019, no later than April 1, 2020. If you are currently receiving RMDs you must continue to take RMDs. Only those who turn age 70½ in 2020 (or later) may wait until age 72 to begin taking required distributions.

You can contribute to your Traditional IRA after age 70½

Beginning in tax year 2020, you can contribute to your Traditional IRA in the year you turn age 70½ and beyond, provided you have earned income. If you are over age 70½, you still may not make contributions to a Traditional IRA for tax year 2019.

Inherited retirement accounts

Upon death of the account owner, distributions to individual beneficiaries must be made within 10 years. However, the IRS may issue additional guidance on how the new 10 Year Rule will be applied. There are exceptions for spouses, individuals with chronic illnesses, disabled individuals, and individuals no more than 10 years younger than account owner. Minor children of the original account owner (who are beneficiaries of IRA accounts) also have a special exception to the 10 year rule, but only until they reach the age of majority. If you've recently inherited an IRA, or potentially qualify for an exception and have questions about the IRS requirements, please consult your tax advisor.

Adoption and birth expenses

Penalty-free withdrawals from retirement plans are now allowed for birth or adoption expenses, up to $5,000 per child. These withdrawals can also be rolled back into the account at any time (beyond 60 days). If you have questions, please consult a tax advisor.

Plan establishment deadline

Starting in tax year 2020, the deadline to establish a qualified retirement plan is the business's tax filing deadline plus extensions.

529 Plans

Can now be used to repay student loans, up to $10,000 lifetime limit. Apprenticeships are now considered eligible institutions. While student loans and apprenticeship programs are considered qualified expenses at the federal level, some states may still consider them non-qualified withdrawals. If this is the case, you may be subject to taxes and a clawback of your state deduction. You should check with your state's plan for specific details.

401k plans provide greater access

Part-time employees who work 500 hours in three consecutive years, and are at least 21 years of age, will now be eligible to participate in their company's 401k plan. Exclusions may still apply for part-time employees.