The SECURE Act is Passed

After making its way through Congress, the SECURE Act was signed into law last week. SECURE stands for “Setting Every Community Up for Retirement Enhancement,” and the legislation is designed to strengthen retirement security for Americans and help workers who don’t have access to workplace retirement accounts. Here are five pieces of the law for Americans to be aware of.

401(k) Annuities

More employers are now able to offer annuities as investment options within 401(k) plans. Whereas employers previously held fiduciary responsibility for these products, that responsibility now falls on insurance companies. Since annuities offer a steady stream of income over the owner’s lifetime, they can be structured to meet the long-term retirement income objectives of each individual. Annuities are complex products, so employees should consult with a financial advisor before picking a plan.

Extended Age Limit for RMDs and IRA Contributions

While individuals previously had to begin taking required minimum distributions (RMDs) from their 401(k) or IRA in the year they turned 70.5, the age cap has been increased to 72. The original age cap was based on life expectancy in the 1960s and hadn’t been updated since. Likewise, traditional IRA contributions are also capped at 72 years old instead of 70.5. This change goes into effect for those turning 70.5 in 2020.

Cap for Inherited IRA Distributions

Although non-spouse beneficiaries were previously able to spread out distributions from inherited IRAs over their lifespan, the entire account must now be distributed within 10 years. They are not required to take RMDs, but they must withdraw all assets within 10 years.

Retirement Plans for Small Businesses

With this new legislation, employers don’t have to share a common characteristic, such as being in the same industry, to pool together for small business retirement plans. Additionally, retirement plans are available to long-term part-time workers who have worked one year of 1,000 hours or three consecutive years of at least 500 hours.

Encouraging Auto-Enrollment

Small businesses that automatically enroll workers into their retirement plans will receive a tax credit to offset the costs of starting a 401(k) plan or SIMPLE IRA plan. This is designed to help employees save for their future since people are more likely to stay in a plan than actively enroll in one themselves.


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