On December 20, 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law. SECURE will change how you think about saving for retirement. The Act is comprised of 29 provisions, and here are some of the highlights:

  • Starting in 2020, the Required Minimum Distribution (RMD) age for distributions from IRAs and 401Ks is extended to 72. This will allow your IRA to continue to grow for an additional 1.5 years.
  • There are no longer any age based restrictions on IRA contributions. You can now put money into your IRA if you work through your 70’s, and beyond.
  • Starting in 2021, part-time workers can participate in their employer’s 401K plan. Employees must have worked at least 500 hours per year for three consecutive years, or worked 1,000 hours with one year of service.
  • There will be penalty free withdrawals for the birth or adoption of a baby, up to $5,000.  If you are married, each spouse can withdraw $5,000, penalty free.
  • There are three provisions that help small businesses offer retirement plans for their employees.
    • The tax credit for the startup costs of a retirement plan have increased with the maximum credit being $5,000.
    • There is a new $500 tax credit for startup costs if the plan includes automatic enrollment. This credit is available for three years and is in addition to the credit noted above. This credit is also available to employers that convert an existing plan to auto enrollment.
    • Starting in 2021, completely unrelated employers can participate in a multi-employer plan. This should result in lower administrative costs.
  • Graduate and Post-Doctoral students who receive stipends, can treat the stipend as compensation for purposes of making an IRA contribution.
  • The current rules that allow non-spouse IRA beneficiaries to take required minimum distributions (RMD’s) over their own lifetime, have been eliminated. Generally, the inherited IRA must be distributed within ten years of the owner’s death. There are exceptions for beneficiaries that are minors, disabled, chronically ill, or not more than ten years younger than the deceased IRA owner.

This is a summary of the changes, and there are additional details. Should you have any questions about these changes, please give Stephano Slack a call.

Brooke Carroll, CPA



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