May 10, 2024

The Secure Tax Acts and Retirement

From 2017 to 2022, there were several wide sweeping changes to the Tax
Code. From the tax cuts created by the 2017 Tax Act to the legislation passed
in 2020 and 2021 in response to the Covid pandemic. These tax law changes
have effected most US taxpayers. However, nestled in the middle of these
changes was a tax law change that did not get a lot of publicity but may have a
wide sweeping long-term effect on US taxpayers as they prepare for
retirement. These changes were in the form of the SECURE Tax Act and
enhanced with its sequel SECURE 2.0.

The Setting Every Community Up for Retirement Enhancement Act of 2019
(SECURE Act) was enacted to provide individuals with more ways to save
towards retirement in a tax advantaged way. The bill which was endorsed by
both parties in Congress was an acknowledgement that a good number of
Americas have not adequately saved for retirement. After addressing the
financial effects of Covid, Congress further enhances the retirement options
found in the SECURE Act with the passage of SECURE 2.0.

A summary of the key provisions of these bills which many went into effect in
2023 or will take effect in 2024 or 2025 include the following:

1. Make it easier and less expensive for small businesses to set up “safe
harbor” retirement plans.

2. Provide admission into retirement plans is more accessible for many part
time workers.

3. Pushes back the age at which a retirement plan participant needs to take
a required minimum distribution (RMD) from 70 ½ to 72. The SECURE
2.0 further pushes back the age to 73 for individuals who turn 72 after
Jan. 1, 2023 and to age 75 for those turning age 73 on or after Jan. 1,
2033.

4. Under SECURE 2.0, Employers who have a matching provision for
employee deferrals into a 401k plan may treat qualified student loan payments made by an employee of a qualified education loan as if they
were making an elective deferral for purposes of making matching
contributions.

5. SECURE 2.0 allows retirement plan participants to elect employer and
nonelective contributions as ROTH contributions.

6. Creation of tax credits to assist small businesses to establish retirement
plans.

7. Removes the maximum age limits on retirement contributions, which
was formerly capped at age 70 ½.

8. Limits the timeframe that a beneficiary has to take the balance of an
inherited IRA to 10 years which under prior tax law could be deferred
over the life expectancy of the beneficiary.

These are only a sample of the changes made by the SECURE Act and
SECURE 2.0. As we get older the need to address retirement planning
becomes more critical. When you combine that fact with the need for
employers to stay competitive in attracting employees by providing
additional benefits, makes understanding the options created by these two
laws more important than ever.

We at Stephano Slack have assisted many clients handle these options
available to both employees and employers. If this something you would like
to explore in more detail, please contact your tax partner and or manager to
discus.

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