The SECURE Act and What It Means for Your Retirement

Employer-sponsored retirement plans and IRAs are valuable tools successfully used by millions of Americans to help save for retirement.  Attached to the spending bill passed by Congress was the Setting Every Community Up For Retirement Enhancement Act of 2019 (SECURE Act). 

The intent of the law is to make it easier for Americans to use retirement plans and IRAs to save and to make it easier for employers to offer retirement plans to their employees.

The SECURE Act seeks to expand opportunities for Americans to increase their savings. Key changes to retirement plans include:

  • Tax credits for starting employer-sponsored retirement plans and incentives for auto-enrolling employees;
  • The law includes provisions to make it easier for employers to offer annuity products through their retirement plans. With fewer workers expecting a traditional, defined benefit pension, annuities offer a way to guarantee some amount of income in retirement;
  • The Act makes it easier for small businesses to join together in offering multiple-employer plans by allowing otherwise unrelated employers to join the same plan. Multiple-employer plans allow small businesses that might not be able to offer a retirement plan to do so by providing economies of scale and by sharing administrative costs and reporting requirements. Benefits to plan participants may include better investment options and lower fees;
  • The Act makes it easier for long-term, part-time employees to participate in employer-sponsored retirement plans;
  • Employers that automatically enroll workers in certain 401(k) plans will be able to automatically raise employees’ savings rates to 15% of annual compensation over time, up from the current 10% cap;
  • Penalty-free distributions may be permitted for births and adoptions;
  • The new law increases to 72 (up from 70 ½) the age after which required minimum distributions from certain retirement accounts must begin;
  • The law repeals the age limit on contributing to traditional IRAs (currently 70 ½);
  • The law revises the rules for distributions from inherited IRA accounts. Instead of being able to take required minimum distributions over the life of a beneficiary, many will have to take all required minimum distributions of a retirement account by the end of year 10 after the original account owner passes away.

If you think you or your employees may benefit from the provisions of the SECURE Act, give us a call to discuss it more thoroughly.