Back to Missives
George F. Bearup, J.D. Senior Legal Trust Advisor

16-Dec-19

SECURE Act Status

Take-Away: Reports out of Washington D.C. are that the Setting Every Community Up for Retirement Enhancement, aka the SECURE Act, may be attached to the $1.4 trillion spending bill for fiscal year 2020. December 20 is the deadline for approving that spending bill before another government shutdown is upon us.

Timing: That spending bill, tied to the 2020 budget, was supposed to have gone into effect on October 1, 2019. A temporary bill was enacted at that time to avert a government shutdown. That spending bill extension expired on November 21, 2019. Hence, this last minute push to attach the SECURE Act [which will generate tax revenues] to the fiscal year spending bill.

Possible Law Changes: Some key provisions in the House’s version of the SECURE Act that it passed last spring include:

  • Provide tax credits to small employers to induce those employers to adopt qualified retirement plans;
  • Simplify qualified plan annual reporting obligations, again to induce small employers to adopt qualified plans for their employees
  • Expand the use of lifetime income/annuity payment options under qualified plans;
  • Simplify 401(k) retirement plan ‘safe harbors’ with regard to satisfying non-discrimination rules;
  • Extend the required beginning date to take required minimum distributions (RMDs) from age 70 ½ to age 72;
  • Authorize IRA contributions after the IRA owner attains age 70;
  • Expand tax-free distributions from 529 accounts to additional purposes, with dollar limits, e.g. pay home-school expenses; $10,000 available to pay college education loans for the 529 beneficiary or their ‘sibling;’ and

‘In exchange for’ the revenue-generating provision that will require most inherited IRA accounts [both traditional and Roth] to be fully emptied within 10 years of the IRA owner’s death (with limited exclusions for surviving spouses, disabled beneficiaries, and minor children beneficiaries.) Existing inherited IRAs would not be grandfathered if the House’s version of the SECURE Act is adopted.

Effective Dates: It is too soon to predict, but the House’s version of the SECURE Act had several effective dates, some effective 1/1/2020. With regard to the delayed required beginning date (RBD) its effective date would be 1/1/2021, while the authorization to continue to make IRA contributions would have an effective date of 1/1/2020.

Conclusion: This could be the week when the SECURE Act finally becomes law. Pay close attention to the news towards the end of the week.