The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law by President Trump on December 20, 2019. The Act made changes to retirement account plans for employers, employees, and inherited retirement account owners. Retirement plans include 401(k), 403(b), Traditional IRA, and ROTH IRAs. All provisions are generally effective starting January 1, 2020.
SECURE Act Changes include:
- Long-term part-time employees’ access to employer retirement plans
- Tax credits for small business retirement plan set up costs and auto-enrollment features
- Elimination of the age cap for IRA contributions for anyone who is still employed or has earned income
- Increases the required minimum distribution (RMD) age to 72
- Elimination of the “stretch inherited IRA”, including ROTH IRAs, rules for non-spouse beneficiaries to mandatory 10-year payout
- Penalty-free withdraws up to $5,000 per taxpayer from qualified retirement plans for childcare or adoption costs
- Repeal of kiddie tax rates enacted by the Tax Cuts and Jobs Act
Traditional and ROTH IRAs inherited before January 1, 2020 are not subject to the mandatory 10-year payout rule and distributions can continue to be made over the beneficiary’s expected life span. Other exceptions to the mandatory payout rule include minor children of the plan holder (generally up until age 18) or beneficiaries who aren’t more than 10 years younger than the account holder at the time of death. This new provision may require the reevaluation of any estate plans that were set up with trusts as IRA beneficiaries to ensure there are not any adverse tax consequences.
Retirement account owners who turn age 70.5 after December 31, 2019 can delay taking their required minimum distribution until April 1 following the year they reach age 72. If you turned 70.5 in 2019 you still must take your first RMD by April 1, 2020.