The SECURE Act of 2019
The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) was signed into law at the end of 2019. This Act will impact almost all investors, so you should be aware of the major pieces. Overall, we are positive on this Act but there are some parts that aren’t ideal (in our opinion). Key provisions include:
| Area of Law |
Summary |
KPP View |
|---|---|---|
| IRAs/Individuals |
||
| Stretch IRAs (Section 401) |
Eliminates most “stretch” IRAs by requiring non-spousal beneficiaries to take money out within 10 years. There are some exceptions. There are some complications for Trusts as beneficiaries too. |
Unfortunate change |
| Contributions (Section 107) |
Allows continued contributions past 70 ½ if you are working |
Great! |
| RMDs (Section 114) |
Moved from 70 ½ to 72 |
Great! |
| Charitable Giving from IRA |
Continues to be an option at 70 ½ and may be deductible before age 72 |
Great! |
| Penalty Free Distributions (Section 113) |
Allows $5,000 penalty-free withdrawal for adoption or qualified birth |
Great! |
| Company/401k Items |
||
| Auto enrollment (Section 102) |
Increase in allowable amount to 15% which will allow companies to steadily increase the amount of employee money that is put into their company 401(k) plan |
Great! |
| Life-time income options (Section 103, 109) |
Provides greater flexibility for fiduciaries to add life-time income products to retirement plans. It also allows for portability to IRAs. This will provide a window for insurance companies to add costly annuity products to retirement accounts. |
Unfortunate change |
| Small Biz tax credit (Section 105) |
Increased incentives for small business to add 401k-like programs |
Great! |
| Part-time workers (Section 102) |
Increased access options for those working 500 hours per year over 3 years |
Great! |
| Multiple Employer Retirement plans (Section 101) |
This allows small companies to partner together to build a more efficient plan. We are big fans of the idea but are curious to see how this will be implemented in practice. |
Great! |
| Non-Retirement Items | ||
| Kiddie Tax on Trust (Section 501) |
Changed the tax brackets on trusts for kids – back to parents’ marginal rates vs more progressive Trust rates |
Great! |
| 529 Plans (Section 302) |
Adds apprenticeship as possible usage and $10,000 for student loan repayment |
Great! |
There are other, smaller provisions, so it is worth a quick read through. Coincidentally, the IRS changed the Uniform Lifetime Table to calculate RMDs as we are now living longer.
