The SETTING EVERY COMMUNITY UP FOR RETIREMENT ACT OF 2019 (SECURE ACT) was signed into law on December 20, 2019. This legislation has far reaching implications for small businesses and estate planning. Here are some of the major provisions of the Act:
- Easier and less expensive for small businesses to set up “Safe Harbor” retirement plans which provide for fully vested employer contributions.
- Part time workers now eligible to participate in an employer retirement plan.
- Required Minimum Distributions (RMDs) now start at age 72 instead of age 70 ½ and IRA owners may continue to contribute indefinitely as long as they are working.
- Eliminates the “stretch IRA” for most non-spouse beneficiaries requiring the IRA to be fully distributed within 10 years. Under the old rules distributions from an inherited IRA could be stretched out over the life expectancy of the beneficiary thereby deferring the income tax for years, if not decades. The stretch distribution is now limited to: (1) spouses, (2) minor children (to be distributed ten years after reaching the age of majority), (3) disabled or chronically ill beneficiaries and (4) beneficiaries less than 10 years younger than the original account owner.
- 401(k) Plans may now offer annuities and the employer is no longer responsible for assuring the appropriateness of the annuity for the employee.
- Student Loan repayment from 529 Plans up to $10,000 per beneficiary.
- Penalty free withdrawals of $5,000 from 401(k) accounts upon the birth or adoption of a child.