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The full House passed by a 297-120 vote on December 17, 2019 the year-end spending bill, which includes the Setting Every Community Up for Retirement Enhancement (SECURE) Act.
The SECURE Act, HR 1994, is being billed as the most comprehensive retirement security legislation in more than a decade. The Senate voted 71 to 23 to approve the legislation. The president signed it into law on December 21st.
What does the SECURE Act accomplish?
The SECURE Act:
- simplifies the 401(k) safe harbor rules;
- expands portability of lifetime income options;
- allows long-term part-time workers to participate in 401(k) plans;
- allows plans adopting by the filing due date to be treated as in effect as of the close of the year;
- provides a fiduciary safe harbor for selection of a lifetime income provider;
- modifies the treatment of custodial accounts on termination of 403(b) plans;
- extends the current required minimum distribution requirements to age 72;
- requires disclosures regarding lifetime income; and
- modifies the nondiscrimination rules to protect longer-service participants.
How the SECURE Act Affects…
The SECURE Act would also expand the uses for 529 accounts, an investment vehicle that helps individuals save for college and certain education costs. Currently, taxpayers who use 529 plan money for anything other than qualified education expenses are subject to a 10% federal tax penalty. However, the new bill allows individuals to use 529 funds for qualified student loan repayments of up to $10,000. This is great for HENRYs and millennials who have large student loans.
The bill also requires defined contributions plans to deliver a lifetime income disclosure to participants. This disclosure would essentially show how much income the lump sum balance in the retirement account may generate–in hopes of encouraging saving.
The SECURE Act has sweeping and broad implications for financial, tax, and retirement planning. If you aren’t working with a fee-only fiduciary advisor, we’d love to introduce ourselves. If you would like to consider outsourcing your financial stress, please consider giving us a call. We’d be happy to have a short conversation with you to see if we can serve you and your family. Click here to learn more about our firm, or click the link below to schedule an anxiety-free call or meeting.