Will the SECURE Act Impact Your Retirement Plan?

Several provisions of the Act are worth highlighting, as they could have an impact on your ability to grow assets, manage taxes and protect retirement assets.

On December 20, 2019, President Trump signed into law the SECURE Act, which is designed to increase access to retirement plans and encourage workers to save for retirement. The Act is very broad, touching on the following account types: traditional, Roth and rollover IRAs; qualified plans, including 401(k) plans; 403(b) and 457(b) plans; cash balance plans; and lump sums from defined benefit plans. Most provisions of the law come into effect on January 1, 2020.

Several provisions are worth highlighting, as they could have an impact on your ability to grow assets, manage taxes and protect retirement assets:

  • Extended Period for Individual IRA Contributions. Individuals may now contribute to a traditional IRA after the age of 70½, as long as they are still earning income. This was not allowed under prior law.
  • Delayed Required Minimum Distributions. Individuals who reach the age of 70½ in or after the year 2020 will not be required to make minimum distributions from their traditional IRAs and retirement plans until the age of 72.
  • 10-Year Distribution Period for Younger Designated Beneficiaries. Beneficiaries who inherit an IRA or retirement plan from an account owner who is more than 10 years older than they are must fully distribute the assets before the end of the 10th year following the account owner's death. There are no required annual distributions. This does not apply to minor children of the account owner, disabled or chronically ill beneficiaries, surviving spouses, or anyone who inherited an account prior to January 1, 2020. However, for minor children who inherit after that date, the 10-year period comes into effect once they reach the age of majority.
  • Tax Credits and Incentives for Employers and Small Businesses. Businesses can claim various tax credits and incentives for offering retirement plans and automatically enrolling employees in these plans. The Act also makes it easier for multiple businesses to join together and offer a multiemployer retirement plan, leveraging their collective resources to provide more cost-effective plans.
  • Expanded Annuity Options. The Act will likely lead to expanded or newly offered annuity options within retirement plans, as it clarifies an employer's fiduciary responsibility and now permits certain safe harbors for employers, which will allow more annuity-type investments to be added over time.

Given the wide-ranging scope of the Act, a discussion with your legal, tax and investment advisors is recommended. As always, the professionals at BNY Mellon Wealth Management are available to discuss the potential ramifications these changes may have for your retirement planning objectives.

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