“SECURE Act” Aims to Make Significant Retirement Plan Upgrades

Short for “Setting Every Community Up for Retirement Enhancement,” the SECURE Act of 2019 (the “Act”) that recently passed through the House Ways and Means Committee, and the similar Retirement Enhancement and Savings Act of 2019 from the Senate, aim to make significant retirement plan upgrades. The bill passed through committee unanimously and quickly, and it contains a handful of improvements for 401(k) plans and a few other provisions. On May 23rd the House of Representatives passed the bill with an overwhelming majority.

Provisions Aimed at Increasing Participation and Employee Savings in 401(k) Plans

  • The cap on auto-escalation of employee contributions increases to 15% from the current cap of 10%.
  • Small businesses starting 401(k) plans and/or including plans with automatic enrollment will get an increased tax credit.
  • Graduate students and post-doctorate students will be able to contribute to 401(k)s based on their graduate stipends and fellowships.
  • Home healthcare workers can include “difficulty of care” payments in their calculation of compensation.
  • Penalty-free withdrawals covering birth and adoption, a provision designed to encourage young savers to use a 401(k) rather than saving for maternity leave separately.
  • The bill will add safe harbor practices to protect employers who choose a group annuity plan to support their 401(k) plan income stream options.
  • The Act requires plans to inform participants how much their monthly retirement income will be based on their assets in the plan. The bill also includes protections for employers when plan participants complain about the retirement income projection.

Additional Bill Provisions

In addition to the parts of the new bill that address retirement, there are a few extra details.

  • Section 529 education savings accounts are expanded to include apprenticeships and homeschooling expenses.
  • Workers of any age can now contribute to IRAs.
  • The bill eliminates required mandatory distributions beginning at age 70 ½ rather than the current requirement of 72 years of age.
  • Provisions to make it easier for small businesses with fewer employees to offer retirement plans by allowing two or more otherwise unrelated employers to join a pooled employer plan. This would be done in tandem with a pooled plan provider who is responsible for ensuring the plan and the businesses are in line with ERISA and other federal and state regulations.
  • The Act increases penalties when plan sponsors fail to file tax returns on time.
  • The bill provides for an accelerated required rate for IRA and 401(k) heirs to take distributions.

Ensuring that your retirement plans comply with the law is not all we do at Hall Benefits Law. We also pay attention to upcoming legislative and regulatory changes to help our clients plan and take advantage of changes in the law that allow them to offer benefits that are better for both employees and the business. For help setting up benefits plans, reach out to the team at Hall Benefits Law. We work with businesses in 25 states to implement and update retirement plans, compliance processes, and handle unique cases. Reach out today by calling 678-439-6236, or visit the Hall Benefits Law website.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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