SECURE Act Passes House: How Could These Changes Impact Your Retirement Plan?

Recently, the SECURE Act (short for Setting Every Community Up for Retirement Enhancement Act) passed the House with a huge majority. The SECURE Act is expected to move to the Senate this year and the SECURE Act, or a similar piece of legislation, will likely soon be law. This would affect many retirement and benefits plans, so it’s important to know what the changes may be up front and to plan for how to handle them.

 

  • Access to Retirement: For small employers, having access to benefits has been a key focus of the Trump administration. The SECURE Act makes it easier to run multiple-employer plans that cover the staff of several small businesses. It lowers the fiduciary concerns and costs associated with these plans.
  • Automatic Enrollment: The SECURE Act incentivizes enrollment in 401(k)s by adding new tax credits of $500 to encourage small employers to automatically enroll employees in retirement plans.
  • Annuity Options: Plan sponsors will now be free, under the safe harbor provision, to select annuity providers that allow them to offer increased annuity options inside of 401(k) plans. This removes current concerns that stop many plans from including annuities.
  • Lifetime Income Disclosure: All defined contribution plans will be required to include a lifetime income disclosure on a yearly basis. This document would show how much income the lump sum balance in their retirement account would create. There is some question still regarding how to calculate this number, but these details will also be included in the disclosure.
  • Required Minimum Distribution Age: Currently, most people must take a required minimum distribution (RMD) once they reach 70.5. The Act would delay this until a person reached age 72. The RESA Act, a substantially similar piece of legislation currently before the Senate, would push this back to 75.
  • Age Limitations on Contributions: Currently, individuals using IRAs for their retirement savings are not allowed to contribute to their IRAs after age 70.5. (You can still contribute to a Roth IRA at this age.) The Act would remove the age limitation completely, allowing individuals who continue to work past the age of 70.5 to continue saving.
  • Distributions for Birth: In another provision aimed at encouraging people to save for retirement, the Act adds an exception from penalties for early withdrawal for individuals using those funds to cover the cost of birth or adoption. The goal is to encourage young families to save for retirement rather than deferring retirement savings in favor of starting a family.

These and many other changes are broadly viewed as positive progress within the benefits industry, though different groups have various changes they would like to see made in the final version of the bill. Hall Benefits Law will be paying close attention to the SECURE Act and RESA in the Senate and the final versions of the bills once they are announced. Our aim is to keep our clients up to date with the latest legislation. To learn more, call us today at 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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