The Secure Act Overview

1. One of the major talking points is changing the RMD (required minimum distribution) age from 70 ½ to 72

• Individuals who attained age 70 ½ in 2019 will still need to take RMDs for 2019 and 2020, even though they may not attain age 72 until 2021. 

2. The maximum age for making contributions to traditional IRAs was removed...makes sense given that the fastest growing demographic of workers are those over 65 years old

• Provides consistency regarding IRA contributions, as there has never been an age restriction on Roth IRAs. 

 

3. A stretch IRA has been a well utilized strategy enabling families to stretch out IRA distributions to future generations after death. Guess what...it's gone. Now, most IRA’s (with the exception of spouses and minor children) will have to be paid out within 10 years.  

• This compressed distribution period will result in many beneficiaries paying higher taxes on distributions from inherited IRAs and qualified plan accounts. 

4. Small businesses will receive tax incentives of up to $500 per year for retirement plans with automatic enrollment 

5. Alternatively, employers can pool together to share access to retirement plans.

• Should be easier for employers to create or join MEPs allowing for economies of scale, which may lower cost to plan sponsors and the participants, making offering a plan more attractive to employers.                      

6. An employer may elect to treat a plan adopted after the end of a taxable year but before the due date (plus extensions) of the employer’s tax return as having been adopted as of the last day of the taxable year.

• Allows employers to determine after the end of a year that its profits are sufficient to support the establishment of a qualified plan. 

7. 529 Plans now allow tax-free distributions for up to $10,000 of distributions over an individual’s lifetime to make payments on student loans. 

 

8. Medical expenses are deductible only if they exceed 7.5% of adjusted gross income (AGI). This has been reduced from 10% allowing more taxpayers to take the deduction.