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The SECURE Act may mean major changes for retirement plan participants

The SECURE Act may mean major changes for retirement plan participants


On May 23, 2019, the House of Representatives passed a bill that, if adopted by the Senate and signed into law by the president, will mean major changes for retirement plan participants. 

The bill (H.R. 1994, the Setting Every Community Up for Retirement Enhancement (SECURE) Act) has bipartisan support and is the natural byproduct of a legislature that is concerned about the retirement security of American workers.

Here’s what you need to know:

Quoting from the summary of the bill

"This bill modifies the requirements for employer-provided retirement plans, individual retirement accounts (IRAs), and other tax-favored savings accounts.

With respect to employer-provided retirement plans, the bill modifies requirements regarding

  • multiple employer plans; automatic enrollment and nonelective contributions;
  • tax credits for small employers that establish certain plans;
  • loans;
  • lifetime income options;
  • the treatment of custodial accounts upon termination of section 403(b) plans;
  • retirement income accounts for church-controlled organizations;
  • the eligibility rules for certain long-term, part-time employees;
  • required minimum distributions;
  • nondiscrimination rules;
  • minimum funding standards for community newspaper plans; and
  • Pension Benefit Guaranty Corporation premiums for CSEC plans (multiple employer plans maintained by certain charities or cooperatives).

The bill also includes provisions that 

  • treat taxable non-tuition fellowship and stipend payments as compensation for the purpose of an IRA,
  • repeal the maximum age for traditional IRA contributions,
  • treat difficulty of care payments as compensation for determining contribution limits for retirement accounts,
  • allow penalty-free withdrawals from retirement plans if a child is born or adopted,
  • expand the purposes for which qualified tuition programs (commonly known as 529 plans) may be used,
  • reinstate and increase the tax exclusion for certain benefits provided to volunteer firefighters and emergency medical responders,
  • increase penalties for failing to file tax returns, and
  • require the Internal Revenue Service to share tax information with U.S. Customs Border Protection to administer the heavy vehicle use tax."

In my view, as a proponent of financial literacy education and a professional money manager who specializes in retirement wealth, the act is a move in the right direction. Of course, I’d like to see more. For one, delaying RMDs to age 75 or even 85 would be preferable, or better yet, how about eliminating taxes on IRA withdrawals during retirement?

You can link to the act here: