How the Secure Act Could Impact Your Retirement Plan


The Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed by the U.S. House of Representatives on May 23, 2019. If the bill passes the Senate and is signed by President Trump, it could impact the way workers plan for retirement and manage their retirement accounts.

Secure Act and Retirement Plans

How Will the SECURE Act Impact Retirement Plans?

Here are some of the changes you can expect to see if the bill becomes law.

More workers will be able to participate in  401(k) plans

By allowing for multi-employer 401(k) plans, this legislation would make it less expensive for small employers to offer retirement plans to workers. The legislation would also permit some part-time employees to participate in 401(k) plans.

Ability to make traditional IRA contributions for as long as you wish

Currently, employees are not allowed to contribute to traditional IRAs after age 70½. If the SECURE Act becomes law, this age limit will be removed. However, limits on contribution amounts would remain. For 2019, workers who are 50 years of age or older can contribute up to $7,000 annually while workers under age 50 can contribute up to $6,000.

The minimum distribution age will change from 70½ to 72

Current law mandates that retirement account owners begin withdrawing funds when they turn 70½. The SECURE Act postpones this to age 72, giving workers 18 more months to enjoy the tax benefits provided by retirement accounts before required withdrawals kick in.

New parents will be able to make early withdrawals without penalty

Withdrawing money from a traditional IRA or 401(k) before the age of 59½ typically incurs a penalty of 10% on the amount withdrawn. (There are exceptions made for special circumstances like a disability, large medical bills, educational expenses, and the purchase of a first home.) The SECURE Act allows new parents to withdraw up to $5,000, without penalty, within one year of having or adopting a child.

Mandatory distributions on inherited accounts

Under the SECURE Act, individuals who inherit an IRA will have to draw down 100% of its assets within 10 years. This is a significant change from current law, which allows inherited IRAs to be drawn down over the course of the beneficiary’s life expectancy. Some IRA beneficiaries would thus lose the opportunity to stretch the value of the IRA and benefit from potential tax breaks. There are exceptions, however, for the spouse, chronically ill or disabled beneficiaries, and beneficiaries who are 10 years (or less) younger than the original account owner.

Will the SECURE Act Become Law? 

So, will the bill become law? The House vote on May 23rd was 417-3. Based on that, one would expect swift passage in the Senate. As of this writing, action has yet to be been taken.

Get Advice From An Experienced Elder Law Attorney

Clifford M. Cohen has more than 35 years of experience and dedicates his practice to guiding aging individuals in the Maryland and D.C. area through all facets of elder law care. Contact us today at 202-895-2799 for a free case evaluation.