January 14, 2020

The SECURE Act – Key Takeaways for Employee Participants

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law on Dec. 20, 2019 by President Trump, is the most expansive piece of retirement legislation since the Pension Protection Act of 2006. Effective Jan. 1, 2020, the law will have some impact on nearly every retirement plan and participant with numerous provisions intended to increase retirement security, expand plan coverage, encourage retirement savings and decrease plan costs.


  1. Beneficiaries inheriting IRA distributions from original owners who passed after Jan. 1, 2020 will generally be required to withdraw assets in a 10-year payout, rather than “stretched” over their life expectancy.


Action: There are some exceptions and approved scenarios, such as assets left to a surviving spouse, minor child or disabled beneficiary. Work with your tax advisor or estate planning attorney to understand these changes and evaluate how they might affect your retirement and estate planning strategies.


  1. You are no longer required to withdraw assets from retirement plans at age 70½. Required minimum distributions (RMDs) now begin at age 72 for both IRAs and qualified retirement plans.


Action: If you are turning 70½ in 2020 and had planned on taking an RMD, consider working with your financial advisor on your withdrawal plans.


  1. You can make IRA contributions beyond age 70½ as long as you are still working.


Action: Determine how long you plan to work and when you expect to start withdrawing from your retirement savings. Note: This change doesn't apply for tax year 2019; it will begin for tax year 2020 contributions.


  1. ”Lifetime Income Investment” options can help you predict your financial security in retirement. Under the new law, your employer will be required to provide an annual lifetime income disclosure which will convert the account balance into an income stream at retirement.


Action: Assess your full financial picture. Consider working with a financial advisor to learn steps you can take to make the most of your monthly income stream.


  1. You can take “qualified birth or adoption distribution” of up to $5,000 from an applicable defined contribution plan, such as a 401(k) or IRA, to assist with funding the birth or adoption of a child. The option applies to each parent separately.


Action: If your family is growing, evaluate your personal savings and determine if this financial assistance can help provide additional monetary support. The “qualified birth or adoption distribution” applies to each parent separately. The 10% early withdrawal penalty will not apply, and you have an option to repay using a rollover contribution to an applicable eligible defined contribution plan or IRA.


  1. If you have money remaining in a college savings (529) plan after graduation, you can now use that account to pay up to $10,000 in student debt over the course of the student’s lifetime.


Action: If you or a member of your family is planning to enroll in a higher education institution, consider investing in a college savings (529) plan. For those already enrolled in 529 plans, determine if any of your funds can be used towards after college programs or student loan repayment.


Whether the SECURE Act ends up being a game changer is yet to be seen. However, armed with the knowledge of its key components, employers and employees alike can be prepared and make adjustments for what lies ahead.


If you have any questions or would like more information on the SECURE Act and how it may affect your plan, please contact CBIZ Retirement Plan Services.


CBIZ Retirement Plan Services is a trade name under which certain subsidiaries of CBIZ, Inc. (NYSE Listed: CBZ) market investment advisory, investment management, third party administration, actuarial and other retirement plan services. Investments, investment advisory and investment management services offered through CBIZ Financial Solutions, Inc., Member FINRA, SIPC and SEC Registered Investment Adviser, dba CBIZ Retirement Plan Advisory Services.  Investment advisory and investment management services may also be offered through CBIZ Investment Advisory Services, LLC, SEC Registered Investment Adviser. Third party administration, actuarial and other consulting services offered through CBIZ Benefits & Insurance Services, Inc.

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