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The SECURE Act

July 21, 2019

Could a sweeping new bill help the country overcome its retirement crisis?  That's what some lawmakers envision with The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was approved by a landmark 417-3 vote in the U.S. House of Representatives in May. If adopted by the Senate and signed into law by the President, the bill would become the most consequential piece of retirement security legislation passed in over a decade, bringing a number of notable changes to employer-sponsored retirement plans and IRAs.

If signed into law, the SECURE Act would impact the way employers administer retirement plans and affect how employees save for their retirement. Key provisions of the SECURE Act include:

  • Increased Tax Credit. The tax credit for new plans will increase from $500 to $5,000. Small employers who utilize an automatic enrollment feature will be eligible for an additional $500 credit.
  • Allowing Multiple Employer Plans. Existing rules restricting multiple employer plans (MEPs) will be eased, allowing two or more unrelated employers to form a pooled retirement plan.
  • Extended Required Minimum Distribution Age. Effective for individuals turning 70 ½ after 12/31/19, the required minimum distribution age will be extended to 72.
  • Increased Part-Time Worker Participation. Long-term part-time workers will be eligible to participate in 401(k) plans.
  • Lifetime Income Investments. Plan sponsors will be able to offer “safe-harbor” annuitized lifetime income investments as an option for plan participants nearing or in retirement.

 

How does this impact plan sponsors?

The passage of the SECURE Act would impact plan sponsors in a variety of ways:

  • Sponsors would be required to open plan participation to long-term part-time employees.
  • More flexible safe harbor rules could help sponsors pass nondiscrimination testing.
  • Small, unrelated employers may band together to pool assets and form a single retirement plan.
  • Mandatory distributions would need to be made at age 72, up from 70 ½.
  • Sponsors would enjoy tax credits for creating a new plan or initiating auto-enrollment.

 

What happens next?

After passing the House, the SECURE Act is waiting for a vote in the Senate. Though the bill has broad bipartisan support, Senate leadership has been reluctant to bring it to the Senate Floor for a vote and it could be pushed out to 2020. 

 

 

 

 

 

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