SECURE ACT Review

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019. The legislation, which passed the U.S. House in May, is one of the most significant pieces of retirement legislation in more than a decade. It contains more than two dozen provisions designed to encourage the adoption and administration of employer-sponsored plans. PSCA created an at-a-glance summary of the SECURE Act's provisions and their effective dates.

SECURE contains nearly thirty provisions that will have a direct impact on retirement plans. Among the key changes, the SECURE Act allows two or more unrelated employers to join a pooled employer plan, creating an economy of scale that lowers both employer and plan participant cost. It significantly increases the tax credit for new plans from the current cap of $500 to $5,000, and small employers that implement an automatic enrollment feature in their retirement plan design are eligible for an additional $500 credit. Other key provisions include: 

• increasing the auto enrollment safe harbor cap from 10% to 15% of pay; 
• simplifying safe harbor 401(k) rules; 
• providing portability of lifetime income options; 
• allowing long-term part-time workers to participate in 401(k) plans; 
• allowing plans adopting by the filing due date to be treated as in effect as of close of year; 
• providing a fiduciary safe harbor for selection of lifetime income provider; 
• modifying the treatment of custodial accounts on termination of section 403(b) plans; 
• requiring disclosures regarding lifetime income; and 
• modifying the nondiscrimination rules to protect longer service participants. 

The legislation also includes a few provisions that are designed to raise revenue. Among those are increasing the penalties for late filing of retirement plan returns and notices (look for a forthcoming post about this), and eliminating the so-called “stretch IRA” requiring beneficiaries of both IRAs and DC plans to draw down assets within 10 years of the death of the owner/participant.

In total, the legislation includes nearly 30 provisions, many of which are designed to make it easier for small- and mid-sized businesses to provide a retirement plan. In addition to the SECURE Act provisions, the appropriations act includes several other measures affecting retirement plans, including disaster-related plan withdrawals.

Click here for a summary highlighting key provisions and timing.