Understanding the SECURE Act

In an attempt to prevent older Americans from outliving their assets in retirement, the federal government passed The Setting Every Community Up for Retirement Enhancement Act of 2019 in December 2019. Known as the SECURE Act, this law was approved as an end-of-year appropriations act and tax measure that helps out many Americans. Learn more about the SECURE Act and how it may impact you.

Understanding the SECURE Act

There are several major components to the SECURE Act, but the overarching intent was to help American workers as they save for their retirement. According to the U.S. Bureau of Labor Statistics, only half of the workers in the United States even participate in their workplace retirement plan, and those who do participate fall far short of contributions necessary to retire with adequate investments. The SECURE Act is an attempt to encourage employers who previously have not established a retirement plan to begin offering this important employee benefit.

Major Provisions of the SECURE Act

The SECURE Act changes many of the established rules regarding retirement plans offered by employers in the United States.

Small businesses will now find it easier to set up 401(k) retirement plans by increasing the cap where they can enroll workers in “safe harbor” retirement plans.
A maximum tax credit of $500 per year will be allowed to employers who create a SIMPLE IRA plan or 401(k) Plan that includes automatic enrollment for employees.
Small businesses will be able to sign up part-time employees who work 1,000 hours or have worked for three consecutive years with 500 hours of service.
The SECURE Act encourages employers to include annuities as options in retirement plans.
Participants will be able to wait until 72 years of age, instead of 70 ½ to take required minimum distributions from their retirement plans, allowing them to save longer for retirement
Student 529 savings accounts can be used to repay qualified student loans, up to $10,000 annually.
Penalty-free withdrawals of up to $5,000 will be allowed to defray the cost of having or adopting a child.
The removal of a provision known as the stretch IRA (Individual Retirement Account) which allowed non-spouses that inherit retirement accounts to stretch out distributions over their lifetimes. Instead, a full payout will be required within 10 years of the death of the original IRA account holder.

How these new changes will impact the retirement savings and lives of Americans remains to be seen, however, what is certain is that most workers in the United States simply do not have enough put away to live comfortably in retirement. Time will tell whether these new federal regulations will help that number grow larger.

Contact an Experienced Business Attorney

If you are a small business owner, you may be wondering how the new SECURE Act can impact your ability to offer a retirement plan for your employees. Contact the Law Office of Kris Mukherji at (858) 442-5747. We can help ensure that you have all of your questions answered, and all of the correct forms filed on time.