Secure Act: Law Changes And What To Expect

The Setting Every Community Up for Retirement Enhancement Act, or the SECURE Act, was signed into law by President Trump on December 20, 2019. The Act was passed by the House of Representatives in May 2019 and then by the Senate in December 2019 as part of an end-of-year appropriations act. The SECURE Act was a bipartisan bill that aimed to strengthen the retirement system in the US by increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets.

The bipartisan bill passed the House of Representatives by a large majority

The bill's passage was the result of intense lobbying efforts by the retirement plan industry and consumer groups who shared the desire to expand and modernise the defined contribution (DC) plan landscape. The SECURE Act, or the Setting Every Community Up for Retirement Enhancement Act, aimed to address the nation's looming retirement crisis by helping small businesses provide robust benefits for their employees and giving Americans incentives to take responsibility for their retirement financial security.

Among its main provisions, the Act would expand the opportunity for employers to join "open multiple employer plans" or "open MEPs"; encourage the availability and portability of annuity options within retirement plans; require retirement plan providers to annually disclose the monthly lifetime income value of retirement accounts; provide employers with tax credits for starting plans and for automatically enrolling workers into retirement plans; and allow long-term, part-time workers better access to employer-provided retirement plans.

The Act's passage in the House was a crucial step towards strengthening retirement security for millions of Americans and addressing the challenges faced by the US retirement system. With the support of lawmakers, industry advocates, and grassroots organisations, the SECURE Act took a significant step forward in becoming law and improving retirement prospects for many.

The bill was held up in the Senate by three senators

The Setting Every Community Up for Retirement Enhancement Act, or the SECURE Act, was held up in the Senate by three senators: Ted Cruz, Mike Lee, and Pat Toomey. The bill was initially passed in the House of Representatives by a large majority of 417 yeas to 3 nays, with 12 non-votes. However, it faced opposition in the Senate, where it was blocked by the three senators, preventing its passage via unanimous consent.

Senator Ted Cruz of Texas had concerns about the 529 college savings plan provisions and wanted to tweak the section on 529 accounts to include home-schooling expenses. Senator Mike Lee of Utah had concerns about a provision that provides relief for small community newspapers. Meanwhile, Senator Pat Toomey of Pennsylvania voiced concerns about certain technical tax corrections that impacted retailers.

Due to the deadlock, supporters of the SECURE Act pushed for its inclusion in a must-pass spending bill. This strategy proved successful, and the SECURE Act was attached to the Fiscal Year 2020 Consolidated Domestic and International Assistance Package (H.R. 1865), which was passed by the House and then sent to the Senate and the President for approval.

The SECURE Act is a bipartisan bill that aims to strengthen retirement security for millions of Americans. Its main provisions include expanding the opportunity for employers to join "open multiple employer plans," encouraging the availability and portability of annuity options within retirement plans, and providing tax credits for employers who start retirement plans and automatically enrol workers. The bill also allows long-term, part-time workers better access to employer-provided retirement plans.

The SECURE Act was attached to a must-pass spending bill

The Setting Every Community Up for Retirement Enhancement Act, or the SECURE Act, was attached to a must-pass spending bill in 2019. The bill, which was passed by the House in May 2019 with a vote of 417-3, was held up in the Senate for several months. Three Republican senators—Pat Toomey of Pennsylvania, Ted Cruz of Texas, and Mike Lee of Utah—placed holds on the bill, blocking its passage via unanimous consent.

The SECURE Act was attached to a fiscal year 2020 appropriations bill that had to be passed by December 20, 2019, to avoid a government shutdown. The spending bill provided a combined $1.4 trillion for fiscal year 2020 across military and civilian departments.

The SECURE Act was the subject of intense lobbying efforts by the retirement plan industry and consumer groups who shared the desire to expand and further modernize the defined contribution (DC) plan landscape. The Act includes provisions that would expand the opportunity for employers to join "open multiple employer plans" or "open MEPs"; encourage the availability and portability of annuity options within retirement plans; require retirement plan providers to annually disclose the monthly lifetime income value of retirement accounts; provide employers with tax credits for starting plans and for automatically enrolling workers into retirement plans; and allow long-term, part-time workers better access to employer-provided retirement plans.

The inclusion of the SECURE Act in the spending bill was applauded by industry advocates, who saw it as a significant victory for the average American worker. The Act was signed into law by President Trump on December 20, 2019.

The act will increase access to tax-advantaged accounts

The Setting Every Community Up for Retirement Enhancement Act, or the SECURE Act, was signed into law on December 20, 2019, as part of the 2020 federal budget appropriations bill. The act aims to increase access to tax-advantaged accounts and prevent older Americans from outliving their assets.

The SECURE Act eases the way for annuities to be included in 401(k)s, which is good for consumers because Americans need more access and sources of retirement income. Lifetime income helps increase the longevity of a retirement income portfolio in many situations. The act also removes the age limitation on IRA contributions, allowing individuals of any age to make contributions as long as they can demonstrate earned income.

The SECURE Act also pushed back the age at which retirement plan participants need to take required minimum distributions (RMDs) from 70.5 to 72, and this was later raised to 73 by the SECURE 2.0 Act of 2022 and will rise to 75 in 2033. This change allows retirement savings to grow for longer, which is beneficial given that people are living longer.

The SECURE Act also allows individuals to withdraw up to $10,000 during their lifetime from their 529 plans tax-free to pay off student loan debt. This change provides more flexibility for those who want to help a child who has already graduated, as parents can now use leftover funds in an educational savings account for this purpose.

The SECURE Act also includes a tax credit of $500 for small employers who encourage automatic enrollment into their retirement plans. This can help offset some of the costs of operating a plan and increase employee participation.

Overall, the SECURE Act is intended to make it easier for Americans to save for retirement by allowing them to invest more money in tax-advantaged accounts and to withdraw that money later.

The act will also increase retirement security

The Setting Every Community Up for Retirement Enhancement Act, or the SECURE Act, became law on December 20, 2019, as part of the 2020 federal budget appropriations bill. The act is intended to enhance retirement security for Americans and address the nation's looming retirement crisis. Here are some ways in which the act will increase retirement security:

Expanding Access to Retirement Plans

One of the main goals of the SECURE Act is to expand access to retirement plans, especially for employees of small businesses. The act makes it easier for small businesses to set up "safe harbour" retirement plans that are less expensive and simpler to administer. Small businesses will be able to join "open multiple employer plans" or "open MEPs", which will reduce fiduciary liability concerns and costs. This will enable more small businesses to offer retirement plans to their employees.

Encouraging Annuities in Retirement Plans

The SECURE Act encourages the availability and portability of annuities within retirement plans. It updates the safe harbour provision for plan sponsors to select annuity providers, reducing their liability concerns if the insurer cannot meet its financial obligations. This will likely result in more annuities being offered within retirement plans, providing workers with guaranteed retirement income that cannot be outlived.

Increasing Tax Credits for Employers

The act provides tax credits for employers who start retirement plans and automatically enrol workers. A maximum tax credit of $500 per year is offered to employers who create a 401(k) or SIMPLE IRA plan with automatic enrolment. This will incentivise more employers to offer retirement plans to their workers.

Enhancing Access for Part-Time Workers

The SECURE Act allows long-term, part-time workers to access employer-provided retirement plans. Businesses can now enrol employees who work either 1,000 hours throughout the year or have three consecutive years with 500 hours of service. This expansion of access will enable more part-time workers to save for their retirement.

Raising the Age for Required Minimum Distributions (RMDs)

The act pushes back the age at which retirement plan participants need to take RMDs from 70½ to 72 (and later to 73 in 2023). This change reflects the fact that people are living longer and may need to work later in life. It gives retirees more time to save and allows their money to last a little longer.

The SECURE Act's provisions are designed to strengthen retirement security for millions of Americans. While it may not be a cure-all for the nation's retirement challenges, it takes significant steps towards improving retirement planning and security for many workers.

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