Secure Act Proposal: Law Or No?

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was signed into law by President Donald Trump on December 20, 2019, as part of the Further Consolidated Appropriations Act, 2020. The SECURE Act was the first major retirement-related legislation enacted since the 2006 Pension Protection Act and included significant provisions to increase access to tax-advantaged accounts and prevent older Americans from outliving their assets. The SECURE Act 2.0, passed in 2022, further updated these provisions.

The SECURE Act became law in 2019

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, also known as the SECURE Act, was signed into law by President Donald Trump on December 20, 2019, as part of the Further Consolidated Appropriations Act, 2020. The act was first introduced by Richard Neal, the U.S. representative for Massachusetts's 1st congressional district and chairman of the House Ways and Means Committee, on March 29, 2019. The bipartisan bill was co-introduced by Ranking Member Kevin Brady (R-TX) as well as Reps. Ron Kind (D-WI) and Mike Kelly (R-PA).

The SECURE Act was the first major retirement-related legislation enacted since the 2006 Pension Protection Act. It changed the most popular retirement plans used in the United States, incentivizing employers to create 401(k) plans and expand access to their existing plans to more workers. The act also raised the minimum age for required minimum distributions from 70.5 years to 72 years, allowing workers to contribute to traditional IRAs after turning 70.5 years old. It also allowed individuals to use 529 plan money to repay student loans and made it easier for 401(k) plan administrators to offer annuities.

The SECURE Act was followed by the SECURE 2.0 Act, enacted in 2022, which updated the 2019 act by expanding the options for retirement savings.

It incentivises retirement planning

The Setting Every Community Up for Retirement Enhancement (SECURE) Act incentivises retirement planning in several ways.

Firstly, it makes it easier for small businesses to set up "safe harbour" retirement plans that are less expensive and simpler to administer. The SECURE Act incentivises employers to create 401(k) plans and expand access to their existing plans to more workers. It does this by allowing unrelated small employers to join together to establish a shared 401(k) plan known as a Multiple Employer Plan (MEP). This allows small businesses to pool resources and reduce the administrative costs of establishing a plan. The SECURE Act also provides a maximum tax credit of $500 per year to small employers who create a 401(k) or SIMPLE IRA plan with automatic enrolment.

Secondly, the SECURE Act makes it easier for part-time employees to participate in employer retirement plans. It enables businesses to sign up part-time employees who work either 1,000 hours throughout the year or have three consecutive years with 500 hours of service. This is beneficial for part-time employees who are just entering or about to leave the workforce.

Thirdly, the SECURE Act allows individuals to continue contributing to traditional IRAs after turning 70 and a half years old. Before the SECURE Act, workers with an individual retirement account could only contribute up to this age. Now, "anyone who is working and has earned income may contribute to a traditional IRA regardless of age". This is beneficial for older retirees who wish to keep contributing to their IRAs.

Finally, the SECURE Act allows new parents to take penalty-free withdrawals of up to $5,000 from their individual 401(k) or similar workplace retirement savings plans within one year of the birth or adoption of a child.

It increases access to tax-advantaged savings programs

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was signed into law by President Donald Trump on December 20, 2019. The SECURE Act incentivises employers to create 401(k) plans and expand access to their existing plans for more workers. It also incentivises retirement planning and increases access to tax-advantaged savings programs.

One provision of the SECURE Act allows unrelated small employers to join together to establish a shared 401(k) plan known as a Multiple Employer Plan (MEP). This allows small businesses to pool resources and mitigate the administrative expenses of establishing a plan. MEPs existed prior to the SECURE Act, but under the previous law, they were required to be related in some way (e.g. through geography or a common industry). The SECURE Act waived this requirement for MEPs.

The law also provides a maximum tax credit of $500 per year to small employers who create a 401(k) or SIMPLE IRA plan with automatic enrolment. If a multiple employer plan is set up with automatic enrolment, each eligible employer participating in the plan may claim a separate tax credit. For this tax credit, an employer is eligible if it had no more than 100 employees who received at least $5,000 of compensation from the employer in the preceding year.

The SECURE Act also incentivises employers to cover long-term, part-time workers. "Long-term, part-time" workers are defined as workers at least 21 years of age who have completed at least 500 hours of service each year for three consecutive years.

The SECURE Act also allows people saving money in a tax-advantaged 529 plan to use up to $10,000 to pay off student loans.

The SECURE Act was drafted to assist in saving and investing for retirement. It contains a number of provisions to incentivise retirement planning, diversify the options available to savers, and increase access to tax-advantaged savings programs.

It makes it easier for small businesses to set up retirement plans

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was signed into law on December 20, 2019, and includes provisions that make it easier for small businesses to set up retirement plans.

One such provision is the increase in the federal tax credit for defraying plan startup costs, from $500 to up to $5,000, with an additional $500 tax credit for plans that automatically enrol new hires. This is a significant incentive for small businesses to set up retirement plans, as it helps to offset the administrative expenses involved in establishing a plan.

The SECURE Act also allows small businesses to join together to establish a shared 401(k) plan known as a Multiple Employer Plan (MEP). This enables small businesses to pool resources and reduce administrative costs. MEPs existed prior to the SECURE Act, but the law waived the previous requirement for MEPs to be related in some way, such as through geography or a common industry.

Additionally, the SECURE Act provides a maximum tax credit of $500 per year to small employers who create a 401(k) or SIMPLE IRA plan with automatic enrolment. If a multiple employer plan is set up with automatic enrolment, each eligible employer participating in the plan may claim a separate tax credit. To be eligible, an employer must have no more than 100 employees who received at least $5,000 in compensation in the preceding year.

Furthermore, the SECURE Act makes it easier for small businesses to set up 401(k)s by increasing the cap under which they can automatically enrol workers in "safe harbour" retirement plans from 10% of wages to 15%. This means that small businesses can offer their employees access to tax-advantaged retirement savings plans more easily.

Overall, the SECURE Act includes several provisions that make it easier and more affordable for small businesses to set up retirement plans, which can help them attract and retain quality employees.

It raises the minimum age for required minimum distributions

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was signed into law by President Donald Trump on December 20, 2019, as part of the Further Consolidated Appropriations Act, 2020. The SECURE Act was the first major retirement-related legislation enacted since the 2006 Pension Protection Act.

One of the major elements of the bill was raising the minimum age for required minimum distributions (RMDs) from 70.5 years to 72 years. This change was designed to help retirees make their money last longer, especially if they need to continue working past the age of 70. The minimum age for RMDs was later raised again to 73 as of January 1, 2023, by the SECURE 2.0 Act, with plans to increase it to 75 in 2033.

The SECURE Act also made other significant changes to retirement plans. It allowed workers to continue contributing to traditional Individual Retirement Accounts (IRAs) after turning 70.5 years old, whereas previously they were prohibited from doing so. It also incentivized employers to create 401(k) plans and expand access to existing plans for more workers. For example, it allowed unrelated small employers to join together to establish a shared 401(k) plan known as a Multiple Employer Plan (MEP).

The SECURE Act was drafted to assist Americans with saving and investing for retirement. It contained several provisions to incentivize retirement planning, diversify the options available to savers, and increase access to tax-advantaged savings programs.

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