For most of you, if you haven’t come to see us already in 2020, this might seem like a trick question. Many people aren’t aware of the existence of the SECURE Act, but it’s an important piece of legislation that was attached the 2019 year-end spending bill. The bill is significant as far as retirement rules are concerned and although there are many changes, we’re going to spend a couple of separate blog posts discussing the ones that we think will impact most people. For the other changes, we’ll do our best to mention them so that you can discuss them with your advisor if they impact your situation.
This first post will only be high level – an attempt to summarize the far-reaching law so that you can consume it in bite-sized pieces. The next couple will go into greater detail regarding the major changes to IRAs and what planning opportunities will come of the changes.
No more fluff – here are the changes:
- No more stretch IRAs -beneficiaries must distribute accounts in a ten-year window. Spouses and other exceptions to this rule apply, but this is the big one.
- RMD age changes from 70.5 to 72. If you’ve already started RMDs, this doesn’t impact you, but probably a long overdue change considering life expectancy changes over last few decades.
- Deductible IRA contributions no longer have age limits
- New rules allowing distributions for birth/adoption
- Some changes in how on campus work is treated for IRA contribution purposes
- There are additional changes for foster care payments, as well
- Changes to how annuities are treated in qualified plans – should mean increased availability and portability (whether this is good depends on a lot of factors).
- Tax credits provided to small businesses for establishing plans and electing auto-enrollment, as well as changes to what is allowed as an auto-enrollment contribution.
- Changes to allow long-term part-timers to contribute
- Changes that make MEPs (Multiple Employer Plans) more attractive – pooling a plan for multiple small employers which may allow for better terms than could be achieved alone.
- No more loans made via 401(k) credit cards (I’ll be honest, I didn’t even realize that was a thing).
- Employers now have more time to set up new plans (up to their tax filing deadline), but are penalized more harshly for not filing retuns
- Expanded use of 529 plan funds – can now pay for (some) student loans.
- Qualified tuition and other similar expenses can now be deducted.
- Special exemption for distributions made in event of disasters.
- Kiddie tax rules – which changes as a result of the TCJA (2016) now revert to old rules (kid’s tax rates, then parents’)
- Mortgage insurance premiums can be deducted
- The amount of medical expenses required to allow as deduction was changed again – back to 7.5% of AGI. This one has gone back and forth for several years and even been different based on age, in the past.
- Some other more targeted incentives for clean energy and economic growth. 
If you’re someone that loves really getting into the weeds on this stuff, or you want to read in more detail about any of the specific topics, the URL in the footnote is about 21 pages worth of information on these changes. Sufficed to say, we will discuss with you individually how any of these changes may impact your specific situation. As mentioned above, we’ll dig a little deeper into the planning implications of the changes to IRAs, as those will impact the greatest number of our clients. Feel free to reach out with any question in the interim.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. LPL Financial does not offer tax or legal advice.