THE SECURE ACT 

The SECURE Act represents the most significant retirement plan legislation in more than a decade. This benefits both employers and employees, by providing administrative relief along with expanded retirement plan coverage and increased savings opportunities to improve retirement security. 

Expands Coverage 

  • Allows employers of all sizes and types of businesses to join together to create “open” multiple-employer plans (MEPs) to make retirement plans more accessible 

  • Allow long-term, part-time workers to participate in 401(k) plans 

Increases Tax Credits 

  • Increases tax credits for small employers who start new retirement plans—from $500 per year to as much as $5,000 per year for three years 

  • Adds an additional $500/year tax credit for new plans that include automatic enrollment.

Preserves Savings 

  • Delays the required minimum distribution age from 70½ to 72 

  • Increases the cap on auto-escalation of contributions for certain safe harbor 401k plans from 10% to 15% of pay after the first year 

  • Encourages lifetime income options through new participant disclosures, new provider selection rules and new ways to increase the portability of lifetime income investments 

  • Prohibits DC plans from extending loans to participants using credit cards 

  • Relieves nondiscrimination testing requirements for closed defined benefit (DB) plans 

  • Provides funding relief for community newspaper pension plans and clarifies church plan requirements 

Eases Burdens for Employers 

  • Offers consolidated Form 5500 filing for a “group of plans” using the same fiduciaries and investments for certain DC plans 

  • Provides more time to retroactively adopt certain retirement plans 

  • Makes it easier to adopt, change, and manage a safe harbor 401(k) plan 

  • Simplifies termination of 403(b) custodial plans by permitting distributions in kind to individual custodial accounts 

  • Reduces PBGC premiums for cooperative and small-employer charity (CSEC) plans 

  • Reduces payout period for non-spouse beneficiaries of DC plans (and IRAs) to 10 years after the participant’s (owner’s) death 

Eases Burdens for Individuals 

  • Eliminates the current age 70½ limit for contributing to an IRA 

  • Allows graduate students to count stipends and non-tuition fellowship payments as compensation for IRA contribution purposes 

  • Permits penalty-free withdrawals of up to $5,000 from qualified retirement savings plans to help pay for childbirth or adoption expenses (with repayment permitted) 

  • Expands allowable expenses for 529 college savings plans to include apprenticeships, or up to $10,000 of qualified education loan repayments 

  • Waives the 10% additional tax on distributions for up to $100,000 of qualified disaster distributions 

  • Fixes the “Gold Star Family” tax problem, also known as the “widow’s tax”.

Increases Penalties 

  • Increases penalties for failure to file retirement plan returns (such as Forms 5500), required notifications of changes and required withholding notices. 

  • Increases penalties for individuals who fail to file tax returns.

Mandatory plan amendments to cover SECURE Act changes will not be required until the 2022 plan year for most plans.