What Is the SECURE Act?

By Chris Tymchuck
Founding Attorney

On December 20, 2019, President Trump signed a major piece of legislation called the Setting Every Community Up for Retirement Act (SECURE Act). The bipartisan bill became effective on January 1, 2020, and its goal is to help Americans with something they have long struggled with, the ability to save for retirement. The SECURE Act has some far-reaching measures aimed at things like increasing access to financial accounts that provide tax advantages and helping people save so that they do not outlive their assets.

Understanding the SECURE Act

As stated above, the main goal of the SECURE Act is to help Americans save for retirement. People across the country are outliving their assets and financial resources. The SECURE Act has several different key provisions that hope to foster long term financial health so that people do not face this predicament.

Some of the key provisions of the act include increasing the age requiring minimum distributions from retirement accounts. The age has been bumped up from 70.5 years of age to 72 years of age. Additionally, the Act puts measures in place so that more part-time workers will be eligible to participate in an employer-sponsored retirement plan.

The SECURE Act also looks to make it easier for smaller businesses to afford setting up “safe harbor” retirement plans and make them easier to administer. For instance, the Act increases the cap under which small business employers can automatically enroll employees in these plans. The cap is increased from 10% to 15%. The SECURE Act also provides small business owners with a maximum tax credit of $500 annually if they create a 401(k) or SIMPLE IRA plan that has automatic enrollment.

One of the really major changes made by the SECURE Act is the elimination of the “stretch” option for non-spouse designated beneficiaries who end up inheriting a retirement account. The Act provides that the majority of non-spouse beneficiaries, with some exceptions, will now be required to withdraw the balance from an inherited retirement account within 10 years. Some of the exceptions include beneficiaries who are not more than 10 years younger than the account owner, children of the account owner who have not reached the “age of majority,” and disabled and chronically ill individuals.

In the past, beneficiaries who inherited retirement accounts had the option to take distributions from the account over their lifetime. Reducing the amount of time to take such distributions to 10 years will most likely result in income tax due to increasing and bumping beneficiaries up into higher tax brackets. Instead of being able to spread disbursements from a retirement account over a lifetime, beneficiaries only have 10 years to do so and there will likely be significant tax implications for beneficiaries because of this. In fact, this is supposed to help raise the estimated $15.7 billion that will be required to pay for the changes the SECURE Act is putting into place.

Estate Planning Attorney

Estate planning law will be seeing some significant changes with the implementation of the SECURE Act. Talk to a trusted estate planning legal counsel now to make sure you are protecting your best interests. Contact Unique Estate Law today.

About the Author
As a Minneapolis Estate Planning and Probate attorney I help build and protect families through the adoption, estate planning, and probate processes. I also have experience working with families on issues related to their small businesses. I know how difficult it is to find time to plan for the future and I am here to help walk you through it.