As you may have seen in the news recently, on December 20, 2019, the SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019 was enacted by Congress.  This legislation has been viewed by many as the next step in helping to ensure that every American will have the opportunity to one day retire.  By providing enhancements and changes to the way retirement plans currently operate, the SECURE Act is one way to help achieve that goal.  A major goal of these new provisions was to make retirement plans available to more American workers and to further cut back some of the “red tape” that is limiting the ability of some individuals to participate.  Of course, there is still more work to be done, but the SECURE Act was certainly a step in the right direction.


Because of the complexity of this legislation, we expect further clarification on some of the aspects of the SECURE Act to be communicated over the coming months.  Additionally, many aspects of the SECURE Act are not immediate, and will gradually take effect throughout 2020 and 2021.  As a result, employers will have some flexibility (generally, until the end of 2022) to amend their plan documents; however, as long as a plan is being operated according to the changes implemented in the SECURE Act, and required amendments are adopted retroactively and in a timely manner, the plan will be treated as operating in accordance with the terms of the Act (and will be seen as being in compliance until the plan document is ultimately amended).  As further developments continue to be released this year, we will be sure to keep you updated on how your plan and plan participants are impacted by the legislation.


Some of the key changes and updates from the SECURE Act that may impact your retirement plan include:


  • “Qualified birth or adoption distributions” are now permissible from qualified plans and 403(b)’s. These distributions allow for payments of up to $5000 per birth or adoption (within 1 year of birth), and will be exempt from the 10% early withdrawal penalty that would normally apply.  These distributions can also be repaid into the plan, and in doing so, would be excludable from income.


  • In-service distributions are now permitted from 457(b) Plans at age 59 ½.


  • For plans that offer auto-deferrals, the maximum deferral rate was raised from 10% to 15%.


  • Annual safe harbor notices are eliminated for 401(k) nonelective safe harbor plans (but would still apply to 401(k) plans with a safe harbor match).


  • If a plan adopts automatic enrollment, an employer tax credit of $500 is available for the first 3 years that it is included in the plan.


  • If a plan offers a lifetime income option (i.e. an annuity), this option can be transferred in-kind to another eligible retirement plan, or it may be distributed from the plan.


  • Effective 1/1/2020, the Required Beginning Date for required minimum distributions (RMD’s) was changed from 70 ½ to 72. Anyone who turned 70 ½ prior to 1/1/2020 must still follow the old RMD rules.


  • A new retirement plan does not have to be formally adopted by the end of the year it is intended to take effect; you now have until your tax filing due date (with extensions) to adopt the plan.


  • In most cases, for participant deaths that occur after 12/31/19, the deceased’s account balance must be paid out within 10 years of death, regardless of whether the death occurs before or after RMD’s have begun. Distributions to those who are not “designated beneficiaries” must still occur within 5 years of death.  An exception applies for “eligible designated beneficiaries” who are no more than 10 years younger than the deceased participant; they may receive payments over their life expectancy.


  • The late filing penalty for a 5500 increases from $25/day to $250/day.


  • “Pooled employer plans” can now be created, which would allow for 2 or more unrelated employers to file a single 5500 and maintain a single ERISA bond.


  • Beginning on 1/1/21, part-time employees who have worked at least 500 hours in 3 consecutive years must now be offered the opportunity to participate in a 401(k) plan.


  • Last, in addition to the SECURE Act provisions listed above, the Further Consolidated Appropriations Act of 2020 contains disaster relief provisions, similar to those provided in past years, as well as other provisions regarding hardship distributions and loans. This provision allows participants to take “qualified disaster distributions” in certain situations and can be taken penalty-free.