Major Retirement Plan Provisions of the SECURE Act

On December 20, 2019, the SECURE Act (“Setting Every Community Up for Retirement Enhancement Act of 2019”) became law when the appropriations bill known as the “Further Consolidated Appropriations Act of 2020” was signed by President Trump.

The SECURE Act aims to expand and preserve retirement savings, making it easier for individuals to participate in a plan, and to maintain plan savings longer. It also incentivizes employers to offer retirement plans, including several new tax credits. The bill includes several provisions to help improve certain plan administration requirements.

Major Provisions Effective in 2019 and 2020

Provisions that promote retirement savings and/or facilitate administration of plans:

  • Increases the age requirement for required minimum distributions to age 72
  • In Safe Harbor plans:
    • Increases the maximum auto-escalation limit from 10% to 15%
    • Eliminates the safe harbor notice requirement for 3% non-elective contributions
  • Tax credits for small employers (100 employees or less)
    • New tax credit for adding auto-enrollment to a new or existing plan (up to $500 per year for 3 years)
    • Increased tax credit for starting a new plan (up to $5,000 per year for 3 years)
  • More time for employers to adopt a new plan after year-end (facilitates tax planning)
  • Provides portability of lifetime income when the investment can no longer be held by the plan
  • Provides a fiduciary safe harbor to fiduciaries when selecting lifetime income providers
  • Permits a penalty-free withdrawal from a plan or IRA for a qualifying birth or adoption up to $5,000

Provisions that are more restrictive or increase penalties:

  • Prohibits plan loans from being made through credit cards
  • Non-spouse beneficiaries (some exceptions apply) who inherit an IRA, or a qualified defined contribution, 403(b), or 457(b) plan account must withdraw the money within 10 years (rather than over life expectancy)
  • Increases penalty for late filing of 5500s to $250 per day up to a maximum of $150,000
  • Increases penalty for failing to provide withholding notices to $100 per day up to a $50,000 per year maximum

Major Provisions Effective Beyond 2020

Provisions that promote retirement savings and/or facilitate administration of plans:

  • Requires defined contribution plan statements to include an annual disclosure/illustration of the monthly income a participant could receive if the total benefits were paid in a lifetime income stream
  • Requires plans to permit long-term part-time employees to make elective deferrals to a 401(k) plan if they workedat least 500 hours for three consecutive years
  • Ability to file a consolidated 5500 if certain conditions are met (IRS/DOL guidance needed)
  • New rules to be issued for multiple employer plans

Major Provisions Impacting Individuals

  • Contributions can be made to an IRA beyond age 70 1/2 as long as account owner has earned income
  • Delays required minimum distribution (RMD) payments until age 72 (those turning 70 1/2 in 2019 will follow the prior rules)
  • Non-spouse beneficiaries (some exceptions apply) who inherit an IRA or a qualified plan account must withdraw the money within 10 years (rather than over life expectancy)
  • Allows tax-free distributions from section 529 plans for student loan repayments up to a lifetime cap of $10,000
  • Permits a penalty-free withdrawal from a plan or IRA for a qualifying birth or adoption up to $5,000
  • Certain taxable non-tuition fellowship and stipend payments may be treated as compensation for IRA purposes
  • Improves access to retirement plans for long-term part-time employees

How BOK Financial Will Assist You

The SECURE Act is one of the most comprehensive retirement reform acts in several years. BOKF will provide additional detailed summaries of the Secure Act and a client webinar to be scheduled soon. We look forward to reviewing these new provisions with you and helping you evaluate the impact to your plans. In the interim, if you have any questions, please contact your Relationship Manager.

Need help navigating the impact of these changes? Contact your relationship manager today.