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Overview of the SECURE Act – Individuals

May 8, 2020

~ Author – Nathan R. Musser, CPA, Deluzio & Company, Tax Supervisor ~

The President signed the Further Consolidated Appropriations Act, 2020 on December 20, 2019.  The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE) (Division O of the Further Consolidated Appropriations Act, 2020), makes major changes for 401(k) plans and IRAs.  The highlights of retirement changes for individuals include:

IRA Changes

  • Moves the start date for required minimum distributions (RMDs) to the year in which the owner turns 72
  • Ends the 70½ age limit for contributions to an IRA
  • Shortens the distribution period for non-spouse inherited IRAs to a 10-year maximum

401(k) Changes

  • Requires plans to offer participation to long-term, part-time employees
  • Permits plans to adopt qualified birth or adoption distributions
  • Streamlines the safe harbor for employer non-elective contributions (the amount employer contributes regardless of employee’s contributions)

Other Changes for Individuals

  • Permits qualified birth or adoption distributions up to $5,000 exempt from the early-withdrawal penalty
  • Includes the following as compensation for purposes of retirement plan contributions
    • Taxable non-tuition fellowships and stipends (amounts received as payments for teaching, research, or other services required as condition for receiving scholarships)
    • Nontaxable “difficulty of care payments” earned by home healthcare workers (those who provide care to an individual who has a physical, mental or emotional handicap)

These provisions under the SECURE Act can have a significant impact on your tax liability and require proper planning. Please call our office to discuss these changes to retirement options and how they may affect your tax situation.

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