SECURE?

April 3, 2019 - Published by IAG Wealth Partners

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Bipartisanship in Congress is a rarity these days, so when key leaders of Democrats and Republicans develop and introduce legislation together it catches one’s eye.

Last week the leaders of the House Ways and Means Committee unveiled the soundly bipartisan SECURE Act. SECURE stands for Setting Every Community up for Retirement Enhancement. I suspect the acronym came before the title, but I will let you be the judge.

The SECURE Act includes some interesting provisions that could change retirement plan rules. Of course, this bill is still a very long way from becoming law and it will likely change as it twists and turns through the legislative process, but it gives us a glimpse of where Democrats and Republicans could agree on changing retirement rules.

Here are some of the provisions they are contemplating:

  • Increase the age that Required Minimum Distributions (RMDs) must begin from retirement accounts. Currently RMDs begin in the year you turn 70.5. This bill would increase that to age 72.
  • Repeal the maximum age for traditional IRA contributions. Currently taxpayers over age 70.5 are prohibited from making traditional IRA contributions. This bill would allow contributions after age 70.5.
  • Require some beneficiaries of retirement plans to pay taxes on their inherited retirement account value within 10 years. Currently beneficiaries are generally permitted to stretch out the taxes on beneficiary retirement accounts by taking withdrawals over their lifetimes. This bill would require non-spouse and non-child beneficiaries to empty the inherited IRA within 10 years (with a few additional exceptions).
  • Expand the qualified expenses of 529 college savings plans to include the repayment of up to $10,000 per year of qualified student loans. Currently taxpayers may not use 529 plan withdrawals to pay off student loans.
  • Encourage small employers to offer retirement savings plans to their employees by simplifying regulations, allowing them to join together in one plan, and creating tax credits to help offset plan startup costs.
  • Allow long-term part-time employees to participate in employer-sponsored plan. Currently employers may exclude employees who work less than 1,000 hours per year from employer-sponsored plans. This bill would permit workers who work over 500 hours per year to participate after 3 years.
  • Permit taxpayers to use retirement plan assets to cover costs associated with the birth or adoption of a child. Currently taxpayers must pay a 10% penalty for such early distributions.
  • Proscribe how employers could include lifetime income annuities as an investment option within employer-sponsored plans.

We will continue to monitor any changes that Congress makes to your retirement accounts and update your financial plan as needed to potentially reduce your tax burden.

Quote of the week:  Henry Paulson: “One of the most constant aspects of American life is change.”


Source: House Ways and Means Committee

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