Late last year, Congress passed, and the President signed, legislation called the SECURE Act. It significantly impacts the landscape regarding retirement plans. If you currently sponsor a qualified retirement plan, or are deciding whether to offer a retirement plan to your employees, the changes made in the SECURE Act should be reviewed.

As a whole, the changes in the SECURE Act are generally positive. There are changes that (1) expand opportunities for individuals (i.e., your employees) to increase their savings in retirement plans, (2) increase access of small employers to qualified retirement plans, and (3) make administrative simplifications to the retirement system. Here’s a quick look at some of the more important changes in the SECURE Act.

Expand Opportunities to Increase Savings

  1. Repeals the maximum age for traditional IRA contributions, effective 1/1/20.
  2. Raises the required minimum distribution age from 70½ to 72, effective 1/1/20.

Increase Access of Small Employers to Qualified Retirement Plans

  1. Allows unrelated employers to band together to create pooled employer plans effective for plan years beginning after 12/31/20.
  2. Increases the annual limit on the credit for small employer pension plan start-up costs to a maximum of$5,000 for years beginning after 12/31 /19.

Administrative Simplifications

  1. Allows a group of similar qualified plans to file a consolidated Form 5500, effective for plan years beginning after 12/31/21.
  2. Adds a fiduciary safe harbor for satisfying the “prudent man” requirement with respect to the selection of annuity providers, effective 12/20/19.

Two SECURE Act negatives

Despite these taxpayer-friendly rules, there are two provisions in the SECURE Act that are generally seen as negative. The first is the elimination of the “stretch IRA.” The SECURE Act changes the stretch period applicable to nonspouse inherited IRAs, generally from a lifetime distribution period to a 10-year maximum distribution period, effective for distributions with respect to participants/I RA owners who die after 12/31 /19. The second negative provision is the significant increase in penalties in failing to file Form 5500 and provide certain notices to participants. For example, the Form 5500 late filing penalty increases from $25 per day for each day the return is late (up to a maximum of $15,000 annually) to $250 per day (with a maximum annual penalty of$150,000), applicable to Forms 5500 with a due date after 12/31/19.

Due to the numerous changes required by the SECURE Act, it is imperative to review your employer-sponsored qualified plan to determine compliance with these changes. If you do not currently sponsor a qualified retirement plan, now might be a great time to see if sponsoring a plan would be beneficial under the new rules. If you have any questions, or would like to discuss retirement plan options under the SECURE Act, please give us a call.

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