In December 2019, President Trump enacted the “Setting Every Community Up for Retirement Enhancement (SECURE) Act”, which made numerous compliance changes to certain employer-sponsored retirement plans. The SECURE Act changed some retirement account rules, including who is eligible to contribute to retirement accounts and when withdrawals are required. The new legislation also adds a new exception to the early withdrawal penalty.
The notable retirement account changes related to the SECURE Act include:
- The required minimum distribution age increases to 72, up from 70 1/2.
- The age limit for IRA contributions has been removed.
- Inherited retirement account distributions must now be taken within 10 years.
- New parents can take penalty-free withdrawals for birth or adoption.
- Part-time employees working at least 500 hours for three consecutive years will now be eligible for 401(k) plans.
The IRS has now issued guidance to answer questions about how employers should implement the SECURE Act. On September 2, the IRS released Notice 2020-68 addressing components of the law such as eased withdrawals from retirement plans for birth or adoption expenses and required retirement plan eligibility for part-time employees.
Next Steps for Employers
Employers should review the guidance and continue to stay up to date on any additional information that is issued by the IRS as it is indicated that the IRS intends to issue additional guidance under the SECURE Act as necessary.
In addition, employers must ensure that they are complying with any parts of the amendments that are considered required by the applicable deadline(s). The IRS guidance reaffirms that the deadline for both required and discretionary plan amendments under the SECURE Act and related regulations is the end of the first plan year beginning on or after January 1, 2022 (or 2024 for governmental plans and collectively bargained plans). Any later amendments must follow the usual remedial-amendment-deadline rules.
