The Secure Act or THE SETTING EVERY COMMUNITY UP FOR RETIREMENT ENHANCEMENT ACT OF 2019  was passed in late-December and is effective as of January 1, 2020 (with some exceptions, we will discuss later.) In the coming weeks we will be discussing what the Secure Act is and how it is going to affect all of us that are in the Estate Planning/Elder Law arena.

The Secure Act will change some of our client’s estate planning including veteran pension.  Here are a couple of the biggest changes we will see:

• It changes the age at which you must start withdrawing from your IRA or retirement plan. It was age 70 ½ under prior law while under the Secure Act it increases to age 72. Why is this a good change?  It will allow aging adults to keep their money in their plan longer giving them an extra 1 1/2 years of tax-deferred growth.
• It allows you to contribute to a traditional IRA past age 70 ½ if you have “earned income” from employment rather than from investments.
• It permits qualified defined contribution plans, section 403(b) plans, or governmental section 457(b) plans to make a direct trustee-to-trustee transfer to another employer-sponsored retirement plan or IRA of lifetime income investments or distributions of a lifetime income investment in the form of a qualified plan distribution annuity, if a lifetime income investment is no longer authorized to be held as an investment option under the plan. The change will permit participants to preserve their lifetime income investments and avoid surrender charges and fees.
• It will require employers maintaining a 401(k) plan to have a dual eligibility requirement under which an employee must complete either a one year of service requirement (with the 1,000-hour rule) or three consecutive years of service where the employee completes at least 500 hours of service. This is great news for those that are working a second job, have retired but are working part-time, or other part-time workers including our veterans!  Employers can however still exclude part-time employees that do not meet the 1,000-hour rule.
• It  provides for penalty-free withdrawals from retirement plans for any “qualified birth or adoption distribution.”
• It expands 529 education savings accounts to cover costs associated with registered apprenticeships; homeschooling; up to $10,000 of qualified student loan repayments (including those for siblings); and private elementary, secondary, or religious schools.

Next week we will be discussing how the Secure Act affects distributions for beneficiaries and what that means for estate planning.

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This is a great time to review your clients’ estate/pension/medicare/medicaid plan!