The Secure Act

September 26, 2019

The House recently passed a new bill, known as Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which will make it easier for Americans to save for retirement. The bill passed the House nearly unanimously and makes major changes to the law governing retirement savings accounts. These include:

  • Changing the age cap for contributions from 70.5 to any age
  • Raising the age for required withdrawals from IRAs and 401(k)s from 70.5 to 72
  • Allowing contributions to retirement accounts even after distribution has begun
  • Allowing new parents to withdraw $5,000 from retirement accounts to cover new child-related expenses without penalties
  • Encouraging the use of annuities of 401(k) plans by limiting liability for annuities that do not reach their future payment goals
  • Limiting the amount of time beneficiaries can draw down inherited retirement accounts; the new limit for withdrawing assets is 10 years

Another feature of the bill allows smaller employers to join in a pool to offer retirement plans that create savings for both employers and their employees. Previously, only larger companies and plans had the purchasing power to negotiate better features and lower costs for their employees.

Opposition to SECURE Act Provisions

While the SECURE Act is endorsed by the AARP and enjoys widespread bipartisan support, critics draw attention to the fact that the new retirement plan guidelines make it possible for the insurance industry to promote high-cost, but low-quality, annuities in employer 401(k) plans. Annuity options would allow for some or all of a 401(k) account to be converted into a monthly payout similar to a pension. This type of lifetime income option is attractive to many 401(k) holders and has been recommended for many years by retirement experts.

Because the bill requires that all 401(k) participants receive annual statements of potential monthly income should the plan account be paid out as an annuity, some see this as essentially a free advertisement for the product. Should actual income from the annuity turn out to be less than the income projections included on the annual statement, under the Act, employers cannot be sued.

Senate Bill Pending

The SECURE Act must also pass in the Senate for the bill to become a law. However, the Senate has its own version of changes to retirement law called the Retirement Enhancement and Savings Act (RESA). The Senate will have to decide whether to call a vote on the SECURE Act or proceed with RESA. There are some differences between the two bills so legislators would have to come together to reconcile them and hold votes on the new version before sending it to the President for signing. How they will proceed remains to be seen.

West Chester Wills and Estates Lawyers at Eckell Sparks Provide Skilled Counsel for Estate Planning

If you need assistance with estate planning, consult with an experienced West Chester wills and estates lawyer at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthews & Auslander, P.C. today. Call us at 610-565-3701 for a free consultation or contact us online. Located in West Chester and Media, Pennsylvania, we serve clients throughout Delaware County, Chester County, and Montgomery County.