The SECURE Act stands for Setting Every Community Up for Retirement Enhancement, and was created to encourage businesses to offer and run employer-sponsored retirement plans. In addition to providing incentives for businesses, it changes a few rules for retirement plan owners. Here are some of the basic changes this act brings about. 

Business Tax Incentives

Under the SECURE Act, small businesses are permitted to pool together to provide retirement plans, called Multiple Employer Plans. This cuts down on fees and admin costs for small businesses.

Other incentives offered to businesses include:

• Tax credits for plan startup costs
• Tax credits for automatically enrolling new hires
• Extra time to start new retirement plans

Extended Distribution Age

Traditionally, 70 and a half years old has been the age where minimum retirement distributions were required for 401(k) plans, IRAs, and defined pensions. However, the SECURE act extends this age to 72. In addition, the age cap for contributing to IRAs has been removed.

Changes Withdrawal Rules for Beneficiaries of IRAs

“Eligible” designated beneficiaries of IRAS will be able to take inherited contributions over the lesser period of their life or life expectancy.

Eligible beneficiaries include:

• A surviving spouse
• A minor child who has not reached the age of majority (the state’s required age to be legally recognized as an adult).
• Someone who has a disability or is chronically ill
• A person not more than ten years younger than the owner of the IRA

Beneficiaries who don’t fall into one of these categories will be subject to the ten-year rule, including children who then reach the age of majority. According to this rule, the beneficiary will need to withdraw and pay taxes on the entire IRA balance within a ten-year period. 

 

If you need help with estate planning and would like to know if the SECURE act affects your situation, contact the attorneys at My Legal Team. With more than 30 years of combined experience, they’re proud to serve all of the Long Beach, CA area. They specialize in estate planning, divorce settlements, and family law. Visit their website for a full list of services or contact them at (562) 479-0900  to schedule a consultation.