There are several changes that this new legislation has made:
- Secure permits a qualified retirement plan to be created up to the extended due date of tax returns effective beginning in 2020. Previously, IRA’s and other plans had a deadline of April 15 leaving the Simplified Employee Pension as the only option available until the extended deadline
- Secure permits penalty-free withdrawals effective 2020 from employer plans or IRA’s up to $5000 per parent for one year following the birth or adoption of a child. Total would be $10,000 for both parents. Income tax still applies. Recontribution is available.
- For those who have not turned 70 ½ by December 31, 2019, Secure raises the age for Required Minimum Distributions to age 72
- Secure requires for deaths after 2019 that defined contribution plans and IRA’s distribute in full within 10 years of the Dec 31 following death except to eligible designated beneficiaries including spouses, disabled or chronically ill individuals, those with no more than a 10-year age difference and children under the age of majority. In this last instance the 10 years begins at date of maturity. One can either take 1/10 of the value out each year or defer all deductions until the 10th year and pay all the tax at once on the appreciated value. One can alternate years as well as long as the account is fully distributed by the 10th
- Secure allows taxable stipends and fellowships at the graduate or post-doctoral level to be treated as compensation for purpose of IRA contributions effective 2020.
- Secure has expanded rules for 529 plans. Effective 2019 it allows utilization of funds for registered apprenticeships and for student loan repayments of principal and interest of up to $10,000 lifetime per beneficiary.
- Medical expense deductions have reverted back to those expenses exceeding 7.5%
There are several other provisions available via the SECURE ACT and can be addressed individually or in later blog posts or newsletters.