The Retirement Enhancement and Savings Act of 2019, also known as the SECURE Act, is a federal law that was signed into law by President Donald Trump on December 20, 2019. The law aims to enhance retirement savings and increase access to retirement plans for American workers.
The bill was then passed by the Senate in December 2019 and signed into law by President Donald Trump on December 20, 2019.
The SECURE Act is considered as the most significant legislation affecting retirement savings since the Pension Protection Act of 2006, and it’s the first major retirement-related legislation in over a decade. The main goal of the law is to enhance retirement savings and increase access to retirement plans for American workers. The law includes several provisions aimed at achieving this goal, such as raising the age for required minimum distributions, increasing access to workplace retirement plans, and eliminating the “stretch” IRA.
The SECURE Act was passed with broad support from both the House and Senate, and it was included in the Further Consolidated Appropriations Act, 2020, which was signed into law on December 20, 2019. The law went into effect on January 1, 2020, and its provisions affect both employer-sponsored retirement plans and individual retirement accounts (IRAs).
After its implementation, some concerns have been raised about the elimination of the stretch IRA, but it was also seen as an opportunity to implement new strategies for estate planning and wealth transfer, and to address the disparities between the wealthy and middle-class savers, and further amendments can be proposed to the Congress.
The SECURE Act includes several provisions that aim to achieve this goal, such as:
- Raising the age for required minimum distributions (RMDs) from 70 1/2 to 72: This allows individuals to keep their money in their retirement accounts longer before they are required to start taking distributions.
- Increasing access to workplace retirement plans: The law makes it easier for small businesses to offer retirement plans to their employees by creating a new type of plan called an “open multiple employer plan” (MEP).
- Encouraging long-term, part-time employees to save for retirement: The SECURE Act allows long-term, part-time employees to participate in 401(k) plans if they have worked for at least 500 hours per year for at least three consecutive years.
- Eliminating “stretch” IRA: The law eliminates the ability for non-spousal beneficiaries to stretch out distributions from inherited IRA’s over their life expectancy.
- Providing tax credits for small businesses: The law provides a tax credit for small businesses that start a new retirement plan, or for those that automatically enroll employees in an existing plan.
- Providing new benefits for survivors: The law requires that certain retirement plan benefits be paid to the surviving spouse unless the spouse affirmatively elects otherwise.
The SECURE Act is considered as a significant change in the retirement savings landscape and it’s expected to help more Americans achieve a secure retirement.
Retirement Enhancement (SECURE) Act Responsibilities and Accountabilities
The Retirement Enhancement and Savings Act (SECURE Act) assigns several responsibilities and accountabilities to different entities in order to enhance retirement savings and increase access to retirement plans for American workers. Some of these responsibilities and accountabilities include:
- Individuals: are responsible for understanding the changes to the required minimum distribution (RMD) age, and how it affects their retirement savings and distribution planning. They should also be aware of the changes to the stretch IRA, and how it affects their beneficiaries’ distribution planning.
- Employers: are responsible for understanding the changes to the employer-sponsored retirement plans, such as the new rules for open multiple employer plans (MEPs), the new rules for long-term part-time employees, and the new tax credits for small businesses that start new plans or automatically enroll employees in existing plans.
- Plan Administrators: are responsible for ensuring that the plans they administer comply with the new rules, such as the RMD changes, and the new rules for MEPs. They also need to understand the changes in the stretch IRA and how it affects the plan’s beneficiaries.
- Financial Advisors: are responsible for understanding the changes to the RMD age, the stretch IRA and the new rules for employer-sponsored plans. They should also be able to provide guidance to their clients on how these changes affect their retirement savings and distribution planning.
- Government agencies: such as the Department of Labor (DOL) and the Internal Revenue Service (IRS) are responsible for enforcing compliance with the SECURE Act’s provisions, including issuing guidance and penalties for noncompliance.
- Citizens: can participate in the process by reporting any fraud, waste or abuse related to the SECURE Act and also by participating in the political process to help shape the law’s future.
Retirement Enhancement (SECURE) Act Sanctions and Remedies
The Retirement Enhancement and Savings Act (SECURE Act) includes a number of sanctions and remedies to enforce compliance with its provisions. Some of these include:
- Penalties: Employers that fail to comply with the provisions of the SECURE Act, such as the requirement to offer a retirement plan or to automatically enroll employees in an existing plan, may be subject to penalties.
- Tax penalties: Employers and individuals may be subject to tax penalties for noncompliance with the SECURE Act’s provisions, such as failure to make required contributions to a retirement plan.
- Civil penalties: Plan administrators who violate the SECURE Act’s provisions may be subject to civil penalties, such as fines and penalties for noncompliance.
- Legal remedies: The SECURE Act provides for legal remedies, such as the ability for individuals to file lawsuits against employers or plan administrators for violations of the law’s provisions.
- Compliance assistance: The SECURE Act provides for compliance assistance to employers, plan administrators and individuals, such as through the Department of Labor’s Employee Benefits Security Administration (EBSA) and the Internal Revenue Service (IRS).
- Enforcement by government agencies: The SECURE Act authorizes government agencies such as the Department of Labor (DOL) and the Internal Revenue Service (IRS) to enforce compliance with the law’s provisions, including issuing penalties and fines for noncompliance.
- Public reporting: Many of the SECURE Act’s provisions require public reporting by employers, plan administrators, and financial advisors to ensure compliance and transparency.
All these remedies and sanctions are put in place to ensure that individuals, employers, plan administrators, and financial advisors comply with the SECURE Act’s provisions and help to achieve its goal of enhancing retirement savings and increasing access to retirement plans for American workers.