SECURE Act

At the end of 2019, The SECURE Act was passed by Congress and went into law on January 1, 2020.  As more information has come out, some key questions keep recurring and we wanted to share with you answers to these key questions that could impact your personal and professional planning.  We will discuss Required Minimum Distributions, Stretch IRA, Small Business Retirement Plans and some miscellaneous changes that might be of interest.

Required Minimum Distributions (RMDs)

• The biggest change is if you turn 70.5 in 2020 or beyond you DO NOT need to take your RMD until you are 72.
• If you turned 70.5 in 2019 or earlier you still MUST take your RMD. 

Stretch IRA

• All retirement accounts inherited in the year 2020 or beyond must be distributed within 10 years by all non-eligible designated beneficiaries.
• This rule does not apply to spouse, disabled beneficiaries (according to IRC Code), chronically ill (according to IRC Code), individuals who are NOT greater than 10 years younger than deceased and certain minor children (until they reach the age of majority)

Small Business Retirement Plans (defined as less than 100 employees earning $5,000 or more in compensation)

• Starting in January 2020 any small business that adopts a retirement plan can be eligible for tax credits up to $5,000 (based on the number of employees) for up to 3 years.
• If an existing small business retirement plan or a new plan adopts auto-enrollment they are also eligible for a $500 tax credit for the following 2 years.
• Starting on January 1, 2021, the Act will impact long-term part-time employees.  Employees who have worked at least 500 hours in the previous 3 years will be eligible for the retirement plan.  The old rule of 1,000 hours worked in the previous year must also be followed. One caveat since this part of the rule starts in 2021 that is when the clock starts ticking on the 3 years.  So part-time long-term employees will not be eligible until 2024.

Other SECURE Act Updates

• Kiddie Tax starting in 2020 will revert back to the parent’s marginal tax rate
• 529 Plans have extended the qualified educational expenses to include apprenticeship programs and to assist in student loan repayment
• Non-tuition fellowship and stipend payments that are taxable can now be considered as compensation for IRA purposes
• Qualified distributions now include birth or adoption of up to $5,000 after the event has happened 

This is just the basic highlights of questions and answers that we have been seeing since this Act passed.  We welcome the opportunity to delve deeper into a topic with you or answer further questions. Please contact our office at invest@dardenwealth.com or 734-294-0100 for more information.