SECURE Act: How this impacts you

A new year means new tax laws, and this year is no exception.  On December 20, 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law resulting in many significant changes for retirement savers.  While these changes may not immediately impact you, it is very likely they will apply to you at some point in your life.  In this post, we will highlight some of the more notable changes coming as a result of the passage of the SECURE Act. Future posts will take a deeper look at some of these changes and how they could impact your financial plans.

New IRA Rules

  1. Elimination of “Stretch” IRA’s which previously allowed non-spouse beneficiaries to spread out IRA distributions over their lifetime. With some exceptions, IRA’s inherited by non-spouse beneficiaries will be subject to a 10-year distribution limit.
  2. The age for Required Minimum Distributions (RMD) will be pushed back from age 70 ½ to 72.
  3. The age limitation for IRA Contributions has been removed. Persons over age 70 ½ may continue making IRA contributions if they have earned income.
  4. New parents can withdraw up to $5,000 from a retirement account within 1 year of a child’s birth or adoption and not pay the 10% early withdrawal penalty. The distribution is still subject to ordinary income tax.


401k Rules impacting business owners

  1. Expanded tax credit from the current $500 to as much as $5,000 (conditions apply) for businesses starting a new 401(k), 403(b), SEP IRA, or SIMPLE IRA
  2. New $500 tax credit for the adoption of an auto-enrollment on a 401(k), for new or existing plans
  3. Employers must allow Long-Term Part-Time Employees to participate in defined contribution plans as long as they have completed at 500 hours of service in 3 consecutive years, and are age 21 or older.
  4. Unrelated small employers may create Multiple Employer Plans which can be more cost effective due to economies of scale. The elimination of the “one-bad-apple” rule reduces the risk of establishing this type of plan in the event one of the business owners does not remain compliant.


Other Provisions

  1. Up to $10,000 (lifetime amount, not adjusted for inflation) may be used from a 529 to make a “Qualified Education Loan Repayment”
  2. 529 plans may be used to pay for fees, books, supplies, and other required equipment associated with Apprenticeship Programs that are registered and certified with the Department of Labor
  3. Kiddie-Tax reverts back to the pre-Tax Cuts and Jobs Act rates which were at the parent’s marginal tax rate. This change is retroactive to the 2019 and 2018 tax years as well.

This brief post only covers some of impact of the SECURE Act, for additional information feel free to reach out to myself or your Client Advisor.




Oakworth Capital Bank does not provide tax or legal advice.   All decisions regarding the tax and / or legal implications of these strategies should be discussed with your tax and / or legal advisors before being implemented.