Yesterday (December 19, 2019), Congress finally passed the Setting Every Community Up for Retirement Enhancement Act (i.e., the “SECURE Act”), and President Trump is expected to sign it. The SECURE Act was previously passed by the U.S. House of Representatives in May on a 417-3 vote, but got held up in the Senate for political reasons, even though it enjoyed virtually unanimous support there as well.
The version of the Act that was eventually passed includes only minor changes from the version that the House passed in the Spring. This legislation is the most significant change to the laws governing retirement plans since the Pension Protection Act of 2006. Among the significant changes made by the SECURE Act are:
- Relaxation of the rules governing eligibility to participate in a multiple employer retirement plan, which will make it easier for unrelated employers to participate in the same plan (also known as “Open MEPs”).
- Increase in the age for required minimum distributions (“RMDs”) from 70½ to 72.
- Required retirement plan eligibility, at least for elective deferral purposes, for long-term part-time employees who work at least 500 hours during each of three consecutive years. The Act does contain nondiscrimination testing relief with respect to these individuals.
- Relaxation of certain timing and notice rules relating to safe harbor 401(k) plans.
- Penalty-free distributions from qualified retirement plans for births and adoptions.
These changes, and others included in the SECURE Act, will have a major impact on both plan sponsors and participants, and will eventually require plan amendments. These changes will also have a significant impact on existing and future estate plans that involve retirement plan assets. Most of the changes are effective January 1, 2020, and thus will require almost immediate changes to plan administration.
If you have any questions about the upcoming changes made by the SECURE Act, please contact Brian Gallagher at (517) 377-0886 or firstname.lastname@example.org.
Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or email@example.com.