The SECURE Act Key Changes and FAQs
What is the SECURE Act?
The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed into law in December 2019 and includes many reforms expanding access to workplace retirement plans for millions of full-and part-time workers, particularly small business employees. It also increases the age for required minimum distributions (RMDs) leaving more time for individuals to reach their savings goals. In anticipation, Voya prepared for these changes and was ready.
When will the changes become effective?
Many of these changes are effective as of January 1, 2020, while other changes have delayed effective dates. More details will be provided here; check back for updates periodically.
Required Minimum Distribution (RMD) Impacts:
How does the law change Required Minimum Distributions (RMDs) for participants in employer retirement plans and IRAs?
The law increases the age at which an individual must begin taking required minimum distributions (RMDs) from 70½ to 72. Updating the RMD rules to reflect changes in life expectancy will allow Americans to continue their retirement savings for an extended period of time.
• The age triggering when individuals must begin taking their RMD for qualified retirement plans and IRAs has increased
to age 72 (previously age 70½).
• This change applies to individuals who will attain 70½ on or after January 1, 2020.
• If you turned 70½ in 2019 you are still responsible for satisfying your RMD for 2019 and all future years,
even if this is your first RMD and chose to defer it to April 1, 2020.
I already receive RMD payments, how does this impact me?
You will continue to take your RMDs as scheduled. This change applies only to individuals who will reach age 70½ on or
after January 1, 2020.
What are the impacts to beneficiaries?
The law changes the payout requirements for inherited IRAs and beneficiaries of employer retirement plans. You may want to contact a tax advisor or financial professional to reevaluate your retirement and/or estate planning strategy.
Would the provisions eliminating the stretch apply to Roth IRAs as well as Traditional IRAs?
Yes, the Act would eliminate the stretch for both inherited Traditional and Roth IRAs.
Would the Act eliminate the stretch provision for existing inherited IRAs?
No, if the IRA owner was deceased prior to 01/01/2020 and there is an existing inherited IRA, the Act would not eliminate the stretch and the inherited accounts would be grandfathered.
What about taking a distribution for Birth or Adoption?
The law permits an individual to take a “qualified birth or adoption distribution” of up to $5,000 from an IRA or authorized defined contribution plan. This distribution is not subject to the 10% early withdrawal penalty. Distributions can be taken for the 1 year period following the birth or adoption of the child. We are analyzing this change and will provide more information as we obtain further regulatory guidance and verification of how the change may be implemented with your employer.
I am in a Governmental 457(b) plan, what are the impacts?
In-service withdrawals from governmental 457(b) plans would be allowable at age 59½. (Previously age 70½). We are analyzing this change and will provide more information as we obtain further regulatory guidance and verification of how the change may be implemented your employer.
How does the law impact IRA contributions for traditional IRAs?
The Act removes the age limit for contributing to a traditional IRA (previously 70½). For taxable year 2020 and beyond, anyone with earned income can contribute to a traditional IRA regardless of age.
What Happens Next?
Voya is evaluating these changes and will provide more information as we obtain further regulatory guidance and verification of how the changes will be implemented with your employer retirement plan. Voya will continue to analyze this legislation for impacts to all of our clients and will continue to make updates. Please contact your Plan information line with any questions.