AIP Marketing Alliance, an Integrity Company, wants to keep our valued independent insurance wholesalers and agents informed about regulations that may affect the insurance industry. One of the laws that continues to evolve involves the SECURE Act, which currently has pending legislation to make updates to this law. You can review H.R. 2954 (RH) – Securing a Strong Retirement Act of 2021 by clicking here.

SECURE Act Overview

• The SECURE Act became law on December 20, 2019, and makes it easier for small business owners to set up "safe harbor" retirement plans that are less expensive and easier to administer
• Many part-time workers are eligible to participate in an employer retirement plan
• The SECURE Act allows traditional IRA owners to keep making contributions indefinitely
• The SECURE Act mandates most non-spouses inheriting IRAs take distributions that end up emptying the account within 10 years
• The SECURE Act allows 401(k) plans to offer annuities

Major Provisions of the SECURE Act

The SECURE Act tweaked a number of rules related to tax-advantaged retirement accounts. Here's what it does:

• Makes it easier for small businesses to set up 401(k)s
• Provides a maximum tax credit of $500 per year to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment
• Enables businesses to sign up part-time employees who work either 1,000 hours throughout the year or have three consecutive years with 500 hours of service
• Pushes back the age at which retirement plan participants need to take RMDs from 70½ to 72
• Allows 529 accounts for qualified student loan repayments (up to $10,000 annually)
• Permits penalty-free withdrawals of $5,000 from 401(k) accounts to defray the costs of having or adopting a child
• Encourages employers to include more annuities in 401(k) plans by removing their fear of legal liability if the annuity provider fails to provide and not requiring them to choose the lowest-cost plan

One key change in the bill was paying for all of this: the removal of a provision known as the stretch IRA, which had allowed non-spouses inheriting retirement accounts to stretch out disbursements over their lifetimes. The new rule requires a full payout from the inherited IRA within 10 years of the death of the original account holder.

Understanding the Possible Changes with SECURE Act 2.0

In 2022, we are looking at SECURE Act 2.0, which could change if H.R. 2954 (RH) – Securing a Strong Retirement Act of 2021 is enacted into law. This bill has passed the House (April 2022) and has been sent to the Senate. The Senate has its own version. Many regulators and industry analysts feel SECURE Act 2.0/H.R. 2954 could pass in some form this year.

In the current House-passed form, there are 14 changes, with some listed below:

• Delay of taking RMDs until an older age
• Reduction of excise tax percentage on violation of 401(k) RMDs
• Employer auto-enrollment of workers' salary for retirement plan
• Increases allowable increase in catch-up provisions
• Part-time worker eligibility for retirement plans

You can track the progress of this legislation by clicking H.R. 2954 (RH) – Securing a Strong Retirement Act of 2021. AIPMA provides these links and content for educational purposes only as the information/regulation is subject to change without notice.