On December 19, 2019 the Senate passed the “Setting Every Community Up for Retirement Enhancement” Act (SECURE). On December 20th it was signed into law by President Trump. The SECURE Act significantly modifies many requirements for employer-provided retirement plans, individual retirement accounts (IRAs), and other tax-favored savings accounts. Some of the modifications went into effect on December 31, 2019. However, others will begin retroactively and a few carry future effective dates.
While it does include numerous provisions affecting individuals, employer plans, plan administration, and penalties, it is important to note two key changes to common retirement accounts:
- The Act raised the required minimum distribution age (RMD) for IRAs. The RMD age changed from 70.5 to 72 for distributions made after December 31, 2019. This goes into effect for any individual who turns 70.5 as of December 31, 2019.
- The Act also repealed the Code Section which prohibits contributions to a traditional IRA by an individual who has attained age 70.5. The Committee Report notes that, “because Americans are continuing to work past traditional retirement ages, Congress wanted to remove the age restriction impediment on retirement savings”. This restriction is lifted for contributions made for any tax year after December 31, 2019.
Please call us if you would like to discuss how the changes of the SECURE Act affect your tax planning now and in the future.