New Provisions of Secure Act January 1, 2020

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 introduced the following changes:

  • Extended period for traditional IRA contributions. Individuals may now make tax-deductible contributions to a traditional IRA after the age of 70½ as long as they are still earning income.
  • Delayed required minimum distributions. Individuals who reach the age of 70½ in or after the year 2020 will not be required to make minimum distributions from their traditional IRAs and ERISA retirement plans until the age of 72. Distribution rules for those who reached age 70½ in or before 2019 do not change.
  • Stretch-IRAs virtually eliminated.  The SECURE Act requires most non-spouse IRA and retirement plan beneficiaries to drain inherited accounts within 10 years after the account owner’s death. Before, RMD rules allowed non-spouse beneficiaries to drain an inherited IRA over a person’s IRS-defined life expectancy.  The Secure Act’s RMD change is generally effective for RMDs taken from accounts whose owners die after 2019. The RMD rules for accounts inherited from owners who died before 2020 are unchanged.
  • 10-Year Rule Specifics. When it applies, the new 10-year rule generally applies regardless of whether the account owner dies before or after his or her RMD required beginning date (RBD). The RMD rules do not kick in until age 72 for account owners who attain age 70 1/2 after 2019. So, the RBD for those folks will be April 1 of the year following the year they attain age 72.

Following the death of an eligible designated beneficiary, the account balance must be distributed within 10 years.

When an account owner’s child reaches the age of majority under applicable state law, the account balance must be distributed within 10 years after that date.