Top 10 Takeaways Advisors Need from the SECURE Act

  1. Multiple Employer Plans

    – The newest “buzz word” in our industry, employers can more easily participate in a MEP or a new variant, a “pooled employer plan,” or PEP. This could be a potential solution for plan sponsors depending on plan size and goals. For those looking for a more custom solution, this may not be the best option.
  2. Credits Matter

    – The small employer retirement plan startup tax credit increases from $500 to a maximum of $5,000 per year for first three years. Auto-enrollment for both new and existing plans increases from $0 to $500 for each of first three years.
  3. Deadlines Do Too

    – Employers can establish a qualified plan as late as their business tax filing deadline and non-elective plans can be amended up to 30 days before the end of the year if they make a 3% contribution.
  4. Less Paper for Certain Plan Provisions

    – For plans with a safe harbor non-elective or QACA (Qualified Automatic Contribution Arrangement) provisions, notices to participants are no longer required. This can be seen to alleviate the administrative burden placed on plan sponsors. Note that plans with safe harbor match provisions are still required to disseminate notices to participants as well as other notices (i.e. QDIAs).
  5. The Insurance Industry Had a Say in This

    – Defined contribution plans must provide, at least annually, a projected lifetime income stream that a participant’s accrued benefit could generate. This disclosure does not create employer liability for the amounts projected.
  6. Actually, They Had a Very Big Say in This

    – Annuity contracts within a plan are now portable if a
    participant terminates employment or retires. There are also new Safe Harbor for Guaranteed Income Provider Selection which mitigates fiduciary liability in regards to offering insurance within a retirement plan.
  7. No More Exclusion for All Part-Time Employees

    – Employees who work three-consecutive 12-month periods at 500-hours or more must be allowed to make deferrals into the plan by 2021 and later plan years. These participants are not necessarily required to receive any employer sponsored contributions, including Safe Harbor Contributions
  8. People Live Longer…Stop Making Them Take Out Cash Early

    – There is a new requirement for required minimum distributions (RMDs) and that is age 72 effective for distributions required in 2020 and later years for those who reach age 70.5 in 2020 or a later year.
  9. Speaking of IRA RMD’s Contribution Changes

    – Taxpayers with earned income can make traditional IRA contributions any time at any age effective immediately.
  10. No More Stretch IRAs

    – Most non-spouse beneficiaries of IRAs are used to stretching their Inherited IRA distributions over their lifetime. This is no longer the case. Inherited IRA assets must be distributed within 10 years after the death of the original account holder.

What does this mean in terms of your business?

Generally speaking, Congress has lowered the barrier to entry to adopt an employer sponsored retirement plan which is a WIN for the American worker. More tax credits, more fiduciary protection, and more flexibility for adoption. On the other hand, heavy lobbying from the insurance industry has also introduced additional pitfalls for employers if not properly guided by an independent plan fiduciary advisor. In our opinion, plan advisors are still the most critical piece to the retirement plan puzzle to help plan sponsors navigate the retirement plan landscape that is both more flexible, but also inherently skewed to the interests of its biggest lobbyists.