SECURE Act Refresher
Although it was signed into law on December 20, 2019, it seems like a decade ago that the SECURE Act was headline news. Between the COVID-19 pandemic and the flurry of legislative and regulatory activity in 2020, some plan sponsors have likely forgotten what was, at the time, the first piece of retirement-specific legislation passed in over a decade.
However, of all the SECURE Act provisions, only one, relating to Required Minimum Distributions (RMDs), was delayed by the COVID-19 pandemic. While there were not too many provisions in the SECURE Act that were hugely disruptive to plan sponsors, there are a few about which retirement plan sponsors should be cognizant. Here is a quick refresher:
- 401(k) plans must allow certain part-time employees the opportunity to make elective deferrals — Arguably, this provision was the most disruptive of the SECURE Act. However, it only applies to 401(k) plan sponsors. Until the SECURE Act, employers could not only exclude part-time employees from receiving employer contributions, but also from the right to make elective deferrals. Beginning in 2024, that will be changing; however, the disruption begins next year for many employers who will need to begin tracking part-time employee service for these purposes. For more details, see our article, Secure Act Deep-Dive: Inclusion of Part-Time Employees.
- The age for when Required Minimum Distributions (RMDs) are required to commence increased from 70½ to 72 — This is a welcome change, as 70½ always seemed to be a strange age to use. However, the implementation of this new rule was effectively delayed by the CARES Act, which suspended minimum required distributions for 2020. To determine when RMDs are now due, check out this PLANSPONSOR Ask the Experts column.
- The welcome mat was laid out for annuities — The SECURE Act made it much easier for plan sponsors who do not already offer annuity products to offer them. It also requires annuity illustrations to be provided to employees. For more details on this issue, read our article, SECURE Act Deep-Dive: Annuities.
- Small plan sponsors should get to know PEPs, MEPs, and GOPs — These acronyms, in theory, enable smaller employers to band together to reduce retirement plan expenses and/or decrease administration. However, whether these plans take the small employer market by storm or not remains to be seen. Regardless, small plan sponsors should familiarize themselves with the details. Find more information in our article, SECURE Act Deep-Dive: Unscrambling PEPs, MEPs, and GOPs.
- QBAD or QBOAD? — The Qualified Birth or Adoption Distribution is here to stay, regardless of whether we can decide on the acronym. This is a new, optional withdrawal feature that allows participants to take penalty-free distributions for birth and adoption expenses up to $5,000 per child. Since it is an optional plan feature, it is one of the few provision of the SECURE Act that will require plan sponsors to make a decision as to whether or not to amend their plan to offer it.
Looking for more details on the SECURE Act provisions? See another brief overview in our SECURE Act cheat sheet, review the provisions with our comprehensive chart, or watch a webinar presentation on the key takeaways and action items for plan sponsors.
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.
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