The SECURE Act of 2019

This year’s federal tax act is called the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, Public Law No. 116-94.  Its focus was on qualified retirement plans of various kinds, and many of the changes made are very technical. 

Here are some of the changes that may affect the most people:

  • Participants in 401(k) and other defined contribution plans, including traditional IRAs, had to take distributions from their plans at age 70-1/2 under the old law (“required minimum distribution”).  Under the new law, participants can leave money in the plan until age 72.  (Assuming they don’t need the money.)
  • Participants in traditional IRAs can continue contributing money to their plans past age 70-1/2.  The old law didn’t allow further contributions after that age.
  • Parents now can withdraw up to $5,000 from their individual 401(k) or similar qualified plan for childbirth or adoption expenses, and avoid paying the 10% penalty that normally is assessed for an early distribution.
  • For graduate students, stipends and non-tuition fellowship payments can now be counted as compensation and be used as the basis for IRA contributions.
  • Long-term part-time employees now must be given a chance to participate in a 401(k) plan that the employer offers.  To be eligible, an employee needs to put in either 1,000 hours in 1 year (as it was under old law) or 500 hours in 3 consecutive years of service.

For further details, there are several websites offering detailed explanations.  Here is one from the National Association of Plan Advisors.

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