The Secure Act and Changes to Retirement Plans

January 14, 2020

The Secure Act that passed as part of the budget includes many items affecting pensions and IRA planning.  For example,

  1. For years, plan participants needed to begin taking distributions from 401(k) plans and IRAs by April 15 following the year they turned age 70½.  The distribution age has changed to 72.

  2. Prior law allowed contributions to IRAs only until you reached age 70½.  That age limit has been eliminated.

  3. Stretch IRAs – Inherited/stretch IRAs have been severely affected.  Prior law allowed non‑spouse beneficiaries of an IRA or 401(k) to generally receive required minimum distributions over their life expectancy.  The Secure Act generally requires distribution of the entire account balance of an IRA or 401(k) within 10 years of the decedent’s death.  This decreases the ability to defer taxes and accelerates the distribution of IRA and 401(K) account balances.  Exceptions to this rule still exist for spouses and disabled children.

These changes could affect estate plans where IRAs or 401(K) accounts benefit minors or fund trusts.