Since last spring, many in the tax-advantaged account industry have been tracking the progress of the Setting Every Community Up for Retirement Enhancement Act of 2019 (i.e., the SECURE Act). In fact, the U.S. House of Representatives passed the bill by a near-unanimous vote back in May. After that, however, the Act became stalled in the U.S. Senate. Recently, the SECURE Act was included in the Further Consolidated Appropriations Act, 2020 (H.R. 1865). H.R. 1865 is a 1,700 plus page year-end funding bill that, among other things, keeps the government open through September of 2020.
H.R. 1865 passed the House on Tuesday and the Senate on Thursday with bipartisan support. The bill was signed by President Trump on Friday, December 20.
Most of the changes in the SECURE Act become effective for tax years beginning after December 31, 2019.
The SECURE Act includes numerous provisions that will impact individual retirement accounts (IRAs). In fact, some of these provisions rewrite core requirements that have long been associated with traditional IRAs. For example, among the most significant changes is a provision that changes the age when traditional IRA owners must begin taking required minimum distributions (RMDs). Going forward, traditional IRA owners must begin taking RMDs no later than April 1 of the calendar year following the year in which they turn age 72 (instead of age 70½). The SECURE Act also removes the maximum age for being able to make regular contributions to a traditional IRA.
Another significant provision, one included as a revenue provision, includes a complex set of changes modifying the distribution rules for designated beneficiaries. More specifically, the SECURE Act is amending the already complex set of rules surrounding the specific amount of time a beneficiary is given to take distributions from an inherited IRA.
Wolters Kluwer continues to analyze the SECURE Act’s impact on forms, brochures, training, and reference materials. Implementation timelines are not yet available as we expect updated rules as well as additional information and guidance to be forthcoming from the IRS.
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