ComplianceMay 27, 2020

SECURE Act: Summary of changes to IRAs


The perfect storm hit the retirement plan world when the Setting Every Community Up for Retirement Enhancement Act of 2019 (i.e., the SECURE Act), which was included in the Further Consolidated Appropriations Act (FCAA), was signed by President Trump on Friday, December 20. Changes that significantly affect individual retirement plan (IRA) rules will likely be followed by additional clarification from the Internal Revenue Service (IRS) in the form of Notices, Revenue Rulings, Announcements, and Regulations. Additionally, we anticipate the IRS will be amending the 5305 IRA agreement language to conform to the SECURE Act provisions.

The SECURE Act made changes to the following IRA related rules:

IRA Regular Contributions

The SECURE Act has repealed the age 70½ restriction to make regular traditional IRA contributions. As a result, individuals who have compensation (generally earned income) can make traditional IRA regular contributions for 2020 and subsequent tax years regardless of age. IRA custodians and trustees should consider the effect this has on their data processing systems as many will likely need to be updated to accept these contributions beginning for tax year 2020. This change also has the following effects:

  • Recharacterization of annual tax year contributions between traditional and Roth IRAs for tax year 2020 and beyond can be done regardless of age
  • If an IRA owner has compensation, rollovers of RMD amounts to a traditional IRA will no longer result in an automatic excess contribution

In addition to repealing the age restriction for traditional IRA regular contributions, the definition of compensation for IRA regular contribution purposes is expanded to now include:

  • Certain taxable non-tuition fellowship and stipend payments for graduate and post-doctoral students, and
  • Difficulty of care payments received by certain individual care providers

IRA Distributions

The SECURE Act has made the following changes to IRA distributions:

  • Birth or adoption of a child: Beginning in 2020 an IRA owner may take a penalty-free distribution of up to $5,000 in aggregate between IRAs and employer qualified plans for qualified birth and/or adoption expenses. There is also an option to repay these distributions under certain circumstances.
  • Income tax withholding: Failure to provide withholding notices for IRA distributions carry a $100 per failure penalty rather than the current penalty of $10 per failure.

In addition to the above-mentioned distribution related changes, an IRA owner who has suffered an economic loss from a disaster that occurred from January 1, 2018 through 30 days after the enactment of the SECURE Act can take a penalty free distribution, has special income inclusion rules, and the amount taken may be repaid to an IRA. This excludes distributions for the 2018 California Wildfires. This provision is part of FCAA, not part of the SECURE Act.

Required Minimum Distributions

The age at which traditional IRA owners must begin taking RMDs has been moved back. Anyone that was not age 70½ by the end of 2019 can wait until the year of attaining age 72 before having to begin taking traditional IRA RMDs. 

On a side note, qualified charitable distributions (QCDs) continue to be available upon an IRA owner (or beneficiary’s) attainment of age 70½, however, some IRA owners won’t get the RMD satisfaction benefit until they attain age 72.

IRA Reporting

IRA custodians and trustees should not generate RMD notices to IRA owners who attain age 70½ in 2020. Furthermore, any reference to age 70½ on RMD notices going forward will be incorrect and misleading. If IRS Form 5498, IRA Contribution Information, is used to meet the RMD notification requirement, boxes 12a and b should only be filled in for IRA owners who were 70½ or older by the end of 2019.

Beneficiary Distribution Options

The SECURE Act created the eligible designated beneficiary (EDB) as a new beneficiary category beginning in 2020. An EDB includes an IRA owner’s surviving spouse or minor child, someone who is chronically ill or disabled, and any other individual who is not more than 10 years younger than the IRA owner at the time of his/her death. The distribution options available to an EDB in 2020 or any subsequent year are the same as they were if an IRA owner died prior to 2020. If an individual does not meet the definition of an EDB and he/she inherits an IRA in 2020 or a subsequent year he/she may be required to take a full distribution of the inherited IRA within 10 years after the IRA owner’s death year.


This article is a summary of the IRA changes under the SECURE Act and is based on current information. Wolters Kluwer continues to analyze the Secure Act’s impact on forms, brochures, training, and reference materials. We also expect updated information and guidance pertaining to the SECURE Act from the IRS in the forthcoming months and potentially years.

Additionally, please remember to visit Insights frequently to read recently posted information on IRAs and other topics.

We can be your SECURE Act Resource. Helping you navigate the SECURE Act rules with tools, support and information. Find the answers you need, along with an easy sign-up email alert, so you can get the news you need, in your inbox! Find more at

Randy Heidmann
Senior Specialized Consultant, Tax Advantaged Accounts, Compliance Center of Excellence
With more than 40 years of industry experience, Randy Heidmann has helped hundreds of financial organizations create, implement and maintain their tax-advantaged accounts programs.
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