Nearly half of all workers in the United States have no retirement savings set aside and over one-fifth have less than $5,000 saved.

New tax laws enacted late in 2019 carry wide-ranging implications for employers, workers, retirement plan administrators, retirees, and students. In fact, this sweeping legislation, the Setting Every Community Up for Retirement Enhancement (SECURE) Act (Division O of the Further Consolidated Appropriations Act, 2020, P.L. 116-94), represents the most significant set of changes since the Pension Protection Act of 2006, P.L. 109-280.

The SECURE Act is intended to encourage individuals to save for retirement while relaxing employer administrative obligations. The most significant provisions affecting individual retirement arrangements (IRAs) and other qualified retirement plans, plan administration, multiple-employer plans, and students are discussed below, along with tax considerations and strategies that CPAs may wish to discuss with their business and individual clients.

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The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019, and has significant implications for individuals approaching retirement. The act aims to make it easier for Americans to save for retirement and to provide incentives for employers to offer retirement plans to their employees. Here, we will break down some of the key provisions of the SECURE Act and explain how they may impact your retirement planning.

One of the major changes brought about by the SECURE Act is the increase in the required minimum distribution (RMD) age from 70 ½ to 72. This means that retirees can now wait until age 72 to start taking distributions from their traditional IRA or 401(k) accounts, allowing their savings to continue to grow tax-deferred for a longer period of time.

The act also allows individuals to continue making contributions to their traditional IRA past age 70 ½, as long as they are still working and have earned income. This can be particularly beneficial for individuals who choose to work longer or who have delayed retirement for various reasons.

Another important provision of the SECURE Act is the expansion of access to employer-sponsored retirement plans. The act makes it easier for small businesses to set up multiple employer plans (MEPs), which allow unrelated businesses to pool their resources and offer retirement plans to their employees at lower costs. This could potentially help more workers access retirement savings opportunities and increase overall retirement savings rates.

The SECURE Act also includes provisions to make it easier for part-time workers to participate in employer-sponsored retirement plans and to allow long-term, part-time employees to participate in their employer’s retirement plan. This is a significant win for part-time workers who have traditionally been excluded from employer-sponsored retirement plans.

Additionally, the act implements changes to inherited retirement accounts, requiring most beneficiaries to withdraw the entire account balance within 10 years of the original account owner’s death. This change will impact individuals who were planning to stretch out distributions over their lifetime, as it may result in a larger tax burden for beneficiaries.

In conclusion, the SECURE Act represents a significant step forward in promoting retirement security for Americans. The act offers new opportunities for individuals to save for retirement, encourages employers to provide retirement benefits to their employees, and makes it easier for workers of all ages and employment statuses to participate in retirement plans. It is important for individuals to familiarize themselves with the provisions of the SECURE Act and to consult with a financial advisor to determine how these changes may impact their retirement planning.