The Senate has passed the Setting Every Community Up for Retirement Enhancement Act – better known as the SECURE Act and has sent the Act as part of a broader spending bill to the president for his approval yesterday, December 19, 2019. The spending bill now heads to the Senate and then to the president for approval by Dec. 20, to avert a potential government shutdown.
If enacted, SECURE will create sweeping changes that will immediately affect retirees and savers. Here are just three of the proposed changes:
Traditional IRA contributions can continue after age 70½.
Current law prohibits people from contributing to a traditional IRA account after they’ve reached age 70½ even if those people are still working. The proposed change comes as life expectancies increase and people work later in life to fund longer retirements. If the bill is enacted, the rules for traditional IRAs will match the current regulations for 401(k) plans and Roth IRAs, which allow people of any age to continue contributing so long as they’re working.
Increase in age for beginning Required Minimum Distributions.
The new rules will change the age at which retirees must take their required minimum distributions (RMDs) to 72 from 70½. Upon distribution, the amount you receive from a 401(k) plan or a traditional IRA account will be subject to federal income taxation. The proposed rule will only apply to people who have not yet reached the age of 70½ by the end of 2019.
Part-time workers can participate in 401(k) plans.
Employers have been able to exclude part-time employees from participation in 401(k) plans. Under the new rule, people who have either worked at least 1,000 hours in one year (roughly 20 hours a week), or three consecutive years of at least 500 hours, will be able to participate in 401(k) plans.