Designed to strengthen retirement savings, on May 23, 2019 the U.S. House of Representatives approved by a vote of 417-3 the Setting Every Community Up for Retirement Enhancement (SECURE) Act (H.R. 1994). However, this landmark or legislation must also pass the Senate before it becomes law, bu the odds are very good that it will also pass the Senate based on the following comments by the Finance Committee Chairman and he Committee’s Ranking Democrat:
“The SECURE Act, which passed today in the House of Representatives and includes my Retirement Enhancement and Savings Act, takes an important step forward to help encourage and facilitate retirement savings. This legislation is an example of bipartisan cooperation to solve issues on behalf of Americans. I appreciate the hard work of my colleagues in the House and look forward to its quick passage in the Senate,” said Grassley.
Sen. Ron Wyden (D-OR) also said that, “The House-passed legislation is very similar to the Senate bill and I’m working with Chairman Grassley to get legislation signed into law as soon as possible.”
Visit HERE to read the SECURE ACT bill language posted by the House.
If it fully passes, The SECURE ACT would result in the following big changes for solo 401k plans, IRAs and ROBS 401k plans:
1. 401k plans including solo 401k plans could be adopted by the business tax return filing deadline instead of by December 31.
2. Extending the required minimum distribution (RMD) from age 70 1/2 to age 72 for IRAs and 401k plans.
3. Long-term part-time works could participate in 401k plans.
4. Traditional IRA contributions could be made past age 70 1/2; thus, resulting in allowing for the back-door Roth IRA past age 70 1/2.
5. The 10% early distribution penalty (distributions prior to age 59 1/2) would not apply to IRA distributions made for the purpose of using the funds to pay for “qualified birth or adoption distributions.”
6. The 10 year rule would apply to decedent accounts (both 401ks and IRAs). The retirement accounts would need to be fully distributed by the non-spouse beneficiary by the end of the tenth calendar year following the participant’s death, so the stretch IRA would essentially no longer apply to non-spouse beneficiaries.