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SECURE Act Passed Potentially Changing Some Retirement Plans

January 2, 2020

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News from the  IslerDare PC December “Employee Benefits Update” looks at how the recently passed SECURE Act (Setting Every Community Up for Retirement Enhancement Act) may impact some retirement plans and strategies.

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Congressional Spending Bills Repeal Cadillac Tax and Other ACA Taxes and Pass Retirement Plan Changes

Repeal of Cadillac Tax and Other ACA Taxes

Ending years of speculation amid multiple delays, Congress permanently repealed the Affordable Care Act’s (“ACA”) 40 percent excise tax on generous health plans – known as the “Cadillac Tax” – as part of the spending bills necessary to extend federal funding.

The Cadillac Tax was originally scheduled to take effect in 2018, but was twice delayed, most recently to 2022, due to widespread unpopularity. The Cadillac Tax would have imposed a 40% tax on employers for certain high-value employer-sponsored health plans with annual premiums over a maximum dollar threshold (projected to be $11,200 for single coverage and $30,150 for family coverage in 2020).

The spending bills also repealed two other ACA taxes: the 2.3% excise tax on medical devices, which originally took effect in 2013, but was then suspended for 2016 and 2017, and the health insurance providers industry fee, which took effect in 2014.

Retirement Plan Changes

As part of the spending bills, Congress also passed the “Setting Every Community Up for Retirement Enhancement Act”, or “SECURE Act”, and some other miscellaneous changes that impact retirement plans.  Highlights of this new legislation include the following:

  • The automatic contribution maximum for qualified automatic contribution arrangements (otherwise known as “QACA safe harbor plans”) has increased from 10% to 15%.
  • Penalty-free retirement plan withdrawals of up to $5,000 will be permitted in the case of birth or adoption of a child.
  • Special disaster-related distributions will be exempt from the 10% early distribution penalty.
  • The age by which retirement plan participants must begin receiving required minimum distributions (RMDs) of their plan benefits has been extended from 70-1/2 to 72.
  • The fiduciaries of 401(k) and other defined contribution plans will have greater fiduciary protection if they decide to offer lifetime distribution options, such as annuities. In addition, retirement plans must provide plan participants with a lifetime income illustration.
  • Small employers who meet certain conditions can benefit from financial incentives and credits to establish retirement plans and automatically enroll workers and will also be able to pool together with other unrelated employers to form multiple employer plans.
  • Long-term part-time workers who work more than 500 hours for their employer, for three consecutive years, would be eligible for coverage under employer-sponsored retirement plans.

Further details regarding the changes being introduced as part of the SECURE Act and the funding bills will be forthcoming as additional guidance is issued by the IRS and DOL (Department of Labor).

Other Related Updates from Deferred Compensation News:

December Checklist of Compliance Deadlines for Retirement Plans and other Benefits

November Checklist of Compliance Deadlines for Retirement Plans and other Benefits


#benefitplan #retirement #FulcrumPartners

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

Securities offered through Lion Street Financial, LLC (LSF) and Valmark Securities, Inc. (VSI), each a member of FINRA and SIPC. Investment advisory services offered through Lion Street Advisors, LLC (LSA) and Valmark Advisers, Inc. (VAI), each an SEC registered investment advisor. Please refer to your investment advisory agreement and the Form ADV disclosures provided to you for more information. VAI/VSI and LSF/LSA are non-affiliated entities and separate entities from OneDigital and Fulcrum Partners.

Unless otherwise noted, VAI/VSI, LSF/LSA are not affiliated, associated, authorized, endorsed by, or in any way officially connected with any other company, agency or government agency identified or referenced in this document.

Lion Street Advisors // Lion Street Financial

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