Key Changes to Know per the SECURE Act of 2019-401(k), IRA and Other Pension Plans
Starting this new year off strong, effective January 2020, the SECURE Act of 2019, “Setting Every Community Up for Retirement Enhancement” has come into play.
The following is a list of the key points everyone should know regarding changes for retirement savings:
- Increases 401(k) flexibility and simplicity
- Eliminates safe harbor notice requirement
- Increases credit limit start-up cost to between $250 to $500, multiplied by either $5,000 or the amount of eligible non-highly compensated employees
- Additional credit (Automatic Enrollment Credit) of up to $500/yr for businesses, up to three years, that provide new 401(k) and SIMPLE plans.
- Increases automatic enrollment rate safe harbor cap to 15% for after an employee’s first year
- No age restriction to contribute to traditional IRA
- Now 401(k) plan are open to part-year employees who have worked for 1 year (1,000 hours) or 3 consecutive years of at least 500 hrs of service
- Required minimum distribution age is now at 72 years (previously was 70 ½ years)
- Allows penalty-free distributions for qualified birth and adoption expenses
- Non-tuition fellowship and stipends received by graduates/post doctoral students now can use this income for IRA contributions
- Ends non-spouse beneficiaries the ability to extend Required Minimum Distributions over a lifetime. Now, generally speaking, all funds from inherited accounts need to be distributed to said beneficiaries within ten years of the account owner’s death.
- Expands Section 529 Homeschooling expenses
The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional tax services information.
Call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730