The sweeping government spending plan that passed in December 2019 brought many changes, tax extensions and updates. One component of the plan was the Setting Every Community Up For Retirement Act of 2019, better known as SECURE. Aimed at addressing a troubled retirement system, SECURE included many provisions for tax-advantaged retirement accounts.
Some of the changes include:
- Increased cap for automatic enrollment in “safe harbor” retirement plans from 10 to 15 percent of wages.
- Extended retirement benefits to qualifying long-term part-time employees.
- Reduced employer liabilities for workplace plans including annuities.
- Raised age for required minimum distributions (RMDs) to 72.
- Permitted penalty-free 401(k) withdrawals of $5,000 if within one year of the birth or adoption of a child.
- Removed stretch IRA provision. Non-spouses inheriting retirement accounts must now take all disbursements within 10 years of the original account holder’s death.
What do the changes mean for employers?
For employers and small business owners, one notable change is an increased tax credit for setting up a retirement plan. In addition to the changes above, SECURE provides a tax credit of up to $500 for employers who create an automatic enrollment retirement plan (401(k) or SIMPLE IRA) or change an existing plan to automatic enrollment.
If you have been wanting to set up a retirement plan, this may be a good time to do it. The tax professionals at Rodefer Moss can answer your questions and help you plan efficiently to maximize this tax benefit.