Wide-ranging, end-of-2019 action by the federal government established new savings opportunities for retirement, repealed three Obamacare-related taxes and added extensions — at least for the time being — to various tax breaks.
Passed by Congress and signed into law by President Donald Trump, the SECURE (Setting Every Community Up for Retirement Enhancement) Act provides Americans with two new ways to grow their retirement nest eggs.
The age at which retirees must take the mandated minimum distribution from their IRA or other qualified retirement plan was raised, from 70½ to 72. With this change, retirees’ savings can continue to grow for 18 additional months before taxpayers are required to take the minimum distribution (which ensures the government can tax the minimum distributions).
Additionally, retirees can continue to make IRA contributions beyond the previous, now-repealed deadline of 70½ years of age.
The legislation opens the door for small businesses to improve their retirement programs by uniting — even with unrelated businesses — into groups of two or more to offer multiple-employer retirement plans or pooled employer plans.
Employers starting a new retirement savings plan for employees may be eligible for a tax credit of up to $5,000.
Three Obamacare-related taxes that ignited pitched legislative battles when they were enacted have been repealed. Ended, not delayed, suspended or given an expiration date.
Equally noteworthy, perhaps, is that it was a bipartisan congressional vote in the U.S. House and Senate.
The repealed health care taxes are the 2.3% medical device tax; a tax on health insurance policies; and what was dubbed the Cadillac Tax, under which a 40% excise tax was levied on employer health plans that cost $10,000 or more in premiums annually for an individual, $27,500 for families.
Arguments surrounding each of the taxes were vocal because they affected large constituencies. Also, in each case, while raising revenue for the government, they had the effect of raising prices for consumers because of the higher costs on medical devices and insurance products.
The Cadillac Tax, for example, attracted opposition from diverse groups. The Alliance to Fight the 40 was a coalition of organizations, among them ExxonMobil, the Laborers International Union of North America, the Blue Cross Blue Shield Association and the United Brotherhood of Carpenters and Joiners of America.
Several deductions have been enhanced or given another year of life. The act lowered the threshold to deduct medical and dental expense to 7.5% of adjusted gross income; mortgage insurance premiums remain as a qualified resident interest deduction; and an above-the-line deduction for educational tuition related fees, among other adjustments.
Many of the provisions that are now law are enacted on the basis of support, opposition and timing. Organized opposition or support plays a major role. Also, in an election year, politicians typically don’t want to raise taxes or eliminate popular tax breaks. They’d rather reduce the former and increase the latter, which is what has occurred.
However, once past 2020, with the U.S. budget showing ever-larger deficits, there could be a move in Congress to eliminate some number of tax breaks, particularly extenders, before the 2022 midterm election. That’s why delay isn’t necessarily a businessperson’s ally in terms of acting on the extenders mentioned here, as well as others.
How one should respond, when and in what way are questions to answer through careful analysis, research and working with financial advisers and accounting professionals who can act as guides in the legal and regulatory maze.
This article first appeared in KnoxNews.