When 2019 came to a close, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act—a major piece of legislation designed to strengthen Americans’ retirement security. Its goal is to expand access to retirement plans, encourage longer participation in the workforce, and reduce the risk of retirees running out of savings. While the long-term impact is still unfolding, several of its provisions have already made a meaningful difference for both individuals and employers.
Later Start for Required Minimum Distributions and Extended Contribution Age
One of the most notable updates under the SECURE Act is the change to Required Minimum Distributions (RMDs). The age at which retirees must begin withdrawing funds from their retirement accounts has increased from 70½ to 72. This adjustment allows investors to let their savings grow for a longer period before they must begin taking withdrawals.
However, those who already reached 70½ in 2019 are still required to begin distributions as originally scheduled or face a steep penalty of up to 50% of the amount that should have been withdrawn.
The Act also removes the previous age restriction on contributions to traditional IRAs. Now, anyone who continues to earn income—even past the traditional retirement age—can keep contributing to their account. This provides older workers with more time and flexibility to build up their retirement savings.
Expanded Options in Employer-Sponsored Retirement Plans
The SECURE Act made significant updates to employer-sponsored plans like 401(k)s, with a focus on broadening participation and simplifying administration. These changes include greater use of annuities, better opportunities for small businesses, and new inclusion rules for part-time workers.
1. More annuity options
Previously, employers faced potential legal liability if an annuity provider failed to meet its obligations. The SECURE Act shifts much of that responsibility to the insurance companies offering these products. By doing so, it encourages more employers to include annuities as a retirement income option for employees who want a guaranteed stream of income after leaving the workforce.
2. Support for small businesses
To help small companies offer retirement plans, the law removes the so-called “bad apple rule,” which previously meant that one noncompliant employer could jeopardize the entire multiple-employer plan. Now, businesses from different industries can join together to offer plans and share administrative costs. In addition, small employers receive a tax credit for automatically enrolling workers, a proven method to boost participation and savings rates.
3. Access for part-time employees
Under the old system, part-time employees were often excluded from company retirement plans unless they worked at least 1,000 hours each year. The new rule expands eligibility: part-timers who work at least 1,000 hours in one year, or 500 hours annually for three consecutive years, must be offered access to their employer’s retirement plan.
The End of the “Stretch IRA” Strategy
Another significant shift involves inherited retirement accounts. Before the SECURE Act, non-spouse beneficiaries could stretch their required withdrawals—and therefore their tax burden—over the course of their lifetime. Now, most non-spousal heirs must withdraw the entire balance of an inherited IRA within 10 years of the original owner’s death.
This change can have major tax implications, especially for beneficiaries who inherit accounts during their peak earning years. The rule applies only to accounts inherited from someone who passes away in 2020 or later. If your estate plan includes a trust as an IRA beneficiary, it’s important to review the trust language, as these new withdrawal rules may affect how the funds are distributed.
Final Thoughts
The SECURE Act represents one of the most comprehensive overhauls of retirement policy in recent years. By raising contribution limits, improving plan accessibility, and adjusting distribution requirements, it aims to help Americans save more effectively and enjoy greater financial security in retirement. However, the changes also introduce new considerations for estate planning and tax strategy. Consulting with a financial advisor or tax professional can help ensure your retirement plan aligns with the new rules and your long-term goals.
