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Posted by Bernard Kaplan on Tue, Feb 4, 2020 @ 12:06 PM


While changes made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act) are important, we expect considerable relaxation of the laws related to retirement plans once legislation is passed. We will keep you informed as we learn more. Recently, Congress passed SECURE Act) This Act makes a number of changes that impact retirement plans, IRAs, and individual retirement and estate planning strategies. The following highlights many of the provisions of the SECURE Act.

Required Minimum Distribution (RMD) Age Increased From Age 70 ½ to Age 72

Effective for years after Dec. 31, 2019, individuals with retirement or IRA balances in general, must begin taking distributions over life expectancy by April 1 of the year following attainment of age 72. Note that those who already commenced receipt of RMDs must do so by April 1, 2020, due to already attaining 70 ½ —they may not delay until age 72.

Post Death Distributions Must Be Completed By the 10th Calendar Year Following Death of the Accountholder

This provision, effective for individuals who die after Dec. 31, 2019, eliminates the planning technique referred to as the “stretch IRA.” Exceptions to the rule apply if the beneficiary is any of the following:

  • The spouse;
  • Disabled or chronically ill individuals; or
  • A child who has not reached majority (note the 10-year distribution time frame applies once the child reaches majority).

Advance Election and Notice to Employees of 3% Nonelective Safe Harbor Provision Is No Longer Required

Effective for plan years beginning after Dec. 31, 2019, employers may amend their 401(k) plan within the last 30 days of the plan year to provide a safe harbor nonelective contribution equal to 3% of compensation to all eligible employees. Furthermore, a 401(k) plan may be amended after the plan year-end to apply the nonelective safe harbor retroactively for the prior plan year. If amended after the plan year-end, the nonelective safe harbor contribution must be 4% of compensation.

These changes to the safe harbor 401(k) rules may be beneficial to employers who find that without the safe harbor, they are failing the 401(k) nondiscrimination tests (ADP/ACP) and would otherwise be required to return contributions to highly compensated employees.

Note that for those plans electing to make the safe harbor match, the advance amendment and annual notice to employees are still required.

Long-Term, Part-Time Employees Must Be Permitted to Defer into the Employer Sponsored 401(k) Plan

While it is common for 401(k) plans to restrict participation to full-time employees, the Act provides that part-time employees working at least 500 hours in three consecutive 12-month periods must be permitted to defer into the 401(k) plan effective for services performed after Dec. 31, 2021. Employers may exclude the long-term part timers from the employer contributions, including the safe harbor contributions.

Note that the long-term part timers are included in the participant count which may then result in plans that would otherwise be exempt from the audit requirements to now be required to file an audited financial statement along with a Form 5500.

Distributions from Defined Contribution Plans and IRAs permitted for Child Birth or Adoption without Penalty

Individuals may now withdraw up to $5,000 for expenses incurred within a year for child birth or adoption. Plans that may be amended to provide for these distributions include 401(k), profit sharing, money purchase plans, and IRAs.

These distributions taken by individuals under age 59 ½ will not be subject to the 10% excise tax typically applicable to distributions taken if under age 59 ½. Note that such distributions may be paid back to the plan or IRA.

Benefit Statements Required to Include Annuity Illustrations

Benefit statements from defined contribution plans such as 401(k) and profit sharing plans will be required to include a lifetime income disclosure statement at least once a year. This disclosure will illustrate an estimate of the monthly payment if the accumulate benefit were to be paid in the form of an annuity instead of a simple lump sum. The required addition to the benefit statements is effective 12 months after the Department of Labor (DOL) issues guidance and model disclosure statements.

Late Filing Penalties for Failure to File Forms 5500 and 8955-SSA Substantially Increased

The IRS penalties for late filings after Dec. 31, 2019 have increased tenfold. The penalty for late filing of Form 5500 has been increased to $250 per day, up to a maximum of $150,000; and the failure for late filing of Form 8955-SSA has been increased to $10 per day, up to a maximum of $10,000. The DOL penalty of $2,140 per day for late filing of Form 5500 has not changed.

Note that an employer may still file a late return under the Delinquent Filers Voluntary Compliance (DFVC) program at substantially reduced rates.

Retirement Plans May Be Adopted by the Due Date of the Tax Return, Including Extensions, and Treated as Effective in the Prior Year

Effective for plan years beginning after Dec. 31, 2021, an employer may adopt a plan retroactively effective for the prior plan year as long as the plan is adopted by the due date of the tax return, including extensions.

Note that 401(k) plans must be adopted prior to employees electing to defer. Thus, 401(k) plans may not be adopted retroactive after the year-end.

Tax Credit Available to Employers Starting a Retirement Plan

An employer with 100 or less employees may receive a tax credit for start-up costs over the first three years of the plan effective for years beginning after Dec. 31, 2019. The tax credit is equal to $250 per eligible, non-highly compensated employee up to $5,000. An additional $500 credit is available for plans providing auto enrollment.


The above highlights only some of the provisions of the SECURE Act. With many of the SECURE Act provisions currently effective, employers and individuals should speak with their consultants to determine their implementation options. Amendments to plan documents will not be required until the last day of the 2022 plan year or later, if the government provides. Plans may adopt the new provisions in the meantime with good faith amendments to their plans. For more information on how we can help, please contact us, or contact Bernie Kaplan at or 617.761.0541.


KaplanBernie Kaplan is the Managing Director of the Retirement and Benefit Plan Services Group in the Boston office. He can be reached at 617.761.0541 or Bernie consults on a wide variety of employee benefit topics including 403(b) plans, qualified retirement plans, executive compensation, nonqualified deferred compensation, section 409A and health care reform.

Tags: retirement plans, Bernard Kaplan, 401(k), Required Minimum Distribution (RMD), defined contribution plans, the SECURE Act, retirement planning

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