What Advisors Should Know About The SECURE Act of 2019

The 116th U.S. Congress took office on January 3, 2019. Since that day, the spotlight has been permanently affixed on Capitol Hill. With all the attention Congress has been getting this year, it seems one very significant piece of legislation has gone largely unnoticed – The SECURE Act of 2019.

Introduced in late March by Rep. Richard Neal, a Democrat from Massachusetts, the Setting Every Community Up for Retirement Enhancement Act restructures current retirement and pension laws. With overwhelming bipartisan support, the bill passed the House in late May and has since been waiting to be picked up by the Senate.

The SECURE Act consists of nearly 30 provisions, many of which would have a direct impact on small businesses and their employees. As summarized on Congress.gov, the bill would bring the following changes to employer-provided retirement plans:

• multiple employer plans;
• automatic enrollment and nonelective contributions;
• tax credits for small employers that establish certain plans;
• loans;
• lifetime income options;
• the treatment of custodial accounts upon termination of section 403(b) plans;
• retirement income accounts for church-controlled organizations;
• the eligibility rules for certain long-term, part-time employees;
• required minimum distributions;
• nondiscrimination rules;
• minimum funding standards for community newspaper plans; and
• Pension Benefit Guaranty Corporation premiums for CSEC plans (multiple employer plans maintained by certain charities or cooperatives).

In short, Congress is trying to make it easier and more affordable for small business owners to provide their employees with retirement plans. This would boost retirement security for nearly 60 million American workers by loosening the rules dictating multiple employer plans. Currently, MEPs are allowed for employers who are connected through various professional associations or share similar economic interests. The SECURE Act would remove those restrictions and make it easier for unrelated employers to enter these types of arrangements. This would cut costs, cut red tape, and reduce legal liability for businesses.

Additional items included in the bill, many of which advisors should keep an eye on, involve lifetime income options. The bill would open the door for employers to offer annuities options as part of their retirement packages. Also of interest to many of your clients are the incentives it gives to employers to give part-time workers access to 401(k) plans. For advisors, this could mean a new segment of prospects whose employment status has limited access to retirement products.

Something else that could impact clients with retirement accounts is the provision that raises the Required Minimum Distribution age from 70 to 72. According to the Tax Policy Center, this will help offset the cost of longer lifespans, which have risen significantly since the current RMD rules were enacted in the 1970s.

While the SECURE Act brings numerous additional changes to the current retirement laws, advisors should pinpoint those that will most directly affect their clients and work to ensure they understand the ins and outs, pros and cons of the bill should it be passed into law. Will it survive the Senate and land in the White House? Only time will tell. Use that time to do your homework and be ready in case it does.

Read the full text of the bill here.