President Trump signed the latest federal government spending bill on Friday December 20, 2019, hours before the government shutdown for lack of funding. The spending bill will keep the federal government going until September 2020. The bill includes many tax law changes and extends several expired provisions. The bill also incorporates the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, addressing several retirement plan changes.
The SECURE Act was passed by the House of Representatives in May, but was never voted on by the Senate. In order to get the SECURE Act passed into law, Congress tucked it into the latest spending bill. Here are three changes from the SECURE Act that all taxpayers should know:
- Repeal of the maximum age for IRA contributions. The bill repeals the maximum age for IRA contributions, previously 70½. Provided an individual has earned income, they will be eligible to make a contribution to an IRA at any age. This will allow seniors who are still working the opportunity to defer taxable income.
- Increases the age for mandatory distributions. The bill increases the age for mandatory distributions from retirement plans from age 70½ to age 72. Individuals will be able to delay taking minimum required distributions from their retirement accounts a little longer.
- Requires beneficiaries of IRAs and qualified plans to withdraw all money from inherited accounts within 10 years. The bill eliminates the opportunity to stretch required minimum distributions over the beneficiary’s life expectancy. The Act forces a beneficiary to withdraw the entire balance of the account within 10 years after the owner’s death. There are no longer required minimum distributions from inherited retirement accounts. Instead, just a requirement that all funds be distributed within 10 years.
These changes will be effective after December 31, 2019. Contact a PBMares tax professional if you have additional questions about how the SECURE Act impacts your retirement plans. Look for additional tax alerts from PBMares as we roll out more information on how the SECURE Act impacts retirement plan administration.