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By: Kevin J. Richter

Effective January 1, 2020 various issues related to retirement plans and IRA’s are changed. The “Setting Every Community Up for Retirement Enhancement ” (The Secure Act) was signed into law by the President on December 20, 2019. Some of the changes in the Secure Act will have substantial consequences to beneficiaries of retirement plans and IRA’s. Some of the new provisions include:

1) The repeal on prohibition on contributions to traditional IRAs by an individual who has attained age 70 and 1/2.

2) Penalty free withdrawals from retirement plans for individuals in case of birth or adoption.

3) Generally, under current law participants are required to begin taking distributions from their retirement plan at age 70 and 1/2. The Secure Act increases the required minimum distribution age from 70 and 1/2 to 72.

4) Increases in the penalty for failing to file 5500s.

5) The legislation expands the use of 529 education savings to cover the costs associated with registered apprenticeships; homeschooling; up to $10,000.00 of qualified student loan repayments (including those for siblings); and private elementary, secondary, or religious schools.

Perhaps the most significant change by the new law are the modifications to the required minimum distributions rules. The Secure Act modified the required minimum distribution rules with respect to defined contribution plans and IRA balances upon the death of the account owner. Now distributions to individuals other than the surviving spouse of the employee (or IRA owner), disabled or chronically ill individuals, or individuals who are not more than ten (10) years younger than the employee (or IRA owner), or child of the employee (or IRA owner) who has not reached the age of majority are generally required to be distributed by the end of the tenth (10th) year following the year the employee or IRA owner’s death.

The changes may require reviewing your estate plan and your beneficiary designations on your retirement plans and IRAs.

Professional Services Disclaimer: Please note that the information presented here is as an educational service, and while it contains information about legal issues, it is not legal advice. No warranty is made regarding the applicability of the information presented to a particular client situation, and the information set forth is not a substitute for original legal research, analysis and drafting for a particular client situation.