After months of stalled progress in the Senate, Congress passed the Setting Every Community Up for Retirement Enhancement Act (“SECURE” Act). This bill was attached to H.R. 1865, the “Further Consolidated Appropriations Act, 2020,” a $1.4 trillion year-end spending bill that funds the Federal Government through September 30, 2020. President Trump signed the bill into law on December 20, 2019.


It is no secret that the current U.S. retirement system is complicated, and many Americans lack sufficient funds to retire comfortably. In fact, the Social Security Board of Trustees estimates that by 2035 taxes will be enough to pay for only 75 percent of scheduled benefits. The SECURE Act attempts to reform the current U.S. retirement system by expanding benefits for more Americans and providing greater access to retirement savings programs.

In May, 2019, the SECURE Act passed in the House of Representatives by a vote of 417-3, but quickly stalled in the Senate despite having strong bipartisan support. After passing in the House, the Senate attempted to pass the SECURE Act through “unanimous consent,” also known as “hotlining.” This is an abbreviated way to quickly decide on the passage of a bill without the usual process of floor debates and amendments. It was derailed by Senators Ted Cruz (R-TX) and Pat Toomey (R-PA), who requested amendments be made to the SECURE Act prior to passage. Notably, Sens. Cruz and Toomey proposed allowing 529 Plans to cover expenses of K-12 students and home-schooled students. Their amendments were removed from the original House legislation by Speaker Nancy Pelosi prior to sending the bill to the Senate.


The SECURE Act aims to increase access to tax-advantaged retirement accounts, especially for small businesses and their employees. The current text of the SECURE Act includes many changes to existing retirement laws, with the most notable changes outlined below:

  • Stretch IRA
    • Current Law: Non-spouse beneficiaries of IRAs can “stretch” minimum distributions over their own lifetime, which allows funds to grow tax-free for an extended period of time.
    • SECURE Act: Funds from inherited IRAs would be required to be distributed within 10 years of the IRA owner’s death.
  • Raised Age Limits
    • Current Law: At age 70 ½, individuals are required to withdraw a required minimum distribution (“RMD”) each year. After age 70 ½, individuals can no longer contribute to traditional IRAs (Roth IRAs have no age limit).
    • SECURE Act: Individuals could wait until age 72 to begin taking RMDs, which would defer the tax impact of withdrawals and allow savings to accumulate longer. In addition, there would be no age limitation on Roth or Traditional IRA contributions.
  • Coverage for Part-Time Employees:
    • Current Law: Employers may exclude part-time employees from 401(k) savings plans.
    • SECURE Act: Employees who work 1,000 hours throughout the year or have three consecutive years of at least 500 hours of service would be eligible to participate in a 401(k) savings plan.
  • Small Business Tax Credit
    • Current Law: Employers are eligible for up to a $500 credit for implementing new retirement plans.
    • SECURE Act: Employers could receive up to a $5,000 credit for creating new retirement plans. Additionally, a new $500 tax credit would be available to small businesses to encourage automatic enrollment in retirement plans.
  • Multi-Employer 401(k) Plans
    • Current Law: It is costly and burdensome for many small businesses to offer 401(k) plans.
    • SECURE Act: Small business employers could join multiple-employer plans or “open MEPS,” which have reduced costs and reduced regulatory barriers, expanding access for their employees to participate in retirement savings plans.
  • Access to Annuity Options
    • Current Law: Many 401(k) plans do not offer annuities due to liability concerns.
    • SECURE Act: Plan providers will have decreased liability concerns when offering annuities to participants of 401(k) plans.
  • Automatic Enrollment Safe Harbor
    • Current Law: Employers may set a contribution rate for employees who participate in an auto-enrollment 401(k) plan. Currently, this contribution rate may not exceed 10%.
    • SECURE Act: Employers can raise the contribution rate to 15% for employees.
  • Birth and Adoption Expenses
    • Current Law: There is a 10% early withdrawal penalty on 401(k) distributions.
    • SECURE Act: Following the birth or adoption of a child, married individuals could withdraw up to $5,000 from their 401(k) accounts without paying the 10% early withdrawal penalty.
  • Expansion of §529 Plans
    • Current Law: Student loan repayments are not considered qualified education expenses.
    • SECURE Act: Funds in §529 College Savings Plans could be used to repay qualified student loan repayments, up to $10,000.
  • Kiddie Tax
    • Current Law: The Tax Cuts and Jobs Act of 2017 (“TCJA”) implemented “Kiddie Tax” measures that tax unearned income of children above $2,200 at the top marginal tax rates for trusts and estates.
    • SECURE Act: The “Kiddie Tax” rules would revert to pre-TCJA law, in which a child’s unearned income above the threshold would be taxed at the parent’s marginal tax rate.

The SECURE Act is the most significant retirement legislation from Congress in over a decade. Attend Surgent’s webinar Critical Update: The SECURE Act and Other Late 2019 Tax Changes (WYNK) for the latest, up-to-date information and webinars regarding the SECURE Act.


Rachel Parsia, CPA is Manager of Tax & Advisory Content for Surgent CPE. She attended Penn State University, graduating with a master’s degree and bachelor’s degree in accounting, as well as a bachelor’s degree in finance. Before joining Surgent, she worked at KPMG and TE Connectivity Ltd. and has experience in Federal Tax, International Tax, and Tax Forecasting.


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