What the ‘Father of 401(k)s’ Thinks of the Secure Act
January 1, 2020 by Ginger Szala
In what has been called the most comprehensive retirement security legislation in a decade, President Donald Trump on Saturday signed a spending bill that includes the Setting Every Community Up for Retirement Enhancement (Secure”) Act. This means changes to retirement plans going into the new year.
Key changes include:
- It will be easier for small businesses to set up 401(k)s by increasing the cap under which they can automatically enroll workers in “safe harbor” retirement plans, from 10% of wages to 15%;
- A maximum tax credit of $500 per year will be provided to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment;
- Businesses can now sign up part-time employees who work either 1,000 hours throughout the year or have three consecutive years with 500 hours of service;
- Plan sponsors are encouraged to include annuities as an option in workplace plans by reducing their liability if the insurer cannot meet its financial obligations;
- The age at which retirement plan participants need to take required minimum distributions (RMDs) is pushed back from 70½ to 72.
The American Council of Life Insurers estimates that the Secure Act will result in 700,000 more American workers saving for retirement.