How the SECURE Act May Affect Your Company’s Retirement Plan

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The “Setting Every Community Up for Retirement Enhancement” Act of 2019, better known as the SECURE Act, was approved by the Senate on December 19, 2019, and signed into law on December 20 by President Donald Trump. The SECURE Act is the largest change to corporate retirement plan laws since the Pension Protection act of 2006. If you are a business owner or assist in operating your company’s retirement plan, there are a lot of changes to be aware of. 


Expanded Enrollment Changes:

Auto-Enrollment Cap Boosted

If you currently use auto-enrollment in your 401(k) plan, the previous Safe Harbor contribution cap was 10% of income. Under the SECURE Act, the cap has now increased to 15%.

Part-Time Retirement Plan Access

Under the previous law, an employer could exclude part-time employees who worked less than 1,000 hours per year from a defined contribution plan. Under the new law, there is now a dual eligibility requirement. If an employee completes one year of service with the 1,000 hour rule, or three consecutive years of service with at least 500 hours of service, the employee would be deemed eligible to participate in the plan.

Required Minimum Distributions Now Begin at Age 72

The starting age for required minimum distributions (RMDs) has moved from age 70 ½ to age 72. This allows you to defer taxes on those withdrawals for a few more years. You should note that if you turned 70 ½ in 2019 or before and have already taken your RMD in 2019, you’re required to continue taking it in 2020 and subsequent years.

Lifetime Income Products Provider Selection Safe Harbor

Under this provision, fiduciaries are afforded an optional safe harbor for selecting annuity like products as available investments within the plan, if certain processes are followed. Thus, the fiduciary is protected from liability for any losses that may results to the participant or beneficiary due to an insurer’s inability in the future to satisfy its financial obligations under the terms of the contract.

Combined Annual Reports for Group of Plan

The legislation directs the IRS and DOL to enforce the filing of a consolidated Form 5500 for similar plans.


Employer Tax Credit & Penalty Changes:


Tax Credit for Automatic Enrollment


The new law provides a tax credit of $500 for some smaller employers who set up automatic enrollment in their retirement plans.


Increase Small Business Tax Credits for New Retirement Plans


These tax credits are given to employers for deciding to begin a retirement plan program. Credits were already available before this law change, but the SECURE Act significantly increases their value up to $5,000 per year for three years of a new retirement plan. 


IRS Filing Penalties


Employers to this point have been penalized up to $25 per day for a maximum penalty of $15,000 per plan year for plans that filed their Form 5500 late or had materially incomplete returns. The SECURE Act has raised this penalty significantly, increasing it to $250 per day, up to a maximum penalty of $150,000 per plan year.


IRS Filing Penalties


Employers will have additional time to adopt a retirement plan. Beginning in tax years after 2019, the legislation allows a plan to be adopted as late as the tax filing deadline, including extensions, for the taxable year rather than by the last day of that taxable year.



The SECURE Act contains some major changes to our current retirement system including the age adjustment of required minimum distributions and tax credit changes. If you have questions, contact your advisor to see how these changes might affect you now and in the future.