PLANSPONSOR - December/January 2020 - 2

INSIGHTS
The SECURE Act Is Here Now
S
" ... plan
sponsors
must pay
close
attention to
a couple
of aspects
of the act,
because it's
in effect, as
of January 1. "
o the SECURE Act finally passed. Late in December, the Setting Every Community Up for
Retirement Enhancement (OK, who comes up with these names?) was integrated into the
spending bill that must get passed by a certain date to keep our government in business. And,
just like that, it was signed into law.
It felt, in some ways, anticlimactic. After all, here at PLANSPONSOR we have been following
the bill since its inception. We tracked not only how it differed from the Senate counterpart, the
Retirement Enhancement and Savings Act (RESA), but we paid attention to why it wasn't adopted
and passed by the Senate after it did pass the House-nearly unanimously-this past summer.
We had writers covering its status, or lack thereof, the Senate holdouts who, in a process called
reconciliation, prevented it from being voted on as it was, and others who continued to monitor
the potential implications should the bill finally get passed. Those articles were some of our most
popular last year.
As the bill worked its way through the congressional channels, there was repeated discussion
about how it would be the most significant legislation since the Pension Protection Act of 2006 (PPA).
Recalling the passage of the PPA, the enactment of the SECURE Act felt different. The PPA seemed
to come together quickly-I recall it being passed, and then poring over it to figure out what was in it.
We needed years, of course, to determine it's full effects, as it required other agencies to enact regulations,
such as the Department of Labor (DOL) to create rules for establishing default funds.
Because we've been reporting on the SECURE Act for so long, and because it was passed by the
House, many people have had the opportunity to read, digest and theorize about what the outcomes
would be. In that way, I think its passage, though important, did seem to be, perhaps, quieter
than that of the PPA. It also might have to do with the fact that it was wrapped inside another-a
massive-bill that received more press, plus it was the week prior to Christmas.
Yet, at some point, any significant legislation gets looked at with the " What's in it for me? " lens.
With this in mind, plan sponsors must pay attention to a couple of aspects of the act, because it's in
effect, as of January 1. You must now be in compliance and ensure that participants-with the help
of your advisers, recordkeepers or other education providers-are aware of what they need to know.
First is the increase in the required minimum distribution (RMD) age from 70.5 to 72. It's
important to note that Americans who turned 70.5 in 2019 would need to withdraw the RMD by
April 1, 2020, but those who turn 70.5 in 2020-born between July 1, 1949, and December 31,
1949-don't need to take an RMD until they are 72. This will require plan sponsors to work with
their recordkeeper to evaluate their participant base and ensure compliance with the new law.
Another change sponsors should keep in mind is that the law allows for an individual to take
a " qualified birth or adoption distribution " of up to $5,000 upon the birth or adoption of a child,
without being subject to the 10% early withdrawal penalty. While no one likes to advocate someone
withdrawing money from retirement savings ahead of retirement, the costs incurred in adding a child
to a family can be taxing, and to acknowledge that may help alleviate some stress for participants.
These changes might seem minor in the context of the whole law, but I think it's too soon to
talk about the potential growth in open multiple employer plans (MEPs) or the number of new small
401(k) or SIMPLE [Savings Incentive Match PLan for Employees] plans that will start up due to the
automatic enrollment tax credit. Either requires us to guess or make judgments we aren't yet ready to.
It also remains to be seen what change we'll see in annuity offerings in defined contribution
(DC) plans, now that sponsors are protected in selecting them. I imagine there will be much pontificating
about that in the future, but as we've seen in the past, any trends will take years to develop.
The above two items are right here, right now, and meaningful in helping many of your employees
or previous employees plan their financial year ahead. -Alison Cooke Mintzer, Editor-in-Chief
2 PLANSPONSOR.COM December 2019 - January 2020

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PLANSPONSOR - December/January 2020

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