Setting Every Community Up for Retirement Enhancement Act of 2019 (Secure Act)


In December 2019 the House of Representatives and the Senate passed the SECURE Act which was subsequently sent to President Trump for signature. The final bill was signed on December 20, 2019 which is the official enactment date. The SECURE Act made many changes to how you save money for retirement, how you use your money in retirement, and how you can better use your Section 529 plans. Regardless of your age these changes will impact every person.

Following are some of the more significant changes you need to know. For a complete analysis of the new 2019 acts check out our new webinar, “Congress Passes 2019 Year-End Tax Legislation: SECURE Act & Disaster Act”, available on

  • No age limit on Traditional IRA contributions: a contribution can be made to a traditional IRA at any age, similar to the Roth IRA.
  • Coordination with Qualified Charitable Distribution (QCD) rules: for those taxpayers who plan to make a QCD from their traditional IRA then the distribution is reduced by:
    • The total traditional IRA contribution deductions taken after age 70 1/2, less
    • All prior reductions you made to your QCDs before the current tax year.

EXAMPLE: Shauna turns 70 ½ in 2020. She continues to work and makes pre-tax contributions to her traditional IRA as follows: $5,000 in 2020; $5,000 in 2021; and $5,000 in 2022. Shauna then makes direct charitable contributions that would previously be tax-free QCDs, as follows: $10,000 in 2023 and $10,000 in 2024. In total she has made $15,000 in pre-tax contributions to her traditional IRA after she turned 70 ½ which will reduce the amount of tax-free QCD in subsequent years. Therefore, in 2023 all of the QCD will be taxable income on her Form 1040 and in 2024, $5,000 will be taxable income and the remaining $5,000 can be treated as a tax-free QCD.

  • Required Minimum Distributions (RMDs) start at age 72: for those who turn age 70 ½ after December 31, 2019, the minimum age for distributions from IRAs and qualified pensions is 72 years of age.
    • For employer-sponsored retirement plans, §401(a)(9)(C)(i)(I) provides that for a non-5% owner the distribution is required by April 1 after the calendar year the employee turns 72 or retires from service with the employer (whichever is later).
    • If the employee is a 5% owner, then §401(a)(9)(C)(ii)(I) provides than the minimum distribution is the same as for traditional IRAs even if the employee continues to work past age 72.
  • Penalty relief for birth/adoption withdrawals: §(72)(t)(H) provides that for distributions made after December 31, 2019, penalty-free withdrawals will be allowed from retirement plans for a qualified birth or adoption distribution. This is only a penalty exception – the income tax must still be paid on the distribution.
    • A qualified birth or adoption is any distribution from an IRA or a qualified plan if made during the one-year period beginning on:
      • The date of birth of a child, or
      • The date a legal adoption of an eligible adoptee is final
    • An “eligible adoptee” is any individual (other than a child of your spouse) who is:
      • Under age 18, or
      • Physically or mentally incapable of self-support
    • The maximum penalty-free distribution is $5,000 per individual per birth or adoption. As a result, on a joint return, each spouse may separately receive a $5,000 distribution.
    • For this purpose, a qualified plan does not include a defined benefit plan.
  • IRA contributions for graduate and postdoctoral students:
    • Before the SECURE Act, certain taxable stipends and non-tuition fellowship payments received by graduate and postdoctoral students were included in taxable income but not considered compensation for IRA purposes.
    • The new law states: “The term ‘compensation’ shall include any amount which is included in the individual’s gross income and paid to the individual to aid the individual in the pursuit of graduate or postdoctoral study.”
    • This change enables students to begin saving for retirement and to accumulate tax-favored retirement savings.
  • Difficulty-of-care payments treated as compensation for retirement plan contributions:
    • The Code provides that income received by a foster care provider is not includable in gross income. A “difficulty-of-care” payment is compensation for providing additional needed for “qualified foster individuals” who have a physical, mental, or emotional disability for which it has been determined that:
      • There is a need for additional compensation to care for the individual,
      • The care is provided in the home of the foster care provider, and
      • The payments are designated by the payer as compensation for such purpose.
    • The SECURE Act now allows for non-taxable income received by home healthcare workers, “difficulty-of-care” payments, are treated as compensation for purposes of contributing to defined contribution plans and IRAs.
      • §415(c)(8) now provides for contributions to defined contribution plan for years beginning after December 31, 2015.
      • §408(o)(5) now provides that for IRA contributions made after December 20, 2019.
  • Kiddie Tax reverts to tax law prior to the Tax Cuts and Jobs Act (TCJA): this repeals the provision in the TCJA that the estate and trust rates would be applied to the tax returns of minors subject to the Kiddie Tax. Taxpayers can amend their 2018 income tax returns if the estate and trust rates were assessed.
  • Expanded tax-free §529 plan distributions now include:
    •  Fees, books, supplies, and equipment for the designated beneficiary’s participation in an apprenticeship program registered and certified with the Secretary of Labor under Section 1 of the National Apprenticeship Act
    • Principal or interest payments on any qualified education loan of the designated beneficiary or their siblings up to $10,000. The deduction for interest paid by the taxpayer during the tax  year on a qualified education loan is disallowed to the extent the interest was paid from a tax-free distribution from a §529 plan.
  • RMDs on inherited accounts revised:
    • Under the SECURE Act, the beneficiary of a defined contribution plan or an IRA must fully distribute the balances of these plans by the end of the 10th calendar year following the year of death. There is no longer a requirement to take out a minimum amount each year. This eliminates the ability to ‘stretch’ out the account and take RMDs each year to deplete the account over many years.
    • There is an exception for an eligible designated beneficiary, defined as:
      • A surviving spouse
      • A child who has not reached the age of majority
      • Disabled as defined in §72(m)(7)
      • A chronically ill individual as defined in §7702B(e)(2) with modification, or
      • Not more than 10 years younger than the deceased
    • This change applies to distributions for plan owners who die after December 31, 2019
  • Increase failure to file penalty: for returns due after December 31, 2019, the penalty is the lesser of:
    • $400, or
    • 100% of the amount of the tax due
  • Disaster tax relief: for those who suffer casualty losses in areas designated as a Presidentially-declared disaster area occurring between January 1, 2018 and 60 days following the date of enactment (December 20, 2019) are provided with several tax-favored benefits:
    • An exception to the 10% penalty for funds withdrawn from a retirement plan, not to exceed $100,000, in qualified hurricane distributions cumulatively.
    • Allows for the re-contribution of retirement plan withdrawals for home purchases cancelled due to eligible disaster
    • Temporarily suspends the limitations on the deduction for charitable contributions associated with qualified disaster relief, therefore, the 60% AGI limitation is not applicable.

Any individual with a principle home or any taxpayer with a principal place of business in a disaster area an automatic 60-day extension with regard to any tax filing.

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