THE SECURE ACT: New Additions Provide Greater Flexibility
By: Emilee B. Gehling and Kecia C. Van’t Hof
On December 19, 2019, Congress passed the Setting Every Community up for Retirement Enhancement Act of 2019, also known as the SECURE Act. The SECURE Act is an effort to fix “our nation’s retirement crisis and help workers of all ages save for their futures” Rep. Richard E. Neal (D. Mass.). With the new updates to the SECURE Act, greater flexibility is provided for employers and employees across the nation.
For starters, the 2019 SECURE Act allows for an increase in employee pay from 10% to 15%. This means that employees are now able to put away more of their income towards retirement plans.
The SECURE Act now also increases credit for retirement plan start-up costs for small employers with 100 employees or less. Further, small employers receive a tax credit of $500 for start-up costs with automatic enrollment.
One of the most interesting updates, in my opinion, to the SECURE Act is that is now allows for stipends and non-tuition fellowship payments received by a graduate or postdoctoral student to not be treated as compensation. Therefore, stipends and non-tuition fellowship payments cannot be used for the basis of IRA contributions. This amendment now enables students to begin saving for retirement, giving them a head start on their contributions.
Another change made to the 2019 SECURE Act is the maximum age of IRA contribution. This has changed from 70 ½ to 72 years of age. Taking into consideration that people are living longer than they have in the past, the increase in age allows for people to make their funds last longer and to contribute for a couple more years.
Finally, the 2019 SECURE Act allows for part-time employees to contribute to retirement plans. This allows more people to participate in saving for their future due to many employees in our nation have part-time jobs.