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As of 09/30/2020

Setting Every Community Up for Retirement Enhancement (SECURE) Act

What is it?

On December 20, 2019, the President signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The following information is a summary of the main provisions that apply to retirement plans, including Individual Retirement Accounts (IRAs). The Act contains a number of provisions that are either immediately effective or retroactive. We expect additional guidance from various entities, including the Treasury, the Internal Revenue Service (IRS), and the Department of Labor (DOL).

What do I need to do? 

Be prepared to discuss the following topics with your clients: 

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Required Minimum Distribution (RMD)

The age at which an individual is required to begin taking distributions from an IRA or a retirement plan: 

New: RMD age changes from 70½ to age 72 (required beginning date for distributions to non-5% owners is April 1 of the year following termination of employment).

Effective date: Distributions made after December 31, 2019, for individuals who attain age 70½ after 2019. 

Plan types impacted: All plans and IRAs subject to required minimum distribution rules (including 401(a)/(k), 403(b), and 457(b) plans).

The RMD change from age 70½ to age 72 also impacts age factors and tables for the RMD calculation.

Required distribution rules for designated beneficiaries

Distribution timing for non-spouse inherited Individual Retirement Accounts (IRAs) and retirement accounts: 

Current: A non-spouse beneficiary of an inherited IRA or retirement plan account who elects timely can take distributions over his or her life expectancy. The plan document for a retirement plan may have special timing/rules. 

New: Limited to a maximum period of 10 years for the distribution of the account to be completed after the participant’s date of death. 

Effective date: Distributions due to the death of an owner/plan participant who dies after December 31, 2019. For collectively bargained plans, the effective date is January 1, 2022, unless the collective bargaining agreement terminates earlier. For governmental plans, the effective date is January 1, 2022. 

Plan types impacted: 401(k), 403(b), 401(a), and 457(b) governmental plans and IRAs. This does not apply to defined benefit plans. 

Note: There are exceptions to this 10-year rule if the individual is an “eligible designated beneficiary,” defined as: 

  1. a surviving spouse, 
  2. a child who has not attained the age of majority, 
  3. a disabled individual, 
  4. chronically ill, or 
  5. not more than 10 years younger than the employee or IRA owner. 

In addition, this rule does not apply to a qualified annuity that is a binding contract as of the date of the enactment of the bill. This may be a significant change for financial professionals who have recommended in the past that non-spouse beneficiaries take advantage of the “stretch” provision in an IRA (which has been a good tax planning approach for a number of non-spouse beneficiaries).

Penalty-free withdrawal for birth or adoption


  1. Distributions up to $5,000 may now be taken for a qualified birth or adoption (QBA).1  Plans may be amended to provide for QBA withdrawals, or a participant may elect to treat a regular withdrawal event as a QBA distribution. 
  2. QBA distributions are not subject to the 10% early withdrawal penalty tax in Code Section 72(t). 
  3. QBA distributions may be repaid as rollover contributions in a later year.


Effective date: QBA distributions made after December 31, 2019. 

Plan types impacted: 401(k), 403(b), 401(a), and governmental 457(b) plans and IRAs.

Important: The $5,000 limit is aggregated across all plans of related employers. A withdrawal that meets the QBA distribution requirements will need to be identified for tax reporting purposes, as well as for future repayment purposes. We expect the Treasury to issue additional guidance regarding this repayment option/provision.

To be a QBA, the distribution must be taken from the retirement account during the one-year period beginning with the date of birth or the date the adoption of an individual under the age of 18 is finalized. The distribution cannot be taken before the birth or adoption date. The $5,000 is a per-child limit, and each parent may use this provision in his or her own retirement plan or IRA. 

Increase in 10% cap for automatic enrollment qualified automatic contribution arrangement (QACA) safe harbor plan

New: A participant in a safe harbor QACA plan may have their automatic contribution cap increased from 10% to 15%. 

Effective date: Plan years beginning after December 31, 2019. 

Plan types impacted: 401(k) and 403(b) plans using QACA. 

Note: An employer cannot use 15% in the initial period. The employer match or employer non-elective contribution (required under QACA) remains unchanged. This is an optional provision.

Election and notices for safe harbor plans (using a non-elective contribution)

Current: An existing 401(k)/401(a) or 403(b) plan is required to adopt the safe harbor plan before the beginning of the plan year. Participants and beneficiaries are required to receive an annual safe harbor notice 30 – 90 days before the beginning of the plan year. As a current alternative, a plan using the 3% non-elective contribution safe harbor may provide a “maybe” or tentative safe harbor notice at the beginning of the year as long as it sends a follow-up notice at least 30 days prior to the end of the plan year to tell people it actually intends to elect to be safe harbor for that plan year. 

New: Employer may adopt a safe harbor plan using the 3% non-elective contributions any time at least 30 days before the close of the plan year. For example, a calendar year-end plan may elect to be safe harbor for that plan year by amending the plan by November 30 (i.e., before December 1) of a plan year. An off-calendar plan year ending June 30, 2021, may amend the plan by May 30 (before May 31) to be safe harbor. 

An employer can still adopt the safe harbor plan after that date if the non-elective contribution is increased from 3% to 4% and the plan is amended on or before the last day required for distributing excess contributions for that plan year (i.e., by the end of the following plan year). 

The annual safe harbor notice requirement for plans that use either of the non-elective contributions is eliminated. 

Plan types impacted: 401(k), 401(a), and 403(b) plans.
Effective date: Plan years beginning after December 31, 2019.  

Note: This provision allows additional time for a plan subject to ADP and/or ACP testing to adopt the safe harbor plan provision to avoid these tests. In order to take advantage of this “late” adoption, the safe harbor contribution must be an employer non-elective contribution. An employer match does not satisfy the safe harbor requirement for this exception to the timing rule.

Long-term part-time workers

Current: In a 401(k) plan, an employer may exclude certain part-time employees from eligibility if they have never been credited with 1,000 hours of service during a 12-month plan year. 

New: The new rules expand the eligibility rules for salary deferral purposes. In addition to the existing year of eligibility service rules, plans must allow an employee to become eligible if he or she is credited with 500 hours of service each year for three consecutive years. 

Current eligibility and allocation rules continue to apply for employer contribution purposes. In addition, nondiscrimination testing rules have been enhanced to exclude from nondiscrimination and top-heavy testing those employees who become eligible solely under the new long-term employee rules. 

Effective date: Plan years beginning after 12/31/2020 (service during 12-month periods beginning prior to 1/1/2021 is not taken into account). 

Plan types impacted: 401(k) plans only. Plan sponsors are not required to apply this rule to participants subject to collectively bargained plans or to nonresident aliens.

Fiduciary safe harbor for selection of lifetime income provider

New: The plan sponsor may choose a lifetime income provider with protection from future liability for evaluating the insurer’s future claims-paying ability, when the insurer can make certain representations and warranties about its good standing with its regulator among other reps and warranties specifically outlined in SECURE. 

There is no requirement for a plan fiduciary to choose the lowest cost option, as various factors and attributes should be considered in the selection. As with other fiduciary duties, the plan sponsor should conduct periodic reviews of the provider. 

Effective date: Date of enactment. 

Plan types impacted: 401(k), 403(b), and 401(a) plans. Fiduciary relief applies only to ERISA plans.

Portability of lifetime annuity income options

New: This provision permits a defined contribution plan to make a direct trustee-to-trustee transfer to another employer-sponsored retirement plan or IRA of a lifetime income option or distribution of a lifetime income option in the form of a qualified plan distribution annuity. These transfers or distributions are permitted if a lifetime income option is no longer authorized to be held as an option under the plan. 

Effective date: Plan years beginning after December 31, 2019. 

Plan types impacted: 401(k), 403(b), 401(a), and governmental 457(b) plans.

Lifetime income disclosure

New: Defined contribution plans will be required to provide in participant benefit statements a lifetime income disclosure illustrating the monthly benefit payments the participant may receive based on his or her account balance. 

Plan types impacted: 401(k), 403(b), and 401(a) plans (only applies to ERISA plans). 

Effective date: Applies to benefit statements furnished more than 12 months after the DOL issues interim final rules, model disclosures, and assumptions.

Plan adoption date and Multiple Employer Plans

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Certain retirement plans may be adopted after year-end

New: A retirement plan that is entirely employer-funded (such as a profit-sharing or pension plan) may be adopted up to the due date (including extensions) of the employer’s tax return. 

Effective date: For plans adopted for tax years beginning after December 31, 2019. 

Plan types impacted: 401(a) plans, including both money purchase and profit-sharing plans.

Pooled Employer Plans (PEPs) – “Open” Multiple Employer Plans (MEPs)

Current: Related employers that do not have enough commonality or nexus are not considered a single plan. 
New: Two or more unrelated employers are allowed to join a Pooled Employer Plan (PEP). This eliminates the “one bad apple rule,” which previously could jeopardize qualified status of the MEP. (Additional guidance must be issued.) The designated pool provider is required to be the named fiduciary, must be responsible for ERISA Section 3(16) plan administrator duties, and must register with the DOL/IRS, among other requirements. Each adopting employer maintains the responsibility for selection and monitoring of the pooled plan provider or any other named fiduciary.

Effective date: Plan years beginning after December 31, 2020. 

Plan types impacted: 401(k) and 401(a) plans.

Individual Retirement Account (IRA) provisions

Repeal of maximum age for IRA contributions – Individuals can now make IRA contributions after age 70½. Effective for contributions made for tax years after December 31, 2019. 

IRA compensation – non-tuition fellowship and stipend payments – Stipends and non-tuition fellowship payments made to graduate and postdoctoral students are now treated as compensation for IRA purposes. 

Effective for tax years beginning after December 31, 2019. 

“Difficulty of care payments” - Treated as compensation for purposes of IRA and defined contribution plan contribution purpose.2 

Effective date – Contributions made after the date of enactment; 415(c) changes are effective for plan years beginning after December 31, 2015.

2IRC 131(c)(1)(A)

Small employer plans – encourage adoption and use of automatic enrollment

Increased credits for small business retirement plans – Employers with up to 100 employees are entitled to an annual tax credit. This change increases the $500 cap to the greater of:

  1. $500 or 
  2. the lesser of 
    1. (a) $5,000 or 
    2. (b) $250 multiplied by the number of non-highly compensated employees eligible to participate in the plan. 

The credit applies for up to three years.
Effective for tax years beginning after December 31, 2019. 

Automatic enrollment small employer credit – A new tax credit of up to $500 per year (for up to three years) for an employer who implements a new 401(k) plan and SIMPLE IRA plans that include automatic enrollment. This is in addition to the start-up tax credit. This credit is also available for employers who add automatic enrollment to their existing plans and is effective for tax years beginning after December 31, 2019.

Additional provisions

Termination of 403(b) custodial accounts – Account termination may be retroactive for tax years beginning after December 31, 2008. This means a 403(b) plan that is holding individual custodial accounts can now be terminated using similar rules for distributing individual annuities.

Combined Form 5500 filing for a group of plans – The IRS and the DOL are directed to allow a consolidated Form 5500 filing for similar plans. The eligible plans must be defined contribution plans and must have the same: 

  1. trustee, 
  2. fiduciary, 
  3. administrator, 
  4. plan year, and 
  5. investments or investment options. 

Effective date for implementation is no later than January 1, 2022 (applies to returns for plan years after December 31, 2021).


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Additional Coronavirus legislation and relief is likely to be forthcoming from the 117th Congress later in 2021, so more to come.

Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives and/or insurance agents do not provide tax, accounting or legal advice. Please consult an independent professional as to any tax, accounting or legal statements made herein.