Secure Act Retirement Bill Passes House

From: Ed Slott and Company,


Subject: ELITE ALERT: SECURE Act Retirement Bill Passes House 417-3 – May 23, 2019 Date: May 23, 2019 at 3:45 PM

SECURE Act Retirement Bill Passes House 417-3 Today, the House of Representatives approved the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) by 417-3 – a significant bipartisan effort – leading many to speculate that the Senate may be poised to pass this bill (most likely with some revisions), as they are also focusing on retirement savings and their own version called The Retirement Security and Savings Act (RESA). While, RESA includes provisions very different than the SECURE Act, it seems both the House and Senate are making great strides in a unified effort. A few notable highlights if the SECURE Act continues as-is: Two biggest changes: 1) Repealing the maximum age for traditional IRA contributions Eliminating the age restriction is a good move that will open the window for more back-door Roth IRA conversions, and more spousal IRA contributions. 2) Raising the age for required minimum distributions (RMDs) from 70½ to 72 We believe there are additional steps the government could take to help further simplify RMDs, but getting rid of that dreaded ½ year is a step in the right direction. Biggest potential revenue loser: Reducing the stretch IRA to 10 years for most beneficiaries. We do not believe this will be an effective revenue raiser as they claim in the bill. Many beneficiaries do not hold the funds as long as Congress projects. Plus, those who wish to have beneficiaries receive funds over many years will find other more tax efficient vehicles, like life insurance that can simulate the stretch IRA and do it tax free with no RMD complexities. Life insurance is also a more tax friendly and flexible asset to leave to a trust. This provision will drive more people to do better estate planning, leaving Congress without the revenue they think will pay for the rest of this bill. Potential Tax Trap for Parents: Penalty-free withdrawals for birth or adoption from retirement accounts. This might be helpful, but the taxes will still be owed and could put new parents in tax trouble the following year. Also, this Bill is about saving more for retirement, not ways to access funds early