Key Components of the Secure Act

Key Components of the SECURE Act include:

• 401(k)s for part-time employees;

• IRA contributions for graduate students;

• Penalty-free for student loan debt;

• Penalty-free for birth or adoption;

• Annuities in 401(k) plans;

• IRA contribution age limits eliminated; 

• Required Minimum Distributions (RMDs) increased to age 72 and Inherited “Stretch” IRA Eliminated (partially).

 401K Plans for Part-Time Employees

• Part-Time Employees eligible for a 401(k) contribution have worked at least 500 hours per year for at least (3) consecutive years and are at least age 21 or older

• Includes Profit-Sharing Plans but not Employee Stock Ownership Plans (ESOP). 

• Previously, employers were able to exclude Part-Time Employees working less than 1,000 hours

IRA Contributions for Graduate Students 

• Graduate Students with post-doctoral stipends and non-tuition payments can be treated as compensation for purposes of making IRA contributions.

• Previously, stipends and non-tuition payments received by graduate and post doctoral students were not treated as compensation.

 Penalty-Free for Student Loan Debt

• Withdrawals up to $10,000 from 529 Plans to pay off student loan

• Amount can also comprise of the beneficiary's siblings, including brother, sister, step-brother, or step-sister

Penalty-Free for Birth or Adoption

• Withdrawals up to $5,000 from their plan to assist with costs related to the birth or adoption of a child.

• With married couples, each spouse may withdraw up to $5,000 penalty-free for a qualified birth or adoption.

Annuities in 401(k) Plans

• Benefits those in need of more access to and sources of retirement income as an optional safe

• Offering lifetime income benefit options under a defined contribution plan, similar to a defined benefit (or “pension”)

IRA Contribution Age Limits Eliminated 

• Allows individuals employed past age 70 ½ to contribute to IRAs, matching the rules for 401(k) plans and Roth IRA's

• Previously, individuals with earned income couldn’t contribute to a Traditional IRA past age 70 ½.

IRA RMDs Increased to Age 72

• This rule is only applicable to individuals who did not reach age 70 ½ by the end of
• Previously, RMDs were age 70 ½ with some receiving a distribution in the same year they turned age 70 while others were age
  • January 1 – June 30: Age 70
  • July 1 – December 31: Age 71

Inherited “Stretch” IRA Eliminated

• The “new law” does not affect non-qualified stretches (e.g. non-qualified annuity). 

• As of January 1, 2020, beneficiaries are limited to 10 years (unless an eligible beneficiary). 

• Current Inherited IRA beneficiaries are still eligible to “stretch” but this allowance is removed under new rules going forward.