Secure Act – Refresher and Reminders

Published December 16, 2020

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The Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act“) was signed into law on December 20, 2019.  This legislation was the most sweeping legislation affecting retirement plans since the Pension Protection Act of 2006.

In February 2020, MCM communicated the provisions of the SECURE Act as it pertained to retirement plans.  The following month all things changed with the nationwide pandemic.  People were forced to stay home and create a new work environment.  The CARES Act was passed in April 2020, a specific reaction to the effects of the pandemic.  Part of the CARES Act provided opportunities for employers to allow retirement money to be accessed by participants in the plan, if needed.  There were also changes to the allowable loan provisions.  These changes were temporary.  The expanded loan amount provision expired in September and the distribution provision will expire on December 30, 2020.

The SECURE act, however, is a permanent change to retirement plans and warrants a refresher as to the different provisions that all Plans will be required to follow.

Required participation of long-term, part-time employees – See related article authored by Patti Smith for further explanation of this provision.

Safe Harbor Plan Status – Safe Harbor Plans that elect to make Safe Harbor Non-elective contributions are no longer required to provide an annual notice prior to the plan year.  Plans that provide a Safe Harbor Matching contribution, however, are still required to provide a notice to participants 30 days prior to the start of the plan year.  One item to consider for those sponsoring a plan with a Safe Harbor Non-elective contribution; suspending the contribution mid-year requires proof that the company is operating at an economic loss unless a formal notice stating that the company can suspend the contribution at any time was provided to plan participants.  In addition, the SECURE Act allows plans that are not currently a Safe Harbor plan, the ability to elect to become a Safe Harbor during or immediately following the plan year.  If a plan determines they will fail required non-discrimination testing, it can elect to become a Safe Harbor plan and would then be required to provide a 3% contribution to all eligible participants for that plan year.  If this election is made after December 1st; however, the contribution amount increases to 4%.

Automatic Enrollment QACA Safe Harbor – Plans that utilize the automatic enrollment QACA Safe Harbor provisions can increase the automatic enrollment percentage to a maximum of 15% (previously 10%).

Required Minimum Distribution Age increased – The participant age to begin required minimum distributions increased from 70 ½ to 72, effective January 1, 2020. This only applies to individuals who attain age 70 ½ after December 31, 2019.  Those already required to take minimum distributions will not be impacted.

Penalty Free withdrawals for individuals due to birth or adoption – Distributions taken prior to age 59 ½ are normally subject to a 10% early withdrawal fee.  This fee is waived for distributions up to $5,000 for new parents, if made during the first year beginning on the date the child was born, or in the case of adoption, when the legal adoption is finalized.  These distributions can also be repaid back into the plan.  We are expecting additional guidance as to how repayments will be facilitated and tracked.

Repeal of maximum age for traditional IRA contributions – effective January 1, 2020, the restriction to make deposits to an IRA after age 70 ½ is removed.

Generally, the deadline for adopting any SECURE Act plan amendments is the last day of the first plan year beginning on or after January 1, 2022.  Document providers are currently in the process of obtaining approval from the IRS for amendment language.  For any plans who have adopted plan documents provided by MCM, we will provide you with the amendment as soon as it is available.

If you have any questions or would like additional information, please contact Becky Barnett via email at or via telephone at 502.882.4320.