SECURE Act Passage Heightens Retirement Security

A sweeping piece of legislation affecting how individuals save and invest for their retirement, known as the “SECURE Act,” has recently been signed into law. Our investment professionals talk about the implications of the Act, and how it can enhance the retirement security of millions of Americans. And, they outline some changes in the legislation that also affect college savings plans.

SECURE Act: a Few Highlights

  • Raises the automatic-enrollment safe harbor escalation cap to 15% of pay from 10% of pay.
  • Creates “open MEPs” or open multiple employer plans (also referred to as PEPs, or pooled employer plans), allowing two or more unrelated employers to join a pooled employer retirement plan.
  • Creates new 401(k) plan coverage and access for small employers.
  • Increases the required minimum age to begin taking distributions from a retirement plan to 72 from 70½.
  • Allows employers to make their plan available to part-time workers, while still excluding them from the discrimination testing rules (and the employer match).
  • Changes 529 college savings plan provisions to include the expansion of qualified expenses to apprenticeship programs and more flexibility in loan repayments.

The long-awaited “Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019” represents the most significant legislative change affecting tax-qualified retirement savings since the Pension Protection Act (PPA) of 2006. An initial version of the SECURE Act passed the Senate Finance Committee in the fall of 2016, as the Retirement Enhancement and Savings Act (RESA). As we consider the individual impacts and the implications of the final SECURE Act, which was signed into law just over three years later, it’s worth keeping in mind our high-level observation—the SECURE Act will improve the retirement savings system for many, many Americans, in multiple ways.