NASE News

Expanded Opportunities for Retirement Savings

Prior to Congress adjourning for 2019, the House and Senate passed a government spending bill that included the SECURE Act, also known as the “Setting Every Community Up for Retirement Enhancement Act of 2019,”which has been supported by the NASE.

“With retirement security continuing to be a looming crisis for American families, including family owned small businesses, the bipartisan measure approved by Congress and headed to President Trump for signature into law will streamline and expand retirement savings opportunities for all Americans,” said Hall. “Small businesses often carry debt and stretched bottom lines to keep their operations afloat, but this major change to our retirement system offers them options to save more for their retirement at every income level and employment structure.”

The Trump Administration’s 2018 executive order opened multiple employer plans (MEPs) to small businesses and “expand(ed) access to workplace retirement savings plans for American workers.” The executive order would no longer require small businesses to have formal business ties and instead would allow small, independent employers to join together through MEPs to offer workers access to 401k retirement savings plans.

Key provisions of the bill include:

Annuities in 401(k) plans
The SECURE Act opens the gates for more employers to offer annuities as investment options within 401(k) plans. Currently, employers hold the fiduciary responsibility to ensure these products are appropriate for employees’ portfolios, but under the new rules, the onus falls on insurance companies, which sell annuities, to offer proper investment choices.

No more stretch IRAs
The SECURE Act requires beneficiaries withdraw all assets of an inherited account within 10 years. There are no required minimum distributions within those 10 years, but the entire balance must be distributed after the 10th year.

Multiple employer plans for small businesses
Under the SECURE Act, employers no longer have to share “a common characteristic,” such as being in the same industry. Employer-sponsored retirement plans would also be available to long-term part-time workers, with a lower minimum number of hours worked. Previously, employers did not have to invite workers who clock less than 1,000 hours every year to participate in a retirement plan, but the SECURE Act drops the threshold for eligibility down to either one full year with 1,000 hours worked or three consecutive years of at least 500 hours.

Encouraging auto-enrollment
Under the SECURE Act, small employers will get a tax credit to offset the costs of starting a 401(k) plan or SIMPLE IRA plan with auto-enrollment, on top of the start-up credit they already receive.