Key Financial Planning Impacts of SECURE Act


Written by Curt Bach

December 26, 2019

The SECURE Act was recently signed into law by President Trump. The legislation primarily impacts distributions from qualified retirement plans and Individual Retirement Accounts (IRA) but there are other provisions that affect contributions and kiddie tax. Most provisions in the legislation are effective for tax years beginning after December 31, 2019.

Distributions from IRAs Qualified Retirement Plans

Effective for plan participants and IRA owners who pass away after 2019:

  • A requirement for a non-spouse beneficiary to withdraw the IRA funds over a 10 year period – regardless of whether the plan participant/IRA owner had started distributions due to their Required Minimum Distribution (RMD). This is significant because typically if the owner of the IRA/Qualified plan was over age 70 ½, the distributions could be taken over the beneficiaries’ life expectancy and allow for a much greater wealth build-up. This effectively eliminates the Stretch IRA – when you put younger beneficiaries on a plan to reduce the amount of withdrawal. There are some limited exceptions to these rules. Those of you that have your spouse as beneficiary of your retirement plan may want to reconsider the impact this rule will have on your nonspouse beneficiaries.
  • The age 70 ½ year requirement to take minimum distributions from retirement plans and IRAs has been moved to age 72.
  • There is a new exception to the early distribution penalty in the case of the birth or adoption of a child.


There are some minor changes to contributions in order to help people save for retirement:

  • Changes in the automatic enrollment for safe harbor contributions from 10 percent to 15 percent.
  • Employers can make plan document changes until the 30th date of the last day of the plan year.
  • 401(k) plans must make an offer to those employees who work between 500 and 1000 hours per year to contribute through salary deferrals (not get contributions) using either a one year of service requirement or three consecutive years of service where the employee works at least 500 hours.

Kiddie Tax

The Tax Cuts and Jobs Act of 2017 changed the way Kiddie tax (the tax on children under age 23 who have unearned income) was calculated. In years prior to 2018, kiddie tax was calculated based upon the tax rate of the parents. The Tax Cuts and Jobs Act changed the kiddie tax to be at the tax rates of trusts. Trust tax rates are highly compressed, with the top tax rate at only $13,000 of income.

Under the SECURE Act, Kiddie tax is reverting to being taxed at the parent’s rate starting after 2019. There is also the ability to amend the 2018 return to apply the new rules to 2018 and the taxpayer/child can choose to apply the new rules to 2019 as well.

Please contact us for further information or ask about the SECURE Act.

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Curt Bach
I joined Hawkins Ash CPAs in August 2010, and am currently a manager in the firm’s Medford office. I provide a variety of tax services, including trust and estate tax preparation and planning. I have more than nine years of experience providing audit and tax services to nonprofit organizations, governmental entities and small businesses. I am a member of our firm’s tax committee and not-for-profit service group.

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