A new retirement savings law, the Setting Every Community Up for Retirement Enhancement Act (the SECURE Act), took effect January 1, 2020, and includes changes that may impact questions on securities exams such as the Series 6, 7, 9, 24, 65, 66, 52, and 99. The Knopman Marks exam preparation bank has been updated to include questions about this new law.

The SECURE Act expands retirement savings options and increases access to workplace plans. It includes policy changes that will impact individual retirement accounts (IRAs), defined contribution (DC) plans, defined benefit (DB) plans, and 529 plans.

What You Need to Know About the SECURE Act for Your Securities Exams

Below are SECURE Act highlights you should know when preparing for your exams:

  • Retirement plan RMDs(required minimum distributions) now start no later than at age 72 with a deadline of April 1 the following year (previously 70.5).
  • Contributions for traditional IRAs are permitted after age 72 (previously, contributions were prohibited after age 70.5).
  • The beneficiary for most inherited IRAs must fully distribute the funds within 10 years of the original owner’s death. Exceptions to the 10-year distribution requirement, and who may stretch the distributions, include:
    • Surviving spouses (who can choose to stretch the IRA or assume it as their own)
    • A minor child of the deceased IRA owner (the 10-year window begins when the child reaches the age of majority)
    • A beneficiary who is no more than 10 years younger than the deceased account owner (e.g., the original owner died at age 75 and left the IRA to her friend who was 68 years old)
    • A disabled or chronically ill individual (as defined by the law)
  •  Anyone who inherited an IRA from an original account owner who passed away prior to January 1, 2020, can continue their current distribution schedule.
  • ERISA-qualified retirement plans must be made available to qualifying part-time employees: this is defined as employees who are at least 21 years old and have worked at least 500 hours per year for each of the past three years. (This is in addition to full-time employees who work at least 1,000 hours in one year.) Note, however, that eligibility for 403(b) and 457(b) plans continues to require full-time employment, or at least 1,000 hours of work per year.
  • A tax-free or qualified distribution from a 529 savings plan includes repayment of up to $10,000 in qualified student loans and expenses for certain apprenticeship programs.
  • For qualified deferred variable and fixed annuities, the law increases the age at which an individual must begin taking required minimum distributions (RMDs) to 72 with a deadline of April 1 the following year (previously 70.5).
  • The law offers small businesses tax incentives to set up automatic enrollment in retirement plans for their workers and to allow them to join multiple employer plans.

Contribution Limits

For 2020, current retirement plan figures are adjusted as follows. The 2019 figures are included as a reference. In general, these specific figures are lightly tested, as they change year by year, but it is useful to be aware of contribution limits.

2019 Limits2020 Limits
IRAs
(Trad. & Roth)
$6,000
+$1,000 if > 50 years old
Roth. IRA Contribution Phaseout:
Married couples: $193,000 to $203,000
For singles and heads of household: $122,000 to $137,000
$6,000
+$1,000 if > 50 years old
Roth. IRA Contribution Phaseout:
Married couples: $196,000 to $206,000
For singles and heads of household: $124,000 to $139,000
401(k)
403(b)
457(b)
Maximum: $56,000
Elective deferral employee: $19,000
Catch-up if over 50: $6,000
Maximum: $57,000
Elective deferral employee: $19,500
Catch-up if over 50: $6,500
SEP-IRA$56,000$57,000
SIMPLE$13,000
Catch-up if over 50: $3,000
$13,500
Catch-up if over 50: $3,000
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Written by Suzanne Riss
Suzanne Riss is an author and a Digital Marketing Strategist consultant at Knopman Marks Financial Training. Previously the award-winning Editor-in-Chief of Working Mother magazine, she is a fierce advocate for issues facing working moms and an authority on work/life trends. Her expertise has been tapped in interviews by The New York Times, The Wall Street Journal, Good Morning America, the Today Show, and CNN. Suzanne is currently completing her third book, A User’s Guide to the Future of Work.