b'Member Information What Do InvestorsNeed to Know About the Secure Act?continuedof IRA but rather a strategy to stretch the periodto long-term part-time workers . The SECUREdefined contribution plan or IRA without having of tax-deferred earnings of assets within an IRAAct changes the minimum number of hoursto pay an early withdrawal penalty (typically beyond the lifetime of the person who set upan individual has to work to be eligible for an10%) . For married couples, each spouse can the IRA, typically over multiple generations . Inemployer-sponsored retirement plan . Prior totake $5,000 from their individual accounts .other words, stretching the IRA would allowthe new law, employers were not required toThe qualified withdrawals must be taken within you to pass your IRA down multiple generationsoffer workers who work less than 1,000 hoursone year from the date a child is born or the to your grandchildren .every year (roughly 19 hours a week over 52date the adoption is finalized . Savers have the The SECURE Act now requires that non-spousalweeks) to participate in their sponsored plan .option to recontribute these funds back into beneficiaries such as a son or daughter drawHowever, the SECURE Act lowers this thresholdtheir retirement account later, and such contri-down the assets in an inherited IRA within afor eligibility to either one full year with 1,000butions will be treated as a rollover and will not decade of inheritance, subject to a few excep- hours worked or three consecutive years ofbe included in taxable income .tions . There are no RMDs within the 10-yearat least 500 hours (roughly 9 .5 hours a week period, but the change is likely to introduce taxover 52 weeks) . Part-time workers must be 21 burdens for those who inherit an IRA while stillyears old by end of the three-year period to be8.Qualified distributions in their earning years . The new law also applieseligible for the plan . from 529 plans forto funds inherited by non-spousal beneficia- student loan debtries from a 401(k) account and other defined6. Increase in the maximum The SECURE Act expands the definition of contributions plans .contribution rate for a tax-free or qualified distribution from a Exceptions to the 10-year requirement includeparticipants in auto-529 savings plan to include repayment of up assets left to a surviving spouse, a minor child, ato $10,000 in qualified student loans and disabled or chronically ill individual and benefi- enrollment 401(k) plansexpenses for certain apprenticeship programs . ciaries who are less than 10 years younger thanfrom 10% to 15% This means individuals can now take penalty the decedent (such as a sibling or friend) . If theThe new law raises the 10% maximum free withdrawals of up to $10,000 for these beneficiary is a minor, the exception only ap- on the contribution rate that employers can setexpenses . It is important to note that the plies until the child reaches the age of majority,for employees participating in auto-enrollment$10,000 limit is a lifetimenot annuallimit, at which time the 10-year rule would apply . 401(k) plans, which are also called qualifiedand that the interest on student loan debt paid Individuals who inherited an IRA from an originalautomatic contribution arrangement (QACA)down by 529 plan funds cannot be deducted IRA owner who passed away prior to January 1,retirement plans . In a QACA, the employer isfrom the individuals income taxes . 2020, are not subject to the new 10-year restric- responsible for setting a default contributionAnother change that impacts students relates to tion . As such, these individuals may continuerate for employees who participate in thehow grants, fellowship funds, stipends or other with their planned distribution schedule . plan, but employees may elect to change themoney paid to fund graduate or post-doctoral contribution rate as they see fit . If the employeestudy or research is treated for purposes of 4. Removal of age limits for chooses the default option, the contributionscontributing to retirement plans . The SECURE contributions to traditional IRAs automatically increase each year the employeeAct treats these funds as compensation so that is in the plan . students may fund an IRA to begin or continue Previously, an individual was only able toPreviously, an employer was unable to set asaving for retirement .contribute to a traditional IRA up to the age ofQACA contribution rate exceeding 10% forIf you have questions about RMD updates or any 70 . Under the new law, this age limit goesany year . The SECURE Act raises the 10% capof the other changes discussed in this article, away (Roth plans never had age limits forto 15%, except in the first year an employeespeak to your financial or tax professional about contributions) . Any individual who still hasparticipates in the plan . This delay is intendedhow the SECURE Act changes may impact you earned income (e .g ., job compensation) in theto ease savers into contributing higher amountsand your financial situation .year 2020 and beyond may contribute to ato their accounts .traditional IRA (or a spousal IRA) . In fact, the SECURE Act allows anyone who is working and has earned income to contribute to a traditional7. Qualified distributions from retire-IRA for as long as desired, even if you have notment plans for birth or adoptioncontributed to an IRA in the past . The SECURE Act provides savers with an option 5.Long-term part-time worker to take an early distribution without penalty from a retirement account when they welcome access to employer-sponsoreda new child into their lives . Upon the birth or retirement plans adoption of a new child, the new law permitsThe Motley Fool Web site:Starting in 2021, the new law will makeindividuals to take a qualified birth or adoptionhttps://www .fool .com/investing/2020/02/10/what-do-employer-sponsored retirement plans availabledistribution of up to $5,000 from an eligibleinvestors-need-to-know-about-the-secure-ac .aspxS18 www.wpma.com / Summer 2020'