December 27th, 2017 was the date the Tax Cuts and Jobs Act (TCJA) was signed in to law. Typically major tax reform is only an every ~30 years affair (with the prior set being in the 1980’s), with some non-trivial bumps every ~10 years. This week, only 2 years later, another round of tax changes were signed into law on December 20th, 2019. This one is called the SECURE Act, which is the “Setting Every Community Up for Retirement Enhancement” Act.

This one doesn’t have as many highly visible effects on every tax payer as the TCJA did, but it’s still got some non-trivial effects for some taxpayers. Some of these are specifically due to increased expected life spans – if we are living longer, we need our money to last longer.

Some of those retirement related points were:

• Incentivizing employers who create a 401k or SIMPLE IRA with automatic enrollment for eligible employees.
  • If employers create a new retirement plan, then many of those used to have to have been created (“adopted”) by the end of the calendar year. Now there will be an option for late opening. This has previously been available for one type of business retirement plan but not others, so often young businesses were getting that one type of plan for at least their first year.
• Increasing advantages for employers to offer annuities in their workplace savings plans (besides 403b’s, many of which were already full of such options).
• Moving the required minimum distributions starting age from 70.5 to 72.
  • Related, traditional IRA contributions used to have to stop at age 70.5, now contributions can continue as long as there is eligible earned income.
• Stretch IRAs will no longer be available to non-spouses, all the money will have to be paid out within 10 years of the death of the original account owner.
• Some income that was previously treated as “unearned” income for the purposes of making retirement contributions, will now be reclassified. This is good news for those in the home healthcare field, as well as graduate and postdoctoral students who are receiving non-tuition payments and stipends!
• For those who have been long-term part-time workers, they may have not had access to their employer’s retirement plan. Now there are provisions to add options for these workers.
• Some birth and adoption expenses can be paid for by withdrawing money from a retirement account.

Then there were other items that, despite the Act’s name, weren’t retirement related.

• Changing the 529 usage rules, they can now be used to pay off up to $10k of qualified student loans. There are lifetime limits here, but siblings can also be considered. Also new are ability to pay for homeschooling expenses or apprenticeships. Beware, your state may not yet be “compliant” with the TCJA 529 changes, let alone whether they will adopt these new plans, so you may still have a state tax bill.
• Potentially affecting all taxpayers, the failure to file penalty has been increased. This means the IRS will be waving a bigger stick at you if you don’t get your tax return submitted on time.
• Remember that TCJA tax reform? One component is getting un-done. The “Kiddie Tax” tax rate will go from the very high trust tax rate, back down to the parents’ marginal tax rate.

And a third type of item were in there, very short term extensions of older tax laws, including the topics of:

• medical expenses deductibility
• tuition deductibility
• economic growth incentives
• green incentives
• disaster relief

In short, people would benefit from figuring out what portions of the new laws impact them. Some may even be eligible for late-breaking financial/tax planning yet in 2019!