As we further assess the SECURE Act, we are hopeful that there may be some creative planning solutions for those without an eligible designated beneficiary. The promulgation of the regulations by the IRS in the near future should help shed some light on the available options.
WHITE PLAINS, N.Y. (PRWEB) February 21, 2020
The “Setting Every Community up for Retirement Enhancement” (SECURE) Act of 2019, which became effective on January 1, 2020, made a number of significant changes relevant to IRAs, 401(k)s and other qualified retirement benefits. Westchester County elder law attorney Anthony J. Enea, member at Enea, Scanlan & Sirignano, LLP in White Plains and Somers, N.Y., recently shed light on the changes – including one provision, in particular, that is causing great angst for those without an eligible designated beneficiary.
The most significant and positive changes in the SECURE Act are as follows:
- The age to commence required minimum distributions from one’s IRA, 401(k), etc is raised from age 70 ½ to age 72 for those who reached age 70 ½ after December 31, 2019.
- Contributions can continue to be made to a traditional IRA after age 70 ½ so long as the individual is still working. This allows the rules for an IRA to be more closely aligned with 401(k) plans and Roth IRAs.
- Prior to the enactment of the SECURE Act, if one worked less than 1,000 hours per year, they were ineligible to participate in the company’s 401(k) plan. The new law requires an employer to offer plan participation to any employee who worked more than 1,000 hours in one year or 500 hours over two consecutive years.
- Small business owners can now receive a tax credit of up to $5,000 for starting a retirement plan.
- Small business owners will be able to join together to offer defined contribution retirement plans. The new law makes the use of open multiple employer plans (MEPs) easier to utilize. An open MEP can help deliver a low cost retirement plan for small business owners.
- An individual can now take a qualified birth or adoption distribution of an amount up to $5,000 from a qualified plan, 401(k) or IRA without any withdrawal penalty.
- A 529 plan can be used to pay down student loan debt up to $10,000 during the lifetime of a student and pay for certain apprenticeship programs.
“The SECURE Act, which will cost the federal government billions in tax revenue, is being paid for over a 10-year period with a new mandate,” said Anthony Enea, who has spent 35 years protecting the rights of seniors, the disabled and their families. “Distributions from IRAs, 401(k)s, and other qualified plans to anyone other than an eligible designated beneficiary must now be made within 10 years from the death of the plan participant. Eligible designated beneficiaries include a spouse, minor child, disabled individual, chronically ill person or an individual not more than 10 years younger than the plan participant.”
If the beneficiary doesn’t fit one of these categories, he or she will no longer be able to stretch the distributions from an inherited IRA or 401(k) during their lifetime. Instead, they must draw down the entire qualified plan within 10 years of the plan participant’s death or make the distribution in one lump sum. “Depending on the size of the IRA, this means potentially incurring significant income tax liability,” noted Enea.
This one change is estimated to raise $15.7 billion of tax revenue over 10 years, compared to a cost of $16.3 billion for all of the changes implemented by the SECURE Act.
“As we further assess the SECURE Act, we are hopeful that there may be some creative planning solutions for those without an eligible designated beneficiary,” said Enea. “The promulgation of the regulations by the IRS in the near future should help shed some light on the available options.”
A strong leader in Westchester’s legal community, Anthony J. Enea is chair of the New York State Bar Association’s Senior Lawyers Section and president of the Westchester County Bar Foundation. He was named Westchester County’s Leading Elder Care Attorney at the Above the Bar Awards and Best Lawyers’ 2019 Trusts & Estates “Lawyer of the Year” in White Plains. A past chair of the New York State Bar Association’s Elder Law Section, Enea’s practice areas include elder law; Medicaid asset protection trusts; Medicaid applications (home care and nursing home); special needs planning; guardianships (Article 81 and 17-A); and wills, trusts and estates.
Enea, Scanlan & Sirignano, LLP is located at 245 Main Street in White Plains, N.Y. with additional offices in Somers, N.Y. Elder law attorney Anthony J. Enea can be reached at 914-948-1500 or firstname.lastname@example.org. For the latest news, visit Enea, Scanlan & Sirignano online at http://www.esslawfirm.com.
About Enea, Scanlan & Sirignano, LLP
Enea, Scanlan & Sirignano, LLP is an AV preeminent rated elder law firm with offices in White Plains and Somers, N.Y. The practice concentrates on Elder Law; Medicaid Planning; Nursing Home and Home Care Applications; Wills, Trusts and Estates; Guardianships; Estate Litigation; Supplemental Needs Trusts; and Special Needs Planning. Enea, Scanlan & Sirignano, LLP serves Westchester, Rockland, Putnam, the Bronx, Manhattan, Long Island and Queens and is committed to providing the highest quality legal services to seniors, the disabled and their families. Visit the firm online at http://www.esslawfirm.com.