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On December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act, 2020.1  This law includes Division O, Setting Every Community Up for Retirement Enhancement (also known as the “SECURE Act”). Several provisions of the Act are described below.


Following the death of a defined contribution plan participant or an IRA owner, account assets generally must now be fully distributed by the end of the 10th year following death.2 Exceptions exist for eligible designated beneficiaries who are children (but not grandchildren) of the participant under the age of majority,3 spouses, disabled or chronically ill beneficiaries, and certain designated beneficiaries who are not more than 10 years younger than the account owner.4 Effective for account owners who die after December 31, 2019,5 with a delayed effective date for governmental plans and collectively bargained plans.

The required beginning date age for qualified retirement plans and IRAs generally increased from age 70½ to age 72.6 Effective for individuals who turn age 70½ after December 31, 2019.

The age 70½ cap on making IRA contributions is lifted.7 Effective for contributions for taxable years beginning after December 31, 2019.

Pension plans and governmental § 457(b) plans may permit in-service distributions at age 59½.8 Effective for years beginning after December 31, 2019.

Defined contribution plans and IRAs may permit a withdrawal within a year after the birth or adoption of a child of up to $5,000.9 These qualified birth or adoption distributions are not subject to the Code § 72(t) 10% early distribution penalty tax and may later be recontributed. Effective for distributions after December 31, 2019.

Plans may permit participants affected by certain disasters declared by FEMA to withdraw or borrow up to $100,000.10 Qualified disaster distributions are not subject to the Code § 72(t) 10% early distribution penalty tax and may later be recontributed.11

The § 401(k) safe harbor plan QACA12 maximum automatic elective deferral percentage is increased from 10% to 15%.13 This does not affect non-QACA plans that have automatic elective deferrals. Effective for plan years beginning after December 31, 2019.

The Act eliminates the annual notice required for safe harbor § 401(k) plans that satisfy the safe harbor with a minimum 3% nonelective employer contribution. 14  Effective for plan years beginning after December 31, 2019.

Employers may now elect safe harbor § 401(k) plan status for a plan year up to 30 days before the close of that year (November 30 for calendar year plans), or by the end of the following year. If the former, the plan must have a minimum 3% nonelective employer contribution, and if the latter, it must have a 4% nonelective employer contribution.15 Effective for plan years beginning after December 31, 2019.

Employers may now establish a qualified plan after the end of the first year for which it is adopted and as late as the employer’s tax return filing deadline (including extensions).16 Effective for plans adopted for taxable years beginning after December 31, 2019.

Credit cards cannot be used to issue a plan loan. 17 Effective after December 20, 2019.

Section 401(k) plans must allow otherwise eligible employees who have worked 500 hours in each of 3 consecutive 12-month periods to elect to defer their wages to the plan.18 Matching and nonelective contributions aren’t required, and these employees may be excluded from nondiscrimination testing. This new participation rule for part-time employees is in addition to the current minimum participation rule, 1,000 hours of service in 12 months.19 Effective for plan years beginning after December 31, 2020.20

The Act includes several provisions aimed at encouraging investment options that promise lifetime income. For example, the Act provides increased protections from ERISA fiduciary liability for selection of certain insurers to provide lifetime income investments per certain standards;21 and the Act permits rollovers from defined contribution plans that terminate a lifetime income investment.22 Effective for plan years beginning after December 31, 2019.

ERISA defined contribution plans will have to provide participants with an annual disclosure of the lifetime income their account could produce. The disclosure is required regardless of whether the plan offers a lifetime income investment.23 Effective 12 months after the DOL issues models, rules and assumptions to be used in the disclosure.

The Act increases penalties for certain late-filed ERISA plan returns.24 Effective for returns due after December 31, 2019.

Defined contribution plans with the same plan year, trustee, administrator, investments, and named fiduciary may file a combined Form 5500.25 Returns for plan years beginning after December 31, 2021.

The Act gives employers until their first plan year beginning on or after January 1, 2022 to amend plans to comply with the Act. Governmental and collectively bargained plans have until plan years beginning on or after January 1, 2024.26

A “pooled plan provider” may establish a “pooled employer plan,” a type of multiple employer retirement plan in which unrelated employers27 may now participate.28 Tax disqualification impacting just one employer (for example, a coverage29 or nondiscrimination30 testing failure) won’t impact the other employers participating in the plan, so long as the pooled plan provider takes corrective action.31 A pooled plan provider selects investments and is a named fiduciary and ERISA plan administrator, and participating employers have the duty to select and monitor the provider.32 Effective for plan years beginning after 2020.

The Act increases certain tax credits for small employers that establish retirement plans.33

The Act also contained provisions applicable to a limited number of retirement plans. For example, the Act reduced PBGC premiums for Cooperative and Small Employer Charity (“CSEC”) pension plans,34 clarifies those eligible to participate in a church plan,35 eases the distribution rules for terminating Code § 403(b) plans,36 eases the nondiscrimination testing rules for certain closed defined benefit plans,37 and eases the funding requirements for pension plans sponsored by certain community newspapers.38 And in the category of applicability to a limited number of individuals, graduate students may contribute to an IRA with respect to certain taxable stipends and fellowship payments,39 and the definition of compensation is expanded to include “difficulty of care” payments to foster care providers.40


The Cadillac Tax is repealed.41

The Affordable Care Act’s taxes on medical devices 42 and the tax on health insurance providers (levied according to market share) 43 were repealed.

The Patient-Centered Outcomes Research Institute (“PCORI”) fee on health insurance issuers and sponsors of self-funded plans was scheduled to expire. The Act reinstates PCORI fees for another 10 years.44

From all of us here at MMPL, your employee benefits law firm.

Not intended as legal advice.



  1. Pub. L. No. 116-94, 133 Stat. 2,534 (2019). In citations, Division O of this law is hereinafter cited as the “SECURE Act.”
  2. SECURE Act § 401. This provision applies to § 403(b) and § 457(b) plans.
  3. Under Treasury Regulations for required minimum distributions from defined benefit plans, the age of majority can extend through age 25 if the child hasn’t completed “a specified course of education.” Treas. Reg. § 1.401(a)(9)-6, Q&A 15.
  4. There is also no change to the IRS’s recently proposed regulations, which in certain circumstances, permit reduced required minimum distributions based on longer life expectancies (for example, for beneficiaries who are spouses).
  5. However, if a participant died before 2020 and her designated beneficiary dies after 2019, the participant’s account must be distributed within 10 years of the designated beneficiary’s death. SECURE Act § 401(b)(5).
  6. Id. § 114. This provision also applies to § 457(b) and § 403(b) plans.
  7. Id. § 107. However, the exclusion from income of qualified charitable distributions from IRAs are now impacted by deductible IRA contributions after age 70½.
  8. Pub. L. No. 116-94, Division M § 104. Previously, this was age 62 for pension plans (Code § 401(a)(36)) and age 70½ for governmental § 457(b) plans (Code § 457(d)(1)(A)).
  9. SECURE Act § 113. This provision also applies to § 403(b) and governmental § 457(b) defined contribution plans. The Act does not require a plan to permit a qualified birth or adoption distribution.
  10. Pub. L. No. 116-94, Division Q §§ 201-202. The Act does not require a plan to permit a qualified disaster distribution or loan.
  11. Restrictions apply to the ability to recontribute distributions. Qualified disaster distributions may be taken into income over three taxable years of the taxpayer. Id. § 202(a)(5).
  12. The QACA elective deferral percentage now begins at 3% for the first year and caps out at 10%.
  13. SECURE Act § 102.
  14. Id. § 103. The notice requirement remains for § 401(k) plans that satisfy the safe harbor by making a matching contribution. (A nonelective employer contribution is an employer contribution that is made regardless of whether an employee elects to defer wages to the plan.)
  15. Id. § 103.
  16. Id. § 201. However, per the May 2019 Committee Report on an earlier bill, H.R. 1994, this would not override existing requirements that certain plan provisions be in effect during a plan year, such as Treasury regulations on elective deferrals to a § 401(k) plan. That is, it is unlikely that a § 401(k) plan can take advantage of § 201 of the SECURE Act.
  17. Id. § 108.
  18. Id. § 112. Collectively bargained employees are excluded from § 112. Plans may still exclude these employees based on factors other than service—for example, geographic location—so long as the plan meets other legal requirements (e.g., minimum coverage and nondiscrimination).
  19. And once the employee meets the regular Code § 410(a) 1,000-hour participation rule, the new 500-hour rule no longer applies. Code § 410(a).
  20. Twelve-month periods beginning before January 1, 2021 are not taken into account in determining whether the employee has worked three 12-month periods, and so January 1, 2024 would be the earliest implementation date. SECURE Act § 112(b). Collectively bargained plans are exempt from § 112.
  21. Id. § 204.
  22. Id. § 109.
  23. Id.  § 203. In certain circumstances the plan’s own annuity may be used as the basis for disclosure. The Act also provides a limited exemption from ERISA fiduciary liability for the disclosure.
  24. Id. § 403. Penalties for failure to file a Form 5500 are increasing from $25 per day ($15,000 maximum) to $250 per day ($150,000 maximum).
  25. Id. § 202.
  26. Id. § 601. Plans must be operated in compliance with the Act per applicable effective dates.
  27. The Act goes further than recent DOL regulations, which expanded the definition of “employer” under ERISA. Those regulations were issued pursuant to President Trump’s 2018 Executive Order.
  28. Id. § 101.
  29. Code § 410(b).
  30. E.g., Code § 401(a)(4) or (k)(3).
  31. The Treasury Department had proposed similar rules in June 2019, issued pursuant to President Trump’s 2018 Executive Order.
  32. SECURE Act § 101. The pooled plan provider must also register with the government and maintain a $1 million ERISA bond (unless an exemption applies).
  33. Id. §§ 104, 105, and 45T.
  34. Id. § 206.
  35. Id. § 111.
  36. Id. § 110.
  37. Id. § 205. The Act also eases nondiscrimination testing where an employer makes greater contributions to another qualified plan for the employees who participate in the closed plan. The IRS previously granted similar relief, last renewed in IRS Notice 2019-49.
  38. Id. § 115. The newspaper must serve a metropolitan area of at least 100,000 people and have been controlled by one family for at least 30 years, and accrued benefits cannot have increased after 2017.
  39. Id. § 106.
  40. Id. § 116.
  41. Pub. L. No. 116-94, Division N § 503.
  42. Id. § 501. The tax been suspended since 2016.
  43. Id.  § 502. The HIT tax was suspended for 2017 and 2019 and applies for 2018 and 2020. Full repeal begins after 2020.
  44. Id. § 104.