Emily Clarke

What to Know About the SECURE Act

In 2019, President Trump signed into law the Setting Every Community Up For Retirement Enhancement (SECURE) Act. This law aims to make it more appealing for small business owners to offer retirement benefit options to workers.

Traditionally, small businesses have been less likely to provide these types of benefits because they can be costly and complex. The SECURE Act is meant to remove some of the barriers that have held small businesses back from offering these benefits while also providing workers with more opportunities to get ahead.

How the SECURE Act Affects 401(k) Benefits

Among other things, the SECURE Act broadens the definition of who is eligible to access 401(k) benefits. Previously, employers had a lot more freedom to exclude part-time workers from 401(k) programs, including the ability to receive matched donations.

With the SECURE Act in place, 2022 tax changes are affected to allow for workers over 21 who have worked at least three consecutive years for the same employer to access 401(k) benefits. The caveat here is that the worker must have worked at least 500 hours for the employer each year.

Birth and Adoption Withdrawals

Another change made by the SECURE Act is found in withdrawals from retirement accounts. Although this change was implemented in 2021, it will need to be factored in with 2022 tax changes as well.

Essentially, workers can now withdraw funds from retirement accounts to use the money for expenses related to birth or adoption. Because both of these events can be pricey, this means that new parents can expect to keep more cash in their pockets without worrying about penalties for withdrawing from retirement accounts.

IRA Contribution Changes

Individual retirement accounts (IRAs) are common savings vehicles that workers use to plan for retirement. Traditionally, there have been strict limits on contributions, and some of these limitations involve age.

Under the SECURE Act, workers who are older than 71 and a half can contribute to an IRA; however, when taking advantage of this change, it should be noted that charitable distributions are disallowed during the contribution period.

Author Resource:-

Emily Clarke writes about employee management, benefits and payroll service. You can find her thoughts at employee management blog.