President Trump signed the Setting

Every Community Up for Retirement Enhancement Act ( SECURE Act ) into law . 1 The SECURE Act is the most significant piece of retirement legislation since 2006 . The SECURE Act has altered estate and tax planning by requiring all IRAs inherited by non-spouses to be paid out within 10 years of the original IRA plan holder ’ s death , rather than allowing distributions over the course of the beneficiary ’ s lifetime . 2

Just three years later , on December 29 , 2022 , President Biden signed “ SECURE 2.0 ,” into law , which went into effect on January 1 , 2023 . 3 SECURE 2.0 expands the SECURE Act and includes 92 provisions that focus on increasing retirement savings , preserving income , and clarifying applicable retirement plan rules . 4

SECURE 2.0 increases the required minimum distribution ( RMD ) starting age for IRAs and workplace retirement plans from 72 to 73 effective January 1 , 2023 . 5 The RMD age increases again to age 75 on January 1 , 2033 . 6 Further , the excise tax for failure to take a RMD was decreased from 50 % of the required withdrawal

amount to 25 %, and down to 10 % if corrected within two years . 7

The age increase allows for deferral of income taxes from

RMDs . However , delayed distributions will result in higher tax liability later . 8 Clients may also leave their RMDs to a beneficiary and direct distributions of the

RMDs upon “ the required age ” or other boilerplate language .

Therefore , clients may need to clarify the timing of RMD distributions to beneficiaries in accordance with the age increase .

Individuals turning 73 in 2023 must take their first distribution by

April 1 , 2024 . 9 Subsequent RMDs are due annually on December 31 thereafter . 10 To avoid including the first two RMDs as income in a single tax year , the first RMD should be taken by December 31 of the year the individual turns 73 . 11

Some additional SECURE 2.0 provisions worth noting : First ,

Section 126 eliminates concerns of overfunding 529 plans by allowing the rollover of unused

529 funds to Roth IRAs tax free and without penalty , under certain conditions . A maximum of $ 35,000 can be rolled over during the beneficiary ’ s lifetime ; these rollovers

are subject to the Roth IRA annual contribution limits of $ 6,000 , and the 529 account must have been open for more than 15 years . 12

Next , Section 202 increases the amount that can be moved to a qualified longevity annuity contract

( QLAC ). QLACs are deferred annuities that limit an individual ’ s risk of outliving their savings .

While more funds can be allocated , upfront costs may increase because the prior cap on QLAC premiums was eliminated .

Finally , Section 303 creates a national searchable online database that allows individuals to “ look up ” their retirement plans , improving accessibility nationwide . 13

SECURE 2.0 increases access to retirement planning and offers new and different options for clients .

Clients should be encouraged to review their retirement planning to ensure that their plans reflect their wishes and are structured in both a tax and administratively efficient manner . n

1

Pub . L . No . 116-94 ( Dec . 20 ,

2019 ).

2

Luis A . Silva , LL . M ., SECURE

Act and Estate Planning : Ensuring Your

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