In the News

Evelyn Haralampu on the SECURE Act, H.R. 1994

June 5, 2019


Working its way through Congress at this writing is legislation that, if passed, will make significant changes to the nation’s retirement system. The bill, Setting Every Community Up for Retirement Enhancement and Savings Act (SECURE Act, H.R. 1994), passed the House on May 23 on a vote of 417-3. The bill is intended to foster retirement savings that last during retirement. Although there is bipartisan support for the SECURE Act, the Senate has not acted, and the bill is not yet law.

If the bill passes, it will mean many changes for employers and employees, and will affect certain estate plans. Here is what you need to know about the major features of the bill.

  • Pooled Employer Plans. Effective for plan years beginning in 2020, the bill would permit unrelated employers to join a multiple employer retirement plan (MEP), treated as a single plan. This change would allow small, unrelated employers to gain the economies of scale of a larger arrangement without risking tax disqualification of its own fund if another employer in the group has problems. This change would also override U.S. Department of Labor regulations that prevent unrelated employers from participating in a single plan.
  • Disclosure of Lifetime Income. The bill would require the disclosure of information to each retirement participant describing how much would be available if the participant’s account or other accrued benefit were paid over a lifetime to the participant alone, or the participant and spouse. By providing a model notice with such information, the plan fiduciary would be protected from liability for providing estimates based on legal guidance. The provision, if it becomes law, might also herald a shift toward lifetime payments, replacing the lump sum distributions that are now commonly made from defined contribution plans.
  • Fiduciary Safe Harbor for Selecting an Insurer. The bill would introduce a safe harbor protecting fiduciaries’ selection of an insurer to provide participants guaranteed lifetime retirement payments. To meet the safe harbor, the fiduciaries must engage in an objective search of insurers, considering their financial capability, cost and other factors. A fiduciary can assess the financial footing of an insurer by obtaining from it a written attestation of its financial capacity. By meeting the safe harbor, a fiduciary would not be liable to a participant or beneficiary for any losses resulting from the insurer’s inability to meet its financial obligations under the annuity contract. One purpose of such a change is to encourage offering annuity options in defined contribution plans which now, typically, pay out lump sum distributions. Combined with the disclosure requirement, annuity options under defined contribution plans would assist retirees in spreading the value of their benefits over a lifetime if the insurer remains financially intact.
  • Age 72 for Beginning Mandatory Distributions. The bill would increase to age 72 the date for beginning required minimum distributions from individual retirement accounts. The current age is 70½. For an employee working past age 72, distributions from the employer’s retirement plan must begin on retirement. The increased age requirement would apply to individuals turning age 70-½ after 2019.
  • Repeal of Maximum Age for Traditional IRA Contributions. Beginning in 2020, the bill would permit persons over the age of 70-½ to make deductible contributions to traditional individual retirement accounts (IRAs).
  • Post-Death Required Minimum Distributions. The new rule would generally shorten the distribution period during which retirement savings are paid after death, unless the benefit is left to a surviving spouse, minor child, a disabled or chronically ill individual, or an individual not more than 10 years younger than the participant. Payments to grandchildren stretched over a period longer than 10 years, for example, would be eliminated.

The bill would require that if a participant dies before the distribution of his or her interest in a defined contribution plan (e.g. 401(k), profit sharing, IRA, §403(b) or 457(b) plan), the account must be distributed to the “designated beneficiary” in the 10 years following the individual’s death. A “designated beneficiary” refers to an individual named as a beneficiary (but excludes entities such as trusts, estates and charities which would continue to be subject to a five-year payout).

Individuals qualifying for a special category, “eligible designated beneficiaries,” could receive retirement death benefits over their own life expectancies. An “eligible designated beneficiary” refers to the participant’s surviving spouse, minor child, a disabled or chronically ill individual, or an individual not more than 10 years younger than the participant. Once any minor reaches majority, the remainder of the death benefit is paid within 10 years thereafter.

Whether an individual is an “eligible designated beneficiary” is determined as of the date of death. If an eligible designated beneficiary dies before receiving the individual’s death benefit, the remainder death benefit is distributed to the eligible designated beneficiary’s designee within 10 years of the death of the eligible designated beneficiary.

These changes would generally apply to deaths of plan participants occurring after 2019. (The effective dates for collectively bargained and governmental plans are different.) Plan amendments reflecting these changes would generally be required by the last day of the first plan year after 2021 (or after 2023 for collectively bargained or governmental plans).

  • Termination of §403(b) Plans. If an employer terminates a 403(b) plan with a custodial account, amounts from that account may be distributed in kind to another 403(b) custodial account of the participant or beneficiary. The rule would apply retroactively for plan years beginning after 2008.
  • Other Changes: Increased Penalties. Other changes include increased penalties for failure to file retirement plan returns and notices (i.e. Forms 5500, registration statements for deferred vested benefits, notifications of changes, required withholding notices) after 2019. 
  • Consolidated Returns. In addition, the provisions would permit filing consolidated Forms 5500 for plan years beginning after 2021, of defined contribution plans of a controlled group having the same named fiduciaries, administrator, trustee, plan year and investment options.
  • Long-Term, Part-Time Employees in 401(k) Plans. For plan years beginning after 2020, long-term employees working at least 500 hours per year would be entitled to contribute to 401(k) plans. The employer would not be obligated to make contributions for such employees, and nondiscrimination and top-heavy testing would not apply. One purpose for such a provision is to accommodate employees who are transitioning toward retirement.

Evelyn A. Haralampu is a partner at Burns & Levinson in Boston where she focuses her practice on employee benefits, executive compensation and tax. She can be reached at


receive news & alerts

Yes, I’d like to receive updates with firm news and insights that are relevant to me.