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December 23, 2019 at 02:36 PM
President Donald Trump signed the legislation creating the Further Consolidated Appropriations Act, 2020, Friday.
The president’s signature brought the “Setting Every Community Up for Retirement Enhancement Act of 2019″ (Secure Act) to life, and it set legislative analysts poring through the 1,773 pages of the PDF to see what’s really in there.
(Related: Life and Annuity Players Prepare to Pop Secure Act Champagne Bottle Corks)
Two sections getting more detailed attention are Section 104 of the Secure Act, which increases the maximum tax credit available to employers that set up retirement plans, and Section 105, which increases the maximum tax credit available to employers that set up plans with automatic enrollment features.
Retirement Plan Tax Credits
The old tax credit was a maximum of $500 per year for three years for setting up a retirement plan — or a total of $1,500 over three years.
An employer can now get up to $5,000 per year for three years for setting up a plan, and $500 per year for three years for including an automatic enrollment feature. That means the total tax credit, over three years, could be $16,500.
To get the maximum possible tax credit, an employer has to make 20 non-highly-compensated employees eligible for the new retirement plan.
The Kiddie Tax
Legislative analysts are also giving more attention to a Secure Act provision that eliminates the “Kiddie Tax” — a provision in the Tax Cuts and Jobs Act of 2017 (TCJA) that changed the tax treatment of children’s unearned income.
Drafters included the provision to counter wealthy family’s tax planning strategies. But the provision ended up leading to dramatic increases in tax bills for low-income and moderate-income students using scholarships to pay for college.
Marc Cadin, chief executive officer of the Associated for Advanced Life Underwriting, and AALU members worked to point out that the provision has also hurt the children of service members who have died in combat. Families ended up having to pay more taxes on the benefits the children received as a result of the deaths of their parents.
Industry Reactions
Some companies and groups sent out celebratory announcements after Congress completed work on the FCAA 2020 package, and before the president signed it.
Some waited until right before, or right after, the president signed the legislation to celebrate.
Here’s a look at excerpts from some of the statements that came out right around the signing time:
John Carter, president of Nationwide Financial
“With record low unemployment rates making it harder for small businesses to retain top talent, paired with America’s growing retirement preparedness challenge, the Secure Act offers a solution for making workplace retirement plans easier to offer: open multiple employer plans (MEPs). MEPs allow small businesses to pool their resources to offer a workplace retirement plan that is cost effective and administratively simpler….
I“Nationwide is a strong supporter of enhancements to our retirement system that enable and protect the future for Americans and small businesses.”
Paula Nelson, president, retirement at Global Atlantic
“We view the Secure Act as the most comprehensive retirement security legislation in more than a decade and are pleased that it’s been signed by the President. At Global Atlantic, we would like to see all Americans achieve their retirement income goals, and we believe this will help by providing more access for working Americans to obtain guaranteed income products in their workplace retirement plans. Along with some of the Secure Act’s other provisions, this will help retirees ensure that they do not outlive their savings.”
Graham Cox, executive vice president and head of retirement and income solutions group at MetLife
