The SECURE Act Details Significant Changes to Tax-Advantaged Retirement Accounts

Credit unions may be affected by provisions that went into effect Dec. 19.

1/21/2020

With the passage of the Setting Every Community Up for Retirement Act, there are some changes to IRAs and other retirement programs that credit unions should be aware of.

Notable Changes

Required Minimum Distributions — The age at which someone would have to take RMDs for traditional IRAs and certain other types of retirement plans increased to 72. This change is effective for distributions required in 2020 and later years.

End of the Stretch IRA — A stretch IRA allowed a non-spouse who inherited an IRA to choose to have the distributions spread out over their lifetime. This is no longer an option in most cases. The beneficiaries now have only 10 years to deplete all the assets from their inherited IRA. There are a few exceptions to this, including spouses, disabled individuals, minor children until they turn 18, and individuals not more than 10 years younger than the account owner.

Elimination of the Age Limit on IRA Contributions — Taxpayers with earned income can make traditional IRA contributions at any age, not just for the years before reaching 70 and-a-half.

Adoption and Birth Expenses — The birth or adoption of a child is now considered a “distribution event.” Parents can now withdraw up to $5,000 from their retirement accounts without incurring the 10% penalty. These amounts may be repaid.

Student Contributions — Certain stipends, fellowships, and similar payments to graduate and postdoctoral students will be treated as earned income for IRA contribution purposes.

Question of the Week

Q. We have an account that has two payable on death beneficiaries listed. The member has died, and, shortly after his death, one of the beneficiaries also died. Does the remaining beneficiary receive all of the funds from the account?

A. No. If both beneficiaries survived your member’s death, then the estate of the deceased beneficiary is entitled to 50% of the funds in the account, unless the contract expressly lists a different amount. The credit union would need to determine when the beneficiary passed away and request a copy of the death certificate.  

Legal Briefs

National Credit Union Administration

Sunshine Act: Notice of Agency Meeting
Thursday, Jan. 23. See agenda online for more information and topics for discussion.  

Civil Monetary Penalty Inflation Adjustment
The National Credit Union Administration Board is amending its regulations to adjust the maximum amount of each civil monetary penalty within its jurisdiction to account for inflation.

Agency Information Collection Activities: Proposed Collection, Comment Request, Suspicious Activity Report
NCUA, as part of a continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to comment on the following extension of a currently approved collection, as required by the Paperwork Reduction Act of 1995.

Consumer Financial Protection Bureau

Civil Penalty Inflation Adjustments
The Consumer Financial Protection Bureau is adjusting for inflation the maximum amount of each civil penalty within the Bureau’s jurisdiction.

Federal Housing Finance Agency

Property Assessed Clean Energy Program
The Federal Housing Finance Agency, as regulator for Fannie Mae and Freddie Mac (the Enterprises) as well as the Federal Home Loan Banks, seeks public input on residential energy retrofitting programs financed through special state legislation enabling a “super-priority lien” over existing and subsequent first mortgages.

Housing and Urban Development

White House Council on Eliminating Regulatory Barriers to Affordable Housing; Request for Information; Extension of Public Comment Period
Through today’s notice, Housing and Urban Development announces that it is extending the public comment period on its “White House Council on Eliminating Regulatory Barriers to Affordable Housing; Request for Information,” published in the Federal Register on Nov. 22, 2019.

Office of Foreign Asset Control

Notice of OFAC Action(s)
The Department of the Treasury’s Office of Foreign Assets Control is publishing the names of one or more persons that have been placed on OFAC’s Specially Designated Nationals and Blocked Persons List (the SDN List) based on OFAC’s determination that one or more applicable legal criteria were satisfied.

Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].