On December 20, 2019, Congress enacted the SECURE Act as part of the Further Consolidated Appropriations Act of 2020 (together, the “Act”). The Act includes both required and discretionary changes for employer-sponsored qualified retirement plans, some of which are effective for the 2020 plan year. Below is an overview of these changes with a reference to each date on or prior to the plan year for which the changes become effective.
Note that this Advisory does not address changes from the Act that do not affect employer-sponsored qualified retirement plans.
Changes Regarding Contributions and Withdrawals
December 20, 2019
- Credit Card Plan Loans. Qualified retirement plans are prohibited from making plan loans through credit cards or similar arrangements.
December 31, 2019
- Default Automatic Contribution Rate. The maximum safe harbor default automatic contribution rate is increased from 10% to 15% (but can’t be more than 10% for the first year of participation).
- Safe Harbor 401(k) Plan – Election. A 401(k) plan may become a nonelective contribution safe harbor 401(k) plan after the beginning of the plan year if either (i) it is amended by the 30th day before the end of the plan year, or (ii) it provides a nonelective contribution of at least 4% for the plan year and is amended before the last day for distributing excess contributions for the plan year.