On December 20, 2019, the president signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act, the most significant retirement plan legislation in 13 years.¹ The SECURE Act—which was attached to an appropriations bill that Congress needed to pass to avert a government shutdown—makes far-reaching changes to the laws governing retirement plans. It will affect employers that currently sponsor retirement plans and encourage those without plans to set them up. It also impacts plan participants, individual retirement account (IRA) holders and their beneficiaries, and even includes a provision that expands the uses of Section 529 college savings plans.

Many of the Act’s provisions are effective in 2020. Below we summarize some of the new law’s key provisions, followed by a chart that shows the plans or accounts to which they apply, along with their effective dates.

“Open” multiple employer plans (MEPs). The Act will allow a financial institution, consultant, recordkeeper or other firm to offer a single defined contribution (DC) plan that several unrelated employers can join. By banding together in a type of MEP that the Act calls a “pooled employer plan,” employers may enjoy reduced costs due to economies of scale. Because professional service providers will likely be performing many of the tasks associated with operating a DC plan, participating employers can also enjoy reduced fiduciary liability. In addition, the Act addresses the so-called one-bad-apple rule, under which one employer’s violation of the tax qualification requirements could disqualify the entire MEP. The Act fixes this by requiring the assets of a noncompliant employer to be spun out into a separate plan.

Tax credits to encourage small employers to set up plans. The SECURE Act will incentivize small employers (those with 100 or fewer employees) to establish retirement plans by increasing an existing tax credit from $500 to a maximum of $5,000 per year for the first three years. This credit will help offset plan startup costs.

¹ H.R. 1865.

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