The House passed a bill earlier this week with sweeping changes related to retirement plans that will impact many Americans.
Some of the changes include:
- Allowing employers to include annuities as an investment selection for their employer 401K plans
- No longer allowing an individual who inherits a pension or IRA from a decedent to “stretch” the required minimum distributions over their lifetime. Instead the withdrawals would have to be withdrawn over a 10-year period. This would apply to inherited amounts after Dec. 31, 2019.
- The new law would allow the employer who automatically enrolls their workers in certain 401K plans to allow them to raise the employee savings rate to 15% of annual earnings over time. This is an increase in the current rule which was up to 10%.
- Allows individuals who are still receiving a W-2 to continue to make IRA contributions even after age 70 ½. The bill also increases the required starting age for beginning withdrawals from retirement accounts to 72 vs. 70 ½. This would also apply to those who turn 70 ½ after Jan. 1, 2020.
Since the bill is part of a $1.4 trillion proposal to keep the government operating through September, it is expected to be passed in the Senate and onto the President for signing most likely before the end of the year. Contact us in one of our many locations to discuss what these changes mean for your tax liability and your retirement plans.