- Of Counsel
Summary of Changes Brought About by the Secure Act
The “Setting Every Community Up for Retirement Enhancement” Act (the SECURE Act) was signed into law by the President on December 20, 2019 and became effective January 1, 2020. The following is a brief summary of some of the Act’s provisions.
Repeal of the Maximum Age for Traditional IRA Contributions
Before 2020, traditional IRA contributions were not allowed once the individual attained age 70½. Starting in 2020, the new rules allow an individual of any age to make contributions to a traditional IRA, as long as the individual has compensation, which generally means earned income from wages or self-employment.
Required Minimum Distribution Age Raised From 70½ to 72
Before 2020, retirement plan participants and IRA owners were generally required to begin taking required minimum distributions, or RMDs, from their plan by April 1 of the year following the year they reached age 70½. The age 70½ requirement was first applied in the retirement plan context in the early 1960s and, until recently, had not been adjusted to account for increases in life expectancy.
For distributions required to be made after Dec. 31, 2019, for individuals who attain age 70½ after that date, the age at which individuals must begin taking distributions from their retirement plan or IRA is increased from 70½ to 72.
Elimination of Stretch IRA Provisions for Inherited IRAs
For deaths of plan participants or IRA owners occurring before 2020, beneficiaries (both spousal and non-spousal) of inherited IRAs were generally allowed to stretch out the tax-deferral advantages of the plan or IRA by taking required minimum distributions (RMDs) over the beneficiary’s life or life expectancy (in the IRA context, this is sometimes referred to as a “stretch IRA”).
However, for deaths of plan participants or IRA owners on or after January 1, 2020, inherited IRAs are required to be completely distributed within 10 years following the death of the original account owner, with a few limited exceptions. As a result of this change, the “stretching” strategy is no longer allowed.
Exceptions to the 10-year rule are permitted for distributions to: (1) the surviving spouse of the plan participant or IRA owner; (2) a child of the plan participant or IRA owner who has not reached majority; (3) a chronically ill individual; and (4) any other individual who is not more than ten years younger than the plan participant or IRA owner. Those beneficiaries who qualify under these exceptions may generally still take their RMDs over their life expectancy (as permitted under the rules in effect for deaths occurring prior to 2020).
In view of this significant change to the RMDs for inherited IRAs, estate plans put in place prior to January 1, 2020 may need to be revisited.
Elizabeth Zuckerman has been named Of Counsel to the Princeton law firm, Mason, Griffin & Pierson, P.C, and will lead its Employment Law section. Ms. Zuckerman received a J.D. from the University of California at Davis School of Law where she served as Executive Editor for the Law Review. In 1997, Ms. Zuckerman co-founded the employment law firm of Zuckerman & Fisher, LLC, focusing her practice on employee rights. Ms. Zuckerman is admitted to practice law in New Jersey, the Third Circuit, and the U.S. Supreme Court. She will continue to practice in the areas of employment law, employee rights and appellate practice. Ms. Zuckerman serves on the Executive Committee of the New Jersey chapter of the National Employment Lawyers Association and is a member of the New Jersey State and American Bar Associations.
Mason, Griffin & Pierson is celebrating its sixty-fifth anniversary. Since its founding in 1955, the firm has evolved from a two-man general practice partnership to a mid-size professional corporation which continues a general practice but has developed specific areas of concentration. The firm has been an integral part of central New Jersey over the past sixty-five years. The firm's first municipal client, Princeton, remains a client today, along with other municipalities and governing bodies in Mercer, Somerset, Middlesex, Hunterdon, Camden and Gloucester counties. Two of the firm's attorneys have served as President of the Mercer County Bar Association and, in 2001, the firm received the Community Partner Award from Mercer County Bar Foundation. Four of the firm's attorneys have been honored with the Fred G. Stickel Award for Excellence in Municipal Law and Service to the Legal Profession.
Elizabeth Zuckerman will be an instructor for the Princeton Adult Education course, Know Your Rights as an Employee. The 3-session course starts on February 11 and will explore topics including sexual harassment, discrimination, medical marijuana in the workplace, whistle-blower claims, NJ’s newly enacted Wage Theft Act, Federal and State family leave acts, and other laws that protect employees. Ms. Zuckerman has been practicing employment law for thirty years in Princeton and serves on the Executive Committee of the New Jersey chapter of the National Employment Lawyers Association. For more information visit .princetonadultschool.org.
MG&P starts the new year with new municipal clients. Kevin Van Hise has been appointed as the attorney for the West Amwell Township Zoning Board of Adjustment and Edwin Schmierer was recently retained by the Borough of Elmwood to serve as Special Counsel.
Elizabeth Zuckerman will be arguing in the NJ Supreme Court on February 3rd, in the case of Wild v. Carriage Funeral Holdings, Inc. The case involves the issue of whether an employee who uses medical marijuana can be terminated for failing a drug test. Ms. Zuckerman will be arguing on behalf of Amicus NELA-NJ.
Mason, Griffin & Pierson is pleased to sponsor Montgomery Township Education Foundation. The Foundation's fundraiser takes place on the evening of March 14 at Cherry Valley Country Club in Skillman, New Jersey. The Foundation is an independent, non-profit organization set up to support strategic programs for the benefit of the Montgomery Township public school children. For more information go to mtefnj.com
The SECURE ACT changes the age for required minimum distributions (RMDs) for traditional IRAs from 70 ½ to 72. The new rules allow an individual of any age to make contributions to a traditional IRA, as long as the individual has earned income from wages or self-employment. The Act also affects beneficiaries of inherited IRAs. Other than a few exceptions, inherited IRAs (for deaths of IRA owners on or after 1/1/2020) are now required to be completely distributed within ten years following the death of the original account owner. In view of this significant change for inherited IRAs, estate plans put in place prior to the SECURE ACT may need to be revisited. Read more here.