SECURE Act

The SECURE Act rode inside a year-end spending law, the Further Consolidated Appropriations Act, 2020, and most of its changes took effect on January 1, 2020. They fall into three groups: rules for savers, rules for heirs and rules for employers that sponsor plans. SECURE 2.0 revised several of them three years later, so the rule in force in 2026 is not always the 2020 version. For individuals, the headline changes were these.

Before 2020, the beneficiary of an IRA or 401(k) could usually take distributions over their own life expectancy. A 40-year-old heir could draw a small slice each year for four decades and leave the rest growing tax-deferred, a strategy known as the stretch IRA.

For owners who die after 2019, only eligible designated beneficiaries keep the stretch: a surviving spouse, the owner’s minor child until the age of majority, a disabled or chronically ill person, and anyone not more than 10 years younger than the owner. Most other individual heirs, including most adult children and grandchildren, fall under the 10-year rule and must empty the account by December 31 of the year containing the 10th anniversary of the death. Final regulations issued in 2024 confirm that annual minimum distributions are also due in years one through nine when the owner had already reached their required beginning date.

For heirs of large pre-tax accounts, inherited money is now taxed over a decade, often during their own peak earning years, rather than over a lifetime. Inherited Roth IRAs face the same 10-year deadline but no annual minimums before it, and qualified withdrawals from them are tax-free.

Much of the law aimed to get more small employers to offer plans. It created pooled employer plans, which let unrelated businesses join one plan run by a registered pooled plan provider. It raised the tax credit for small-employer plan startup costs to as much as $5,000 a year for three years, figured at $250 for each eligible non-highly compensated employee, and added a $500 credit, also for three years, for adding automatic enrollment.

For workers, 401(k) plans had to let long-term, part-time employees make elective deferrals once they logged at least 500 hours in each of three consecutive years, instead of waiting for a 1,000-hour year; only service from 2021 on counted. Benefit statements must show, at least once a year, the monthly lifetime income the balance could buy. Plans can no longer offer loans through credit cards, and sponsors gained a safe harbor for choosing an annuity provider.

The law also reversed a Tax Cuts and Jobs Act change. From 2020, a child’s unearned income subject to the kiddie tax is again taxed at the parent’s rate rather than at the brackets for trusts and estates, and families could elect the parent’s rate for 2018 and 2019 as well.

The RMD age of 72 lasted only for people born from July 1, 1949, through 1950. SECURE 2.0 raised it to 73 for people born from 1951 through 1958, and proposed regulations also apply 73 to anyone born in 1959, because the statute describes that year both ways. For people born in 1960 or later it is 75. The part-time worker rule dropped from three years of 500 hours to two, starting with 2025 plan years, and repayment of a birth or adoption withdrawal is now limited to three years.

Other SECURE Act rules stand as written. The 10-year rule for most heirs, the ability to fund a traditional IRA after 70½, and the $10,000 lifetime student-loan use of 529 money all still apply in 2026. One interaction trips people up: deductible IRA contributions made after 70½ reduce the tax-free amount of later qualified charitable distributions, as the example below shows.