On December 20, 2019, President Trump signed into law the SECURE Act (“Setting Every Community Up for Retirement Enhancement Act”) as part of the government’s spending bill.
Two important provisions in the SECURE Act will affect the unclaimed property reporting of retirement accounts, and will be effective on January 1, 2020:
- The age for required mandatory distributions (RMDs) increases from 70.5 to 72 (for individuals who reach age 70 ½ after December 31, 2019).
- The RMD rules for inherited IRAs are modified such that an IRA must be fully distributed within 10 years of the owner’s death (unless the beneficiary is an “eligible designated beneficiary” – the surviving spouse, a minor child, a chronically ill beneficiary, or another beneficiary who is not more than 10 years younger than the owner). Eligible designated beneficiaries can take distributions over their life expectancy if they begin taking them within a year after the owner’s death (if the owner’s date of death is after December 31, 2019).
Note that many state unclaimed property laws, including the laws in the RUUPA states, use age 70.5 as a possible trigger for the escheatment of retirement accounts. Other laws are vague and provide that the trigger date is the earlier of the date of distribution or attempted distribution of the property; the date of the required distribution as stated in the plan agreement; or the date, if determinable by the holder, specified in the income tax laws of the United States by which distribution of the property must begin in order to avoid a tax penalty.
With the passage of the SECURE Act, we may see legislation in states like the RUUPA states, to bring their retirement provisions in line with the new law.