What the SECURE Act Means for Small Business Owners

In this episode of Coffee with Carl, attorney Carl Zoellner provides an overview of the SECURE Act and its major features as they relate to small businesses and employees.

Updated January 26, 2021

The SECURE Act, which stands for the Setting Every Community Up for Retirement Enhancement Act, was passed in July 2019. I’ve started receiving more questions about the impact of this legislation on clients’ businesses recently, so let’s go over the main ways the SECURE Act may change things for small business owners.

Retirement Plans for Part-Time Employees

The SECURE Act makes it easier for small businesses to offer employees 401(k)s. This is because the Act changes the minimum amount of hours worked for employees to qualify. It further implemented some age restrictions. The Act requires businesses to contribute to part-time employees’ retirement accounts, depending on the number of hours the employee has worked and their age.

Age Restrictions for Retirement Plans & RMDs

This Act also made some changes regarding retirement age restrictions. Another significant change with the SECURE Act was to remove maximum age limits for retirement account contributions. On top of that, the Act also increased the required minimum distribution (RMD) age from 70.5 to 72.

Penalty-free Withdrawals for Certain Situations

Additionally, this Act allows for penalty-free withdrawals from retirement plans up to $5,000 for the birth or adoption of a child. Relatedly, it also allows some penalty-free withdrawals from 529 plans.

Elimination of the Stretch IRA

Whether or not these changes positively or negatively impact you depends on your individual situation. For instance, the Act also eliminated the stretch IRA, which was a tool used as part of an estate planning strategy.

Overall, major legislation such as this is designed to be tax-neutral. This neutrality is reflected in what the Act in question gives or takes away, and to whom. So, while stretch IRAs are one of the items that were removed, some of the “gifts” include greater access to retirement plans for part-time employees and an increase in the required minimum distribution age for retirement accounts.

The Takeaway

Ultimately, whether or not these changes affect you, and to what degree, depends entirely on your individual situation. That’s why I encourage you to take advantage of a complimentary Strategy Session today. On the call, you and a Senior Advisor will develop the best custom entity structure and retirement plan for your individual situation. There’s no one-size-fits-all approach to retirement and business planning, so that’s why a custom plan is critical. Claim your free Strategy Session now by scheduling online or calling 888.871.8535.


Watch as Carl covers the key features of the recently-passed SECURE Act and how employers & employees are affected.


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Got an idea for a future Coffee with Carl? Send it to Carl at cwc@andersonadvisors.com.