It finally happened! On December 19, Congress wrapped up 2019 by passing legislation (H.R.1865) that enacted the SECURE Act, repealed the Health Insurance and Cadillac taxes, extended the National Flood Insurance Program (NFIP) and the Terrorism Risk Insurance Act (TRIA), and funded the government for the rest of FY 2020. President Trump signed the measure into law on December 20.
Long a top priority for NAIFA, the SECURE Act, among other things, removes impediments to multiple employer plans (MEP), requires employers to illustrate estimates of monthly income for life, based on current account balances, eases rules governing use of annuities in qualified plans, adds new discrimination rule safe harbors to allow more retirement saving, delays imposition of required minimum distribution (RMD) rules to age 72, allows contributions to traditional IRAs by people still working after normal retirement age, and modifies rules for “stretch IRAs” that is restrictive and will require review of current financial plans that include stretch IRA techniques. Details are in the GovUpdate sent to NAIFA members on December 22, 2019.
H.R.1865 also repealed three Affordable Care Act (ACA) taxes—the health insurance tax (HIT), a tax on health insurers that has been described as a kind of sales tax that would increase the cost of health insurance; the Cadillac tax, a levy on health insurance plans with premiums that exceed a statutory maximum—the tax would have been 40 percent of the premium amount that exceeded the maximums allowed; and the Medical Device Tax. Also in H.R.1865 were rules that extend for one year the above-the-line deduction for unreimbursed medical expenses to the extent they exceed 7.5 percent of adjusted gross income (AGI); a one-year extension of the tax credit for paid family leave; an extension through September 30, 2020, of the NFIP; and a seven-year extension of the Terrorism Risk Insurance Act (TRIA).
H.R.1865 did not include a solution to the surprise billing issue or any rules aimed at controlling the cost of prescription drugs. However, the new law does include a May 22 expiration date (for funding certain government health programs) that was designed to create a deadline for action on surprise billing and prescription drug cost control issues.
Prospects: Enactment of H.R.1865 sets up several issues for 2020. First, financial advisors must learn and then implement the new retirement savings rules—which will create substantial new opportunities for NAIFA members and their employer clients. NAIFA plans a webinar to provide education on the details of these new rules, including addressing concerns about the new stretch IRA rules, and the implementation challenges of the 1-1-2020 effective date of most of the provisions. In addition, Congress will have to act later this year to extend –and perhaps reform – the NFIP. The medical expense deduction expires again on September 30, 2020, so Congress must address that issue again this year.
NAIFA Staff Contacts: Diane Boyle, Senior Vice President – Government Relations at DBoyle@naifa.org; Judi Carsrud, Assistant Vice President – Government Relations at firstname.lastname@example.org; or Michael Hedge, Director – Government Relations at email@example.com.