Big Changes to Retirement Policy and Extensions of NAELA Priorities in Spending Bill

On Monday, December 16, lawmakers introduced a spending package to fund the government through FY 2020. The legislation is anticipated to be law by the end of the week.
The legislation contained a number of “policy riders,” including a short-term extension of NAELA’s priorities and inclusion of the SECURE Act, which makes a number of changes to retirement tax policy, such as drastically limiting the availability of the “stretch” distribution for inherited retirement accounts.
SECURE ACT: Limits to Stretch IRAs and Other Changes to Retirement Planning
The SECURE Act will introduce major changes to retirement tax policy. The House previously passed a version of the SECURE Act in May, but NAELA has already identified some modifications to the text. Policies include:

• Limiting “stretch” distributions for inherited retirement accounts (Sec. 401)
• Repealing the age limit for Traditional IRA contributions (Sec. 107)
• Increasing the required minimum distribution (RMD) age to 72 (Sec. 114)
• Expanding access to annuities in retirement accounts (Sec. 204)

Regarding Sec. 401, limits to stretch distributions for inherited retirement accounts, in August NAELA submitted an issue brief to Congress about the impact of the legislation on certain trusts. Under Sec. 401, most individuals will need to take distributions from an inherited retirement account within ten years. But exceptions to this rule exist for people with disabilities, spouses, or someone less than ten years younger than the employee. As a result of NAELA’s efforts, lawmakers added some language to deal with trusts for individuals with disabilities. NAELA is analyzing the language to understand its impact and will provide updates to members in the coming weeks.

NAELA Priorities Get a Short-Term Extension
The legislation includes a five-month extension of Money Follows the Person and the requirement that state’s apply Medicaid’s spousal impoverishment protections to home and community-based service waivers. The language maintains the “rule of construction” provision for states such as Minnesota and New Hampshire.

Thank you to all members who voiced your support this week for these provisions! NAELA will continue to advocate for a long-term extension of these policies in the new year.
Medical Expense Deduction Extension Added After Introduction
On Tuesday, it was reported that a number of expiring tax provisions will also get extended, including the medical expense deduction. NAELA had advocated in coalition for the extension of the medical expense deduction threshold of 7.5% of adjusted gross income (AGI). Without an extension, the threshold would revert back to 10% of AGI. The amended legislation will keep the lower threshold for tax years 2019 and 2020.
Questions? Email NAELA Senior Public Policy Manager David M. Goldfarb.