Four Changes to the Tax Code that May Affect You

By Mitchell J. Smilowitz, CPA

At the end of December 2019, Congress approved appropriations bills authorizing Federal spending. One component of this legislation, the SECURE Act (Setting Every Community Up for Retirement Enhancement), included several provisions governing retirement plans, including the JRB 403(b) retirement plan.

This article reviews three provisions of the SECURE Act most likely to affect you. The article also addresses a topic relevant to non-profit organizations regarding employee parking and transit taxes.

Additional clarification from the IRS on these topics is expected. The JRB will act on these changes once the IRS issues further guidance.

Required Minimum Distribution Age Rises to 72

In good news for retirement savers, Congress raised the age at which you must begin taking withdrawals from your retirement account known as Required Minimum Distributions (RMDs). The age for taking RMDs increases from 70½ to 72 for anyone turning 70½ after December 31, 2019.

Accelerated Distribution of Inherited Retirement Assets

Under previous law, those inheriting retirement savings when an accountholder dies could “stretch” the withdrawal of funds from the account for their entire lives. A child inheriting the account from a parent, for instance, might stretch distributions over 30-40 years or more.

The SECURE Act limits the time during which a beneficiary must withdraw the funds in a retirement account to 10 years. However, there are exceptions for the following beneficiaries:

  • Surviving spouses. They can continue to stretch distributions over their lifetime.
  • Minor children. The 10-year period does not begin until they reach the age of majority. This rule applies to children of the participant, not grandchildren. Grandchildren are subject to the 10-year limit regardless of their age when they inherit assets in a retirement account from a deceased accountholder.
  • Disabled and chronically ill individuals. Defined narrowly, this includes those who are unable to engage in any substantial gainful activity due to a medically accepted physical or mental impairment. It also includes chronically ill individuals whose period of inability to perform at least two activities of daily living has been certified as indefinite and is expected to be lengthy.
  • Individuals not more than 10 years younger than the accountholder.

For the beneficiaries of those who died before January 1, 2020, the old rules apply, meaning they can stretch the distributions over the remainder of their lives, even if this exceeds 10 years.

Beneficiaries can withdraw any amount they wish each year as long as the account has no assets at the end of the 10-year period. This offers beneficiaries flexibility to use the money when they need it or to withdraw funds when it best fits their tax situation.

This change may affect those who planned to leave their accounts to children and grandchildren, especially those who named a trust as their beneficiary. The JRB suggests reviewing the terms of these trusts to see how the SECURE Act may affect them.

Retirement Plan Withdrawals for the Birth or Adoption of a Child

The new law now allows the withdrawal of up to $5,000 from a retirement account within a year after the birth or adoption of a child. The withdrawal of these funds is subject to income tax. The funds can only be taken after the birth or adoption, so they can’t be used to cover pre-natal care expenses. Each parent can take $5,000 from their own account, so, if both parents have retirement plans, they can withdraw up to $10,000. Parents have the option to repay these funds into their retirement account without penalty.

Non-Profit Parking and Transit Tax Repealed

This item affects non-profit organizations, including synagogues, day schools and other religious organizations. The 2017 Tax Cuts and Jobs Act required non-profits to pay tax on the value of parking and other transit benefits provided to their employees. Congress repealed this rule retroactively.


These four changes in the tax code may impact your – and your beneficiaries’ – financial security. The change in the RMD allows plan participants to extend the deadline for taking withdrawals from their accounts from age 70½ to age 72. On the other hand, the ability to stretch out use of those funds by your beneficiaries may be limited to 10 years. The law also makes it easier for new parents to use retirement assets to pay for children during the first year of birth or adoption and for non-profits to provide parking and transit benefits to employees.

As the IRS issues guidance on these topics, the JRB Board of Trustees will act on them. In the meantime, please contact us via email or call 888-JRB-FREE (572-3733) to answer your questions on these and other financial planning topics.