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News & Views | Q4 2020 Page 2 of 4

NEW MORTALITY TABLES CHANGE REQUIRED MINIMUM DISTRIBUTIONS

In November, the IRS issued revised life expectancy tables, which are used in calculating Required Minimum Distributions (RMD)
from retirement accounts. In doing so, they reviewed existing mortality tables against current mortality data. They determined that
since people are living longer, the life expectancy and distribution tables should be adjusted to reflect current data.

For most people, the RMD is calculated by dividing total assets at the end of the prior year, by the participant’s life expectancy
factor.* By changing the life expectancy tables, this will result for most people in a reduced RMD. The changes became effective
November 12, 2020, and are applied to distribution years beginning January 1, 2021.
*This calculation applies to most retirees. A tax advisor or plan provider should always be consulted when making distributions.

More information about distributions from retirement accounts can be found in IRS Publication 590-B, by clicking here.

WASHINGTON REPORT

Contribution Limits Unchanged
Each year, the IRS determines whether to adjust contribution limits. They do so based on the increase in inflation, and will raise the
contribution limits in $500 increments if inflation data supports an increase. For 2021, they determined that the rate of inflation did
not warrant an increase of $500, so the limits will not change. The limits remain at 2020 levels:

• $19,500 for regular contributions

• An additional $19,500 for traditional catch-up, three years prior to reaching normal retirement age
• $6,500 for age 50 & over catch-up

As a reminder, participants can only contribute one type of catch-up at a time. The maximum contribution for a participant utilizing
catch-up is $39,000.

New Retirement Bill Introduced

In October, House Ways and Means Committee Chair Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) introduced
Securing a Strong Retirement Act 2020 (aka, Secure Act 2.0). Included were many of the same provisions we saw from Senators Rob
Portman (R-OH) and Ben Cardin (D-MD) in their Retirement Security and Savings Act 2019. Provisions important to governmental
retirement plan sponsors include:

• Elimination of the 1st month rule
• Increasing the age for Required Minimum Distributions (RMD) to age 75 (RMD was increased to 72 in the Secure Act in late
2019)
• Increasing the catch up limit to $10,000 for age 60 and over

• Allow a person whose total assets are less than $100,000 to be exempt from RMD

• Safe harbor to correct administrative mistakes (e.g., those found in an audit) – currently the safe harbor is 180 days; this bill
increases the correction period to 9-1/2 months

It is important to note that many of the same provisions have been introduced in both the Senate and the House. This indicates
that there is wide Congressional bipartisan support for these changes. While we do not know how the outgoing or incoming
Administrations will prioritize changes to retirement programs, the fact that these have such broad support from Congress is
encouraging.

NFP is monitoring the proposals and will continue to keep you informed of how your plans may be affected. Please contact your
NFP advisor if you have questions.