John Grobe, Federal Career Experts

News Flash! Congress doesn’t think of everything when they enact or amend legislation. Long after laws are changed, their meaning and application get interpreted by the regulation setting process. After regulations are set, further interpretation takes place by means of the legal process, as individuals and organizations try to test the limits of the new legislation or regulation. This is especially true with financial and tax related legislation/regulation. One might say that interpretations trickle in for quite some time and here are some early trickles from the SECURE Act (which was passed in 2019 and became effective on January 1, 2020).

The SECURE Act changed the law to allow individuals age 70 ½ and older to contribute to traditional Individual Retirement Arrangements (IRAs). This change affects all individuals of 70 ½ or older, whether or not they were still working, though, in order to contribute, they were required to have “earned income” as defined by the Internal Revenue Service (IRS). Well, the IRS recently announced that IRA custodians are not required to accept IRA contributions from those 70 ½ or older under any circumstances. In fact, if a custodian wants to accept such contributions, they must amend IRA contracts and update disclosure agreements. The odds are high that almost all custodians will do so by the deadline of December 31, 2022 – but they don’t have to.


There were many rule changes about inherited IRAs, and the “stretch-IRA” was eliminated for all but Eligible Designated Beneficiaries (EDBs). But, even if you are an EDB, you cannot roll over an inherited IRA into an IRA of your own unless you are also a spousal beneficiary.

The IRS clarified the newly introduced exception to the 10% early withdrawal penalty for birth or adoption. This exception, by the way, applies to both company plans (e.g., TSP, etc.) and IRAs. First, the distribution must be taken within one year of the birth or adoption. Second, the penalty-free part of the distribution is limited to $5,000 per birth or adoption. Third, the adoptee must be under 18, or meet the tax code’s definition of disability. But Wait! On top of this, the IRS said that company plans are not required to offer distributions in the case of birth or adoption – but IRAs are. I swear, they’re deliberately making this difficult for us!

This last paragraph isn’t related to any of the above items, but it’s worth sharing, especially in light of stock market volatility. There’s an old saying about the stock market, “The market takes the stairs up and the elevator down.”

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