8 Things to Know About the SECURE Act of 2019

Sam Payne, RICP®, CLTC – VP Business Consultant
(Asset Marketing Systems)

The “Setting Every Community up for Retirement Enhancement” Act (SECURE Act) passed in the House last week with a 417-3 vote. This legislation is expected to make it through the Senate during this term, and in doing so, it will be the first major retirement legislation passed since the Pension Protection Act in 2006.

The Senate is working on their version of retirement legislation, it’s called the Retirement Enhancement Securities Act (RSA). As often happens, some of the provisions of the RSA may find their way into the SECURE Act. For this article, I stick to what we know about the SECURE Act, but keep in mind; it has not passed the Senate…

So what are some of the components of the SECURE Act? Out of the 29 or so new provisions, here are 8 things I think advisors should know:

1. Increase Small Employer Access to Retirement Plans – Part of the legislation will attempt to expand small employers capability to offer some form of retirement savings to employees. One way the act proposes to accomplish this is by expanding the ability to run multi-employer plans and streamline the process overall. This would essentially allow small employers to band together to offer reduced overall cost to the employer, and purportedly a reduction in the fiduciary liability.

2. Increase Annuity Options Inside Retirement Accounts – the act proposes to update the safe harbor provision for plan sponsors to select annuity providers to offer in-plan annuities for use within the 401K. The new rules would essentially ease liability concerns, perhaps opening the path for more annuities to be offered in the plan.

3. Increase RMD Ages – the plan proposes to increase the RMD start age from the current 70 ½ to 72.

4. Remove Age Limitation for contributing to an IRA – if RMD ages are going up, it only makes sense to remove the contribution age limits. Individuals are living longer, and as a consequence working longer. Having the ability to continue to contribute to an IRA as long as they work just makes sense.

5. Tax Credit for Automatic Enrollment – this provision would introduce a tax credit for small employers to encourage automatic enrollment into their plan. It’s a $500 credit, and the intention is to offset the costs of operating the plan at the start.

6. Penalty-Free Distributions for the Birth of a Child or Adoption – this provision will provide an exemption from the 10% penalty tax 72(t) for early withdrawal. It would allow an aggregate amount of $5,000 to be distributed from the plan within one year of birth or adoption.

7. Lifetime Income Disclosure for Defined Contribution Plans – the bill will require defined contribution plans to deliver a disclosure at least once every 12 months to illustrate how much income the account balance would generate. As you can imagine, the methodology for determining or calculating that income is still in the works.

8. Removal of “Stretch” IRA Provisions – here is where I see some significant changes to inherited plans. This provision would require most beneficiaries to distribute the account value over ten years.

So these are 8 quick things to know about the SECURE Act, but the real question in my mind is, will this really help Americans save more? I don’t think it will have a huge impact. I believe our continued message needs to be that each individual has the burden of saving for their financial future placed squarely on their shoulders. They should recognize that, and act accordingly.

Using financial tools and concepts with the advice and direction of a financial professional may help Americans better achieve the retirement of their dreams, so be their guide.

Sam Payne

858.207.2127
VP Business Consultant
SPayne@AssetMarketingSystems.com

Rates Have Dropped…
Now What?

Kurt Metcalfe – Sr. Annuity Sales Consultant
(Asset Marketing Systems)

The 10-year treasury has gone from 3.2% in November 2018 to the current 2.1% (as of 6/4/19). Of course, this is not the only measurement used by carriers in determining interest rates, but it’s a good guide. It’s clear to see how a 33% decrease can lead to lower caps and higher spreads. So how do we handle this? My simple response… “This changes nothing.”

It’s important to remember what we’re trying to accomplish for your annuity clients. Whether your client is looking for income, growth, or death benefit; the collective key to an FIA sale is safety. Consistent, sustainable income is best created using fixed annuities as their living benefits are stronger than VA counterparts. Rate decreases have left most income riders unaffected and therefore has not changed this sale. You can sit across from a client and tell them exactly how much income they will receive in retirement AND they will never outlive it.

In the past two weeks, I have heard a repeated question that has surprised me, “do we have anything out there that is still good for growth?” My response is always very simple, “Why wouldn’t we?” Sometimes we get stuck in this trap remembering how interest rates were 20-30% higher looking back six months ago. Is it true that those past clients are in a better spot than current/prospective buyers are today? Yes, probably. How does that help your current client? You are working as their advisor at this moment, not the past. We have no idea when interest rates will turn back around and increase. Your client can’t afford to sit on the sidelines and wait. S&P 500 is down 7% in the last month, is that better? If we stick to the basics and fulfill client needs with our best current tools, we are doing the best job. FIAs are not designed to outpace the equities market. I point to Roger Ibbotson’s whitepaper talking about how uncapped FIAs are your bond alternative. With this portion of your client’s money, are they ok with 3.5% – 5.5% per year, net of fees? People that tell them otherwise are promising something that will be difficult to deliver. If your client wants more, they will have to take more risk.

FIAs will not lose a dime of their money. FIAs can create an income stream that clients will not outlive. Those two facts remain the same, regardless of the interest rate environment.

And don’t forget to review our latest top picks and annuity recommendations. Click here to download the flyer.

Five Important Annuity Processing Tips

Mia Dempsey – New Business Department Manager
(Asset Marketing Systems)

We understand that having to go back to your client multiple times for new or corrected paperwork is time consuming and frustrating. Let us help you get it right the first time. Review these tips below for best practices when submitting your Annuity cases:

  • 1. Verify Your Carrier Contract Status
    • Make sure your Continuing Education (CE) credits are current!
      • Licensed agents need 24 hours of CE credits every two years. Some of those credits include AML and Annuity training. You can look up your CE credits via the Department of Insurance for your state.
    • Make sure your Carrier Appointment is current!
      • Call Asset Marketing Systems to confirm you are contracted and active with the carrier. If you have not written business with that carrier in the last 12 months, you may have been terminated.
    • Make sure your Product Training is complete!
      • Many carriers require specific product training. In some cases, each product line has its own training. Check your product training status with the AMS licensing department.
    • Do not take the application until you are sure all items above are in place.
      • Taking an application with one or more of these items missing most likely will require you to get updated paperwork signed.
  • 2. Keep up-to-date on Product Information & Rates Changes
  • 3. FireLight Tips – (E-Application)
    • Jurisdiction Selection
      • Incorrect state selection will require you to start over with a new case.
    • Optional Redtail Data Upload
      • If you are a Redtail CRM user, this is an optional selection for you. Via FireLight you can select the client information in your Redtail CRM to pre-populate portions of the application.
      • If you do not have the Redtail CRM or would rather manually populate the information, select the chevrons to the right to skip this page.
    • Where to View Missing Items
      • Click the chevrons at the top left of the page, under the Data Entry counter, and open the pages available. The red highlighted pages are those missing information.
      • If you still can’t find what’s missing, click the red “comment” icon on the top right of the page and missing information will be highlighted.
  • 4. Where to Send Your Annuity Applications
    • AMS case manages certain annuity carrier applications
      • Most of the carriers shown below require Asset to case manage the applications. Please make sure to send these applications to Asset (send copies to Asset if you submit the originals direct to the carrier at NewBusiness@assetismarketing.com)
        • 1. Ameritas – FlexMark Select (Optional)
        • 2. Americo – ClassicMark & LibertyMark (Optional)
        • 3. Athene – BCA
        • 4. Delaware Life – Retirement Chapters (Optional)
        • 5. Nationwide – New Heights
        • 6. North American – Prime Path
        • 7. Transamerica – Secure Retirement Index II
      • The remainder of our annuity carriers work directly with the agent’s office to obtain outstanding requirements on cases. These applications should be sent directly to the carrier. For these direct submit carriers, duplicated case management efforts on the part of Asset Case Managers who aren’t privy to info sent directly by the agent or his staff can cause confusion.
  • 5. Funding the Case
    • Transferring Money
      • Call the transferring company to confirm if a specific transfer form is required.
      • Annuity transfers require a current statement from the existing policy to be submitted with the application.
      • Since most carriers will not accept e-Signed Transfer of Asset (TOA) forms, it’s advisable to get a TOA physically signed by the client to be safe.
    • Sending a Physical Check
      • Send the check with the original application packet, OR
      • Wait for a policy number from the carrier and reference that number on the memo section of the check. This will allow the carrier to match it to the correct policy.

If you are not contracted with Asset, contact us to
learn more at 866-546-5267.