Understanding the SECURE Act and IRS Regulations: What Brown & Brown Employees Need to Know for Their Retirement Planning

Healthcare Provider Update: Healthcare Provider for Brown & Brown: Brown & Brown is a leading insurance intermediary, and they provide a range of employee benefits, including health insurance solutions, through partnerships with various insurers. Their healthcare offerings typically involve plans from major carriers such as UnitedHealthcare, Anthem, and Cigna, focusing on customizing solutions to meet the needs of their employer clients and their employees. Expected Healthcare Cost Increases in 2026: As we approach 2026, healthcare costs are anticipated to surge considerably, with some reports indicating premium hikes in the Affordable Care Act (ACA) marketplace exceeding 60% in certain states. Factors contributing to these increases include the potential expiration of enhanced federal premium subsidies, escalating medical costs driven by inflation, and significant rate hikes from insurers, which may leave up to 22 million enrollees facing out-of-pocket premium costs that could soar by over 75%. With systemic pressure from a combination of profit-seeking behaviors among insurers and rising medical expenses, employers and employees must prepare for a challenging landscape in the upcoming year. Click here to learn more

In December 2019, the 'Setting Every Community Up for Retirement Enhancement  (SECURE) Act ' introduced transformative adjustments to the taxation of post-mortem distributions from qualified retirement accounts. A pivotal element of these changes was the elimination of the 'stretch' provision for most non-spouse beneficiaries, replaced by the 10-Year Rule, which mandates the full distribution of inherited retirement assets within a decade of the account holder’s death. This shift directly affects Brown & Brown employees planning for or managing inheritance scenarios.

By February 2022, the IRS had released Proposed Regulations extending the impacts of the SECURE Act by imposing requirements for annual Required Minimum Distributions (RMDs) over a 10-year period for beneficiaries, provided the deceased had been subject to RMDs prior to their death. This meant that annual distributions were mandatory even during the decennial distribution period, significantly altering the landscape for taxation and estate planning. This regulation demands attention from Brown & Brown advisors to assist their colleagues effectively.

This complexity was further emphasized with the IRS’s release of the Final Regulations on July 18, 2024, which not only confirmed these stipulations but also expanded the situations in which various beneficiaries would be impacted. These regulations have strengthened the framework for both eligible and non-eligible beneficiaries, introducing nuanced rules that address scenarios ranging from undistributed RMDs at the death of an account owner to the management of inherited estates through different types of trusts. Such intricacies require careful navigation to optimize outcomes for Brown & Brown families.

Key Provisions and Their Implications

1. Post-mortem Distribution Rules:  For beneficiaries inheriting after the Required Beginning Date (RBD) of the account holder, annual RMDs are mandatory until the end of the tenth year following the death. This rule emphasizes the IRS’s stance on reinforcing tax deduction benefits previously extended through the stretch measure. Brown & Brown employees must be aware of these timelines to make informed decisions about their retirement assets.

2. Management of Undistributed RMDs:  The regulations stipulate that if the deceased had not taken their full RMD at death, any beneficiary can fulfill this obligation. This flexibility helps simplify compliance for beneficiaries managing inherited estates, which is particularly relevant for Brown & Brown beneficiaries who may be navigating these waters for the first time.

3. Specific Rules for Spouses:  A new 'hypothetical RMD' rule requires surviving spouses who first opt for the 10-Year Rule and then decide to treat the inheritance as their own account, to carry out RMDs as if the assets were still in their account. This regulation highlights the importance of careful planning by surviving spouses in managing asset rotation schedules, a critical consideration for Brown & Brown families ensuring financial stability.

4. Trusts as Beneficiaries:  The regulations outline how Passage Trusts, whether Conduit or Accumulation types, are treated under the law, specifying the beneficiaries considered for RMD calculations. This ensures that trusts designed to extend asset distributions over an extended period are meticulously structured to comply with the new rules, offering strategic insights for Brown & Brown planners.

Featured Video

Articles you may find interesting:

5. Annuities and Retirement Accounts:  Clarifications on how annuities embedded in retirement accounts are to be treated for RMD calculations highlight the management of annual payments to meet RMD obligations. These clarifications are vital for Brown & Brown employees who have invested in these financial vehicles as part of their retirement planning.

Strategic Perspectives for Financial Advisors

Financial advisors face these regulations with a deep understanding of their implications on estate planning strategies. This evolution highlights the need to review future plans and beneficiary designations to adapt to the new legal framework. Advisors are tasked with interpreting these complex rules to provide clear, strategic expertise that minimizes tax liabilities and ensures compliance while achieving clients’ long-term financial goals, which is especially pertinent for Brown & Brown advisors working with their peers.

In conclusion, the latest regulations from 2024 mark a crucial evolution in managing retirement assets post-death. By strengthening rules regarding the timing and mode of distribution, the IRS aims to ensure quicker tax remedies while allowing some leeway in certain cases. For financial advisors, staying informed about these regulations is essential to effectively assist their clients, ensuring that strategic decisions are both tax-efficient and aligned with estate management goals. As this legislation continues to evolve, it will be crucial for advisors to engage proactively and continually educate themselves to deliver the best value to their clients in this complex environment. Brown & Brown advisors are uniquely positioned to navigate these changes, providing invaluable guidance to their colleagues and families.