In this blog entry, I comment on the legislative process behind enactment of the Consolidated Appropriations Act, 2023, which Congress passed and President Biden signed into law on December 29, 2022. That act included a significant piece of legislation on estate planning for retirement plans and IRAs [entitled the SECURE Act 2.0 of 2022 (SECURE 2.0)]. 

General Thoughts: In my opinion, SECURE 2.0, and, indeed, the entire 1,653 page Consolidated Appropriations Act, 2023, was victimized by hyper partisan, frustrating last-minute politics (even though SECURE 2.0 enjoyed strong bipartisan support, so much so that it was surprisingly tacked onto the larger bill as Division T (beginning at page 817 of the Consolidated Appropriations Act, 2023) at the last minute).

In my opinion, the overall legislative effort was a gargantuan, Herculean task that required combining and amending several separately filed lengthy bills in both the House and Senate in an unnecessarily, candidly self-inflicted truncated time-period. As one who’s drafted beaucoup bills, many of which became state laws, and who’s testified before legislative committees on pending legislation an equal number of times, it’s hard to watch how Congress conducts its legislative business today.

As the co-author of a wills and trusts formbook (presently not in print), in addition to my substantial legislative drafting experience, it seems that Congress ignored an immutable truth to its (and, unfortunately, our) detriment: good drafting is hard generally, but drafting legislation is even harder than drafting legal documents. It’s not best done in secret or under a time-crunch.

Why? When you’re drafting wills, trusts or really any legal private agreement or document, you’re dealing with a specific set of facts and players and covering reasonably foreseeable contingencies in that limited space. However, any law you draft has to work at every socioeconomic stratum-literally from the homeless to the Rockefellers and DuPonts. This isn’t easy to do, and you often need some quiet, contemplative time in regular order, not watching the sand almost finished flowing down the hourglass.

Unfortunately, the necessary haste that the appropriations bills required adversely impacted SECURE 2.0, which was added at the 11th hour by the quick combination of different bills on SECURE 2.0 in the House and Senate, which has resulted in unnecessary complexity, an unacceptable number of ambiguity, as well as some poor choices around the so-called “default rules,” i.e., the general rule that applies to all who don’t elect otherwise.

One particularly nettlesome flaw of SECURE 2.0 is the Byzantine number of different effective dates of the law changes, i.e., various sections of SECURE 2.0 go into effect in 2023, 2024, 2025, and even later, including 2033!!! I predict that taxpayers and their advisors are going to get tripped up by missing the applicable effective date. It’s imperative that one reading the various sections of SECURE 2.0 pay extremely close attention to the effective date of the section you’re reading.

Failure to carefully consider the bill language unfortunately has resulted in a few poorly conceived and thought through changes, which I predict will, in turn, lead to underperforming legislation, which will likely produce unnecessary uncertainty for both the IRS and taxpayers alike and probably will require subsequent technical corrections legislation.

The new provisions provide significant benefits for those surviving spouses who have been well advised, but in my opinion set unnecessary traps for the unwary due to the new necessity of an election that wasn’t previously required to get the benefits of the default rule, when most non-participant/IRA account holder surviving spouse plan or IRA beneficiaries will want to make the new election.

In my opinion, this is a legislative drafting error as it’s a misplaced default rule, i.e., which is the result you get under the subject law unless you affirmatively elect otherwise. I’m certain that most congressmen and senators didn’t intend to unnecessarily complicate their constituents’ situations, but they have (again), principally due to the inability of the Congress for a decade or more to follow the time-honored legislative procedures, which were victims of the current hyper-partisan nature of national politics. Unfortunately, this change often is going to wind up being quite harmful for certain surviving spouses, yet will be very advantageous for those using so-called “conduit trusts” for surviving spouses, i.e., probably putting an unnecessary premium on getting (and paying for) good advice.

My grade for Congress on Consolidated Appropriations Act, 2023, which includes SECURE 2.0: C-/D+. Too much unnecessary drama; too little actual negotiation, give-and-take, and compromise, and way too much voting on bills that affect our lives without our representatives having first read them.

The result: missed opportunities and flawed legislation that’s not as good as it should’ve been.

Sursum corda.