The Secure 2.0 Act
On December 29th, 2022, President Biden signed a spending bill that included the Secure 2.0 Act. Many of the changes go into effect in later years but some went in effect January 1st, 2023. The law attempts to help Americans plan and save for retirement. The act requires an increased amount of automatic enrollment in employer retirement savings plans, increases catch-up limits, sets the age for RMDs (required minimum distributions) higher, and allows you to make penalty-free withdrawals in case of emergency.
In 2025, part-time workers who work at least 500 hours annually over the last 2 years are now eligible for 401(k) enrollment.
Employers can also choose to provide matching contributions to retirement plans based on an employee’s student loan payments beginning in 2024. These matching contributions are deposited straight into the retirement fund.
The federal government is also providing assistance in retirement savings by providing a 50% match of what the individual contributes up to $2,000 for workers earning less than $71,000 per year. This amount will be directly deposited in to the taxpayer's retirement account, and this addition begins in 2027.
Beginning in 2025, SECURE 2.0 also requires new 401(k) and 403(b) plans to enroll participants automatically, once they become eligible.
Employers without a retirement plan may establish a starter 401(k) or safe harbor 403(b) beginning in 2024.
For small employers, with no more than 50 employees, the startup credit for retirement plans has been increased from 50% to 100% beginning in 2023.
Employers may offer de minimis financial incentives for enrolling in a retirement plan for plan years beginning after December 31, 2022.
The Act increases the age for RMDs from 72 to 73 as of January 1, 2023. In 2033, the RMD age will raise to 75.
In 2025, individuals age 60 through 63 who qualify will be able to contribute the greater of $10,000 or 150% of the standard age 50 catch-up contribution..
Beginning in 2024, all catch up contributions for those whose annual salary is greater than $145,000 will be treated as Roth contributions.
Catch-up contributions will be indexed for inflation beginning in in 2026.
RMDs for Roth employer retirement accounts will no longer be required beginning in 2024.
SEP and SIMPLE IRAs are allowed to offer Roth options beginning in 2023.
The Act allows penalty-free rollovers from a 529 college savings account to a Roth IRA. This does include limitations:
- The lifetime rollover limit is $35,000
- The annual rollover limit is equal to that of the annual IRA contribution limit. IRA contributions that you make during the year will count towards this limit.
- The individual must be the beneficiary of the 529 plan to rollover to their IRA
- The 529 plan must be open for at least 15 years.
- Contributions from the last 5 years are not eligible for rollover.
- This provision takes effect in 2024.
SECURE 2.0 also allows a one-time, $50,000 charitable contribution from your retirement account through charitable remainder unitrusts, charitable remainder annuity trusts, and charitable gift annuities, beginning in tax years after 2022.
The effective dates for many of these changes vary, so it is imperative to be aware of all of the dates listed. Although some revisions may seem several years away, it is beneficial to begin planning now for retirement savings accounts.