Key Provisions of the SECURE 2.0 Act

What is the SECURE 2.0 Act and what are its likely impacts on you?

With over 90 provisions impacting retirement savings, the SECURE 2.0 Act will have far-reaching and lasting impacts on Americans for many years to come. In 2019, Congress enacted the Setting Every Community Up for Retirement Enhancement (SECURE) Act. This legislation made significant changes to rules around retirement savings by eliminating age limits for some IRA contributions and raising the age of required minimum distributions.  

Then, in late 2022, Congress passed a revised version of this legislation, the SECURE 2.0 Act, to further enhance how Americans can save and access money in their retirement accounts. By breaking down barriers and simplifying processes around saving for retirement, SECURE 2.0 aims to encourage everyone, particularly those from lower-income groups, to save and invest in their financial security for their post-retirement years.

SECURE 2.0 increases access to retirement accounts and tax benefits

Whether you are a business owner, retiree, older worker, part-time worker, or student, the SECURE 2.0 Act is likely to change how you plan and save for retirement.

Some of the provisions that are likely to have broader impacts include:

• An increase in the age limit for required minimum distributions from 73 to 75
• Elimination of required minimum distributions for Roth IRA savings
• Increased catch-up limits & cash-out limits
• Opportunities to take penalty-free early distributions for emergency expenses, and opportunities for emergency savings accounts within some retirement plans
• providing domestic abuse survivors with more access to savings
• New savers’ matching contribution up to $2,000
• Allowing employers to make matching or non-elective Roth contributions
• Expansion of pooled employer 403(b) plans and allowing investments in collective investment trusts with other tax-preferred savings plans and IRAs
• Automatic enrollment requirements of eligible participants for new 401(k) or 403(b) plans established after 2024
• Allowing employers to contribute to workplace savings plans on behalf of employees repaying student loans
• The opportunity to roll-over of excess 529 Plan balances to Roth IRAs

This list only includes some of the provisions of the plan. Other provisions may impact a smaller audience, but all are designed to encourage increased retirement savings.

Who is impacted by the new law?

The law provides new options for employers to help employees save for retirement. It makes it easier for small businesses to establish retirement savings plans. It provides increased flexibility for retirees to use and manage their retirement savings. Provisions in the act even allow emergency savings and distributions in some retirement plans to encourage savings at all income levels. Students who are repaying education loan debt can have their payments counted as a salary deferral to a 401(k) or 403(b) plan. And excess 529 Plan college savings can be converted to Roth IRA.

Business owners will want to explore the increase to the startup credit that can cover 100% of administrative costs (up to $5,000) for the first 3 years of a new retirement plan. If your business offers 401(k) or 403(b) plans, most businesses will need to automatically enroll eligible participants in the plan.

Older workers can take advantage of increased catch-up contribution limits. The act gives retirees greater control of their savings by eliminating RMDs for Roth IRAs and increasing the age for required minimum distributions.

When does the SECURE 2.0 Act take effect?

Many of the 92 provisions included in SECURE 2.0 take effect in 2023 and 2024. Yet, some other provisions don’t kick-in until later years. The act is likely to change how Americans save and plan for retirement for at least the next decade. Hopes are high that SECURE 2.0 will have a positive impact on retirement savings for most people. However, there is potential that it may not. To understand your opportunities and potential pitfalls created by SECURE 2.0, we recommend sitting down with your financial and tax advisors to review your specific situation.

If you’re interested in learning more about the SECURE 2.0 Act, reach out to us. We can help you gain better understanding of ways to incorporate the impacts of its many provisions in your financial decision-making process. And, we can help you explore opportunities to decrease your tax burden, increase your retirement savings, and better prepare for retirement. By understanding the potential opportunities and risks, you can help create a secure future not just for yourself, but also for your family and your employees.

Creating a secure financial future through employer-sponsored retirement plans

The SECURE 2.0 Act is an important new piece of legislation that will impact retirement planning and investments for most Americans. It significantly expands access to retirement accounts and increases tax benefits for retirement plan participants. Employer-sponsored retirement plans continue to be a vital part of retirement for most Amercians. And the Act’s inclusion of “stretch” provisions make them more flexible for employees. The rules have been changed for rollovers from IRAs to 401(k)s or other employer plans, and investors should have good understanding of the Act’s requirements regarding minimum distributions.

In today’s ever-changing economic landscape, it is essential to be proactive about saving money and investing wisely. Employer-sponsored retirement plans, such as a 401(k), offer an organized and structured approach to investing. Moreover, these retirement plans typically provide a level of ease and accessibility that many individuals might not have if they were to attempt investing on their own. Businesses benefit as well, with these plans serving as a valuable tool to attract and retain top talent. And the SECURE 2.0 Act of 2022 encourages employees to prioritize their retirement goals by easing the burdens of partipcation.