SECURE 2.0 – Proposed Retirement Plan Changes and What They Mean
Published on by Joe Conover in Benefit Plan Audits
The Securing a Strong Retirement Act easily passed the House last week. Labeled “SECURE 2.0” by many, given it builds on some of the provisions recently passed by the SECURE Act. Designed to expand retirement plan coverage and increase savings, the proposed changes impact both individuals and companies. Here are some of the highlights:
- The Act requires that many Sections 401(k) and 403(b) plans to automatically enroll eligible participants beginning with plan years after December 31, 2023. Plans with fewer than 10 employees, early-stage companies, and church and governmental plans would be exempt from this automatic enrollment requirement. Consistent with current automatic enrollment features, employees could always opt-out of deferring.
- Allow companies to make qualifying matching contributions to the employees’ retirement account for employees paying off student loans who don’t contribute enough to receive the full match.
- The required age for taking required minimum distributions was increased from 70 ½ to 72 under the SECURE Act and would further increase to 73 beginning next year, 74 in 2030, and 75 in 2033 under SECURE 2.0.
- Increase the maximum catch-up contributions limit from $6,500 to $10,000 for employees between 62 and 64, beginning in 2024.
- Reduce the eligibility requirements for long-term, part-time employee provisions of the SECURE Act from three years of service to two years.
- Certain individuals are currently eligible for a tax credit on the individual tax return for making retirement plan contributions, known as the Saver’s Credit. This act increases the credit to a flat 50% of qualified retirement savings limitations from today’s range of 10% to 50% based on adjusted gross income and increases the phaseout range as well.
Some level of change is expected given SECURE 2.0 passed the House with a 414-5 vote, and it’s bipartisan-led. Stay tuned as the act works its way through the Senate.
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