Big Changes To Retirement Plan Rules with SECURE 2.0

James Lee |

In December of last year, Congress passed the so-called SECURE 2.0 Act of 2022. SECURE 2.0, which had rare bipartisan support, was enacted as part of a larger omnibus spending bill. The goal of the new law is to help Americans save and prepare for retirement.

The following highlights some of the major provisions of SECURE 2.0:

  1. Required Minimum Distributions Are Pushed Back
    • The age at which owners of qualified retirement accounts are required to take minimum distributions have been pushed back from the current age of 72 to:
      • For those born between 1951-1959, the new RMD age is 73
      • For those born after 1960, the new RMD age is 75
  2. Roth accounts associated with employer plans (Roth 401ks, Roth 403bs) will no longer be subject to RMDs, putting them on par with Roth IRAs, effective 2024.
  3. Authorizes Roth SIMPLE IRA and SEP IRA accounts.
  4. Allows employers to provide employees with the option of receiving matching retirement account contributions in Roth IRA accounts.
  5. Higher Catch-Up Contributions for Older Savers
    • Starting in 2025, individuals ages 60-63 will be able to make catch-up contributions up to $10,000 per year to a workplace plan (from the current $7,500 available to those 50 and older). However, if you earn more than $145,000 (adjusted for inflation) in the prior calendar year, all catch-up contributions will need to be made in a Roth IRA account with after-tax dollars.
  6. Limited transfer of 529 plan assets into Roth IRAs.
    • Beginning in 2024, assets in 529 accounts that have been opened for at least 15 years, may be eligible for transfer to a Roth IRA. There are limitations:
      • The Roth IRA must be in the name of the beneficiary of the 529 plan;
      • Any contributions made to the 529 plan within the last 5 years are ineligible to moved to a Roth IRA;
      • The annual limit for the transfer is the IRA contribution for the year;
      • The aggregate lifetime limit for 529 plan to Roth IRA transfers is $35,000.
  7. Authorizes employers to establish Emergency Savings Accounts associated with defined contribution plans (like 401ks) that is a designated Roth account for non highly-compensated employees, effective 2024.  Contributions would be limited to $2,500 annually, and first 4 withdrawals in a year would be tax- and penalty-free.

In all, there are over 90 new provisions that make up SECURE 2.0. If you have questions on how SECURE 2.0 may impact you, please contact us.