What is it?
The SECURE 2.0 Act went into law December 23, 2022, as part of the Consolidated Appropriations Act. It is expected to reshape retirement tax incentives for years to come. It includes (but is not limited to), 401(k), 403(b), IRA, and Roth accounts. The changes are designed to encourage more workers to save for retirement. There are nearly 100 provisions in the SECURE 2.0 Act, some of which are in place now or will become effective in the coming year(s). A few key provisions are highlighted in the summary below. Our team is abreast of current legislation, so if there is a particular issue you would like further detail or information on, we are happy to discuss it more in depth with you.
Contributions and Withdrawals
Employer contributions can be Roth. Plan sponsors are now allowed to let participants elect to receive their matching and QNEC (corrective qualified non-elective contributions) on a Roth basis. These contributions must be 100 percent vested and are optional.
There are additional provisions and options for varying types of withdrawals, such as those dedicated for emergencies and federally declared disasters.
Student Loans and Part-Time Employees
Sponsors can make matching contributions to the plan based on student loan payments made by employees outside of the plan. This option must be made available to all employees eligible to receive matching on elective deferrals, and must be at the same rate as elective deferrals.
In the first SECURE Act, it stated that part-time employees who complete 500 hours in three consecutive years are allowed to save. SECURE 2.0 Act lowers that threshold to two consecutive years, and expands coverage to 403(b) plans.
Summary – What You Should Be Doing Now?
Plan amendments for SECURE 2.0 are not required to be adopted until the last day of the first plan year that begins on or after January 1, 2025 (January 1, 2027, for collectively bargained plans).
If your plan does not contain Roth sources, you should begin the process of adding Roth to your plan. Bear in mind that most of the major lift projects start in 2024. Your organization should know which direction it is going before the providers are ready to implement, and will take time for coordination of all the moving parts.
Finally, ask a lot of questions and pay attention to updates. The rules around this law will fluctuate. The Employee Benefit Plan Team at Templeton will stay on top of these changes and will be sure to keep you abreast. As always, if you have any questions, please contact me [email protected] or 561-798-9988.
SECURE 2.0 Act Timeline
| 2023 & Before
– Roth Employer Contributions * – Disaster Withdrawals – Terminal Illness Withdrawals – Self-Certification of Hardship* |
– Small Financial Incentives
– All Administrative Provisions – RMD Penalty Reduction |
| 2024
– Student Loan Matching* – Roth Catch-Up Over $145K – Pension Linked Savings Accounts* – Emergency Withdrawals |
– Domestic Abuse Withdrawals*
– Auto-Portability – Top Heavy Rules – Retirement Lost and Found |
| 2025
– Increased Catch-Up – Paper Statements – Part-Time Workers* |
2026
Long Term Care Withdrawals 2027 Savers Match 2033 RMD Age Increase |
*Should begin discussion now