Broker Check
‘Top 10 List’ of SECURE 2.0 Changes You Should Know

‘Top 10 List’ of SECURE 2.0 Changes You Should Know

| September 15, 2023

Most will be familiar with David Letterman’s ‘Top 10’ lists, where he would – in reverse order – count down his answers to that night’s topic. I have chosen as my topic SECURE 2.0 Act Changes to Employer Sponsored Retirement Plans (mostly, find the bonus item related to 529 college savings accounts). The most immediate changes are listed last. SECURE 2.0 was passed last December and will affect employers and employees now and well into the future.

Number 10     

Employers take note! Retirement plans will be required to provide a paper benefit statement at least once annually unless the participant opts out, by 2026. 

Number 9       

By 2025, the Department of Labor must create and administer a national, online, searchable lost and found database for Americans’ retirement plans. However, this will require plan administrators to provide annual reporting or disposition of balances for vested, terminated participants.

Number 8       

Retirement plans, by 2025, must permit long-term, part-time workers to defer wages into the plan. An employer match is not required though.

Number 7       

New defined contribution plans established in 2023 or later will need to satisfy auto-enrollment and auto-escalation requirements (increase savings rate) by the plan year beginning in 2025. Check with your plan administrator since there are limited exceptions, such as employers with 10 or fewer employees.

Number 6       

Retirement plan participants can benefit from an exception to the early withdrawal penalty, in 2024, for distributions up to $1,000 annually when used for emergency expenses. 

Number 5       

Next year, employers will have the option to “match” employee student loan payments with matching payments to a retirement account, thus giving workers an extra incentive to save for retirement while paying off educational loans.  

Number 4       

Starting in 2024, catch-up contributions for those age 50 and over must be designated as Roth contributions, not pre-tax contributions, for those employees earning greater than $145,000 in the prior year. 

Number 3       

A beneficiary of a long-established 529 college savings account has the option to rollover funds in the student’s name to a Roth IRA up to an aggregate lifetime limit of $35,000, beginning next year.

Number 2       

Allowable now, retirement plan sponsors have the option to allow plan participants to designate the employer match on a Roth basis. This does not affect the employer’s tax-deductible expenses or cost the employer anything. 

Number 1       

Effectively immediately, tax credits for start-up plans have increased. Federal tax credits may cover up to 100% of plan start-up costs for three years up to prescribed limits. Up to $1,000 per employee could be given in tax credits related to employer contributions.  

The SECURE 2.0 Act of 2022 was designed to substantially improve retirement savings options. It was at the center of advocacy efforts during my Capitol Hill visits in July 2022 with the National Association of Plan Advisors.

If you are responsible for a 401(k) plan, or would like to start one, there are plenty of rules and processes to know and follow. Thankfully, you don’t have to navigate them alone when you partner with professionals.