6 Important Provisions of the SECURE 2.0 Act
December 22, 2022
At a glance
- Main takeaway: The SECURE (Setting Every Community Up for Retirement Enhancement) 2.0 Act looks like it will become law before the end of 2022. In it are important new provisions for retirement plan savings for employers and employees.
- Impact on your business: It’s important to understand the provisions of the pending legislation and how they impact both businesses and individuals. Among the highlights are a requirement for 401(k) and 403(b) plans to automatically enroll participants upon becoming eligible and the establishment of a new “Starter K” retirement plan that could expand retirement plan coverage to 19 million American workers.
- Next steps: The SECURE Act 2.0 is likely to pass and when it does, it’s important to discuss with your advisor how you may need to modify your current plan to meet or take advantage of the new requirements. Aprio’s Retirement Plan Services team can help you navigate and manage all aspects of your retirement plan.
Schedule a complimentary plan review with our Retirement Plan Services team today.
The full story:
The SECURE 2.0 Act has been on Aprio’s radar since last spring when we wrote about its potential provisions. Now, as we head into the end of 2022, it’s looking like the Act will become law, and with it, several provisions will be implemented to make it easier for employees to save more for retirement.
Six are worth highlighting briefly because come January 1, they will likely be new realities for many American employers and workers.
6 provisions of the pending SECURE 2.0 Act
Many of the provisions are good news for employers and employees, and were supported by the American Retirement Association. The new act is the product of three separate acts and more than 10 years of work by lawmakers to bring it to fruition.
1. A new “Starter K” provision will allow employers that don’t currently sponsor a retirement plan to offer a 401(k) or 403(b) plan. Importantly, this provision could expand retirement savings coverage to 19 million more Americans who aren’t saving enough for retirement to provide more security for themselves later in life. AARP research shows that 57 million people — which makes up about half of all working Americans — don’t have access to an employer-sponsored retirement savings plan. Since that is the easiest way to save for retirement, expanding access is critical to helping more people prepare for retirement.
2. An enhanced “Saver’s Match” will change the existing Saver’s Credit from a credit paid in cash as part of a tax refund to a government matching contribution. If passed, that contribution would then be required to be deposited into an IRA or other retirement plan.
3. A new “Pension-Linked” emergency savings account will allow one distribution of $1,000 per year for certain financial expenses related to emergencies. The person making the withdrawal would have three years to repay the amount.
4. The ability to rollover a 529 plan to a Roth IRA would be particularly helpful for young people who did not use all of the 529 plan savings to redirect those funds to their own retirement. While certain conditions will need to be met, a potential amount of up to $35,000 could be rolled over the course of a lifetime from a 529 plan into a Roth IRA in the same name.
5. The age for required minimum distributions (RMDs) would increase if the SECURE 2.0 Act is passed. In 2019, the original SECURE Act increased the RMD age from 70 ½ to 72. Version 2.0 would increase the RMD age to 73 on January 1, 2023, then to 74 on January 1, 2030, and finally to 75 on January 1, 2033.
6. Employers could help workers with student loan debt start saving earlier for retirement with contributions that match their employees’ student loan payments. Since time is critical to growing the money needed to achieve financial security during retirement, such a provision could help younger workers start saving earlier and could help employers attract younger workers to their teams.
We’ve written elsewhere about other important provisions of the potential legislation. Learn more about those here.
The Senate is expected to take procedural steps to pass the SECURE 2.0 Act as part of an omnibus spending bill by Thursday. Then, it will be sent to President Biden for his signature before the deadline to pass the bill arrives on Friday, December 23, 2022.
The bill, which is a massive 4,000 pages long, can be accessed here. The SECURE 2.0 Act language begins on page 2,046.
The bottom line
It’s important to understand the final provisions of the SECURE 2.0 Act and how they affect you as a small business owner and worker. Aprio’s Retirement Plan Services Practice will be digging into the legislation and will be ready to help you make sense of it, as well as help you make the most of it for yourself and/or your employees.
Aprio’s Retirement Plan Services team can help you make sense of regulations, including the provisions of the SECURE 2.0 Act, that affect your retirement savings plan. Schedule a consultation today!