The SECURE 2.0 Act of 2022 is a law designed to substantially improve retirement savings options. With over 92 different retirement plan provisions, we want to make it easier for employers, fiduciaries and administrators to digest. In this summary, we focus on the most common sections that are most applicable in your leadership position.



 

Effective 2023

 

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Roth Employer Contributions

Employers may now choose to offer matching or nonelective contributions as Roth contributions.

 

Small Incentives for Contributing to a Plan

To help boost participation, employers can now offer low-dollar amount incentives, such as gift cards, as long as they are not paid from plan assets.

 

Tax Credits

For new retirement plans, companies with up to 50 employees can claim up to 100% of the start-up administration costs (max $5,000). And for the employees who make less than $100,000, employers can claim an additional $1,000 per person, in which employers could apply the credit toward a matching contribution (max $50,000).

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Age Increases for Requirement Minimum Distributions

Individuals can wait until age 73 (previously 72) to take a mandatory retirement savings withdrawal. Starting 2033, the RMD age is increased to 75 years old.

 

Military Spouses

Employers can claim up to a $500 retirement plan tax credit if they allow employees who are spouses of uniformed services to save through the company’s retirement plan.

 

Required Minimum Distribution Excise Tax Reduction

Missing an RMD can cost older people greatly. New provisions reduce this pricey penalty from 50% to 25% and if the failure is corrected in a timely manner, the penalty is reduced to 10%.

 

Expand Self-Correction Program

Allows for easier plan corrections of loans through the Employee Plans Compliance Resolution System (“EPCRS).

 

Self-Certify for Hardship Distribution

Employees may self-certify they are going through a hardship and need access to their retirement funds.

 

Penalty-Free Withdrawals for Terminal Illness

Terminally ill individuals may withdraw retirement funds without being subject to the 10% early distribution tax penalty.

 

Cash Balance Calculations

New rules clarify and cap the maximum interest rate at 6%, which will provide larger pay credits for older, longer service workers.

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Penalty-Free Withdrawals for Federally Declared Disasters

Permanent rules go into effect that allow up to $22,000 to be distributed from a retirement plan or IRA for affected individuals and are not subject to the 10% early distribution tax penalty. Retroactively effective from January 26, 2021.

 

 

Effective Date 2024

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Roth-Required Catch-Up Contributions (DELAYED)

On August 25th, the IRS issued Notice 2023-62 granting a two-year delay in the Roth catch-up requirements. See "Effective 2026.".

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RMDs Not Required for Roth 401(k) and 403(b) Accounts

Retirement plan savings in designated Roth 401(k) and 403(b) accounts are no longer subject to RMD rules. This means employees’ accounts can continue growing tax-free.

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Emergency Withdrawals

An employee may claim a personal emergency and access up to $1,000 from their retirement plan. They can take one distribution per year and have the option to repay it within three years. If repaid and they have another personal emergency expense, they can take another distribution. If not repaid within three years, they cannot take another distribution.

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Matching Student Loans

For employees who are paying down student loans, employers will be able to apply the retirement plan’s matching formula to that repayment amount and deposit the match into the workplace retirement savings plan. This helps the employees save for retirement while getting out of debt.

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Force-Out Rollover Limit

Under current law, employers may transfer former employees’ retirement accounts from a workplace retirement plan into an IRA if their balances are between $1,000 and $5,000. This section increases the upper limit from $5,000 to $7,000.

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Automatic Portability

This provision makes it easier to move retirement accounts from a former employer to the new employer. By allowing for automatic portability, it helps to reduce future missing participant issues, supports employers with clean participant data and helps employees by consolidating retirement savings accounts.

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“Side Car” Emergency Savings Account

New payroll deduction account that is for short-term emergencies. Non-highly compensated workers could be automatically enrolled at 3% and can save up to $2,500 in this Roth account. They can access the account tax- and penalty-free.

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Starter 401(k) Plans

If an employer does not offer a retirement plan, there is a new barebones option. The plan only allows employee deferrals. Eligible employees are auto-enrolled and the maximum savings amount is $6,000. This is similar to State IRA plans.

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Retirement Lost and Found

A new national online searchable database to locate retirement accounts.

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Penalty-Free Withdrawals for Victims of Domestic Abuse

Domestic abuse survivors may withdraw the lesser of $10,000 or 50% of their retirement account.

 

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Effective Date 2025

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Improving Retirement Plan Access for Part-Time Workers

Long-term, part-time employees who meet the eligibility requirements will be allowed to save through the company’s retirement plan. For part-time employees, it is important to have a good time tracking system in place because eligibility rules are retroactive. The stated eligibility rules are for employees who work for two consecutive 12 month periods during each of which they have at least 500 hours of service. Employers are not required to match contributions.

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Automatic Enrollment and Escalation| Retirement Savings on Autopilot

All new 401(k) and 403(b) plans are required to automatically enroll participants and auto-escalate savings. The employer will set the introductory deferral amount between 3 – 10% and the deferral amount increases by 1% up to 10 – 15% retirement savings per year.

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Higher Catch-Ups for 60 - 63 Years Old Employees

Employees between the 60 – 63 years old who are looking to maximize retirement savings will be allowed to increase their catch-up contribution to $10,000 in 401(k), 403(b) and governmental plans. For individuals who make more than $145,000, the catch-up must be a Roth contribution.

 

Effective Date 2026

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Roth-Required Catch-Up Contributions

The Roth catch-up contribution provision, initially set to start in early 2024, was postponed for 2 years. This provision is applicable to employees aged 50 and above, earning over $145,000, who intend to maximize their retirement savings through catch-up contributions. For these employees, catch-up contributions must be in the form of Roth contributions. If an employee earns less than $145,000, they have the option to choose either pretax or Roth contribution types. Please note that plans must permit Roth contributions in order for this provision to be accessible. The delay aims to ensure a smooth transition and compliance for retirement plans and sponsors. Effective January 1, 2026.

 

Effective Date 2027

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Enhance and Promote Saver’s Match

As part of the mission of SECURE 2.0 Act, the Saver’s Match sections are to increase access to savings opportunities and to increase retirement savings. The Saver’s Match is designed to help low-to-moderate income workers save more for retirement through a Treasury matching program. To qualify for the match, employees must be 18 years or older and make up to $41,000 but not more than $71,000. Treasury to match 50% of their retirement plan contribution up to $2000. Stated another way the Treasury will put $1000 in “free” money into that participant’s account. The original program, called the Saver’s Credit, is available now. For more information, visit IRS’ website.

 

 

We hope that you found this high-level summary helpful. As always, we are here to be a resource to you and are available to discuss your retirement plan details in more depth. This information is not all-encompassing. Please consult our team, legal council and retirement plan service providers for more specific information.

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SECURE Act Resources​

 

Senate Finance Committee Summary