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SECURE 2.0 Brings Changes to Retirement Plans and Planning
Heather Sinclair-Smelley

The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act was signed into law in late 2022. Although some provisions are being phased in over time, the law includes many significant changes that take effect in 2023 and 2024. Below are some that may influence your or your employees’ retirement planning.

Changes Now in Effect

SECURE 2.0 has already made dramatic changes in several areas, including:

Required Minimum Distributions (RMDs)
The first SECURE Act generally raised the age that individuals must start taking taxable RMDs from traditional IRAs and other qualified plans from 70½ years to 72 years. SECURE 2.0 increased the age to 73 years as of Jan. 1, 2023. In 2033, the age will jump to 75 years.

Small Business Startup Tax Credits
SECURE 2.0 doubles the tax credit for employers with up to 50 employees. These small businesses now can deduct 100% of their startup administrative costs, up to $5,000 per year for three consecutive years. Another credit is available for employers’ contributions to new defined contribution, SEP and SIMPLE plans, up to $1,000 per employee. The full credit is available only to employers with no more than 50 employees; the credit phases out between 50 and 100 employees.

Savings Incentives
Employers historically have been prohibited from conditioning bonuses or other benefits on whether employees defer pay to make contributions to retirement plans (other than matching contributions). Now, though, you can provide employees with “de minimis” financial incentives to encourage deferral contributions (for example, gift cards in small amounts). Note, though, that you may not pay for the financial incentives with plan assets.

Related Read: SECURE Act: Changes to 401(k) Plan Eligibility and Vesting for Part-Time Employees

Changes Coming Next Year

A variety of notable provisions will become effective next year, including those addressing:

Matching Contributions for Student Loan Payments
Younger employees with student loan debt have sometimes missed out on the benefit of employers’ matching contributions because their student loan obligations left them without money to put toward their retirement accounts. SECURE 2.0 will allow employers to make matching contributions to retirement accounts based on an employee’s qualified student loan repayments.

Emergency Savings Accounts (ESAs)
Employers will be allowed to establish ESAs for non-highly compensated employees. The accounts will be linked to Roth accounts, and only employees can contribute. New contributions cannot be made if the account balance exceeds $2,500 (or less, at the employer’s discretion). Withdrawals are treated as tax-free qualified Roth distributions and will not trigger the usual 10% early withdrawal penalty.

“Starter” 401(k)s
Employers that do not offer another qualified retirement plan can offer a 401(k) deferral-only plan. The plan must automatically enroll all eligible employees who satisfy age and service requirements, if any, with uniform contributions of 3%-15%. You can exclude union workers. Only employees can contribute, with the amount adjusted for inflation annually. Currently that is up to $6,000 per year, with so-called catchup contributions allowed for employees age 50 or older, which are currently set at $1,000. Starter plans will be treated as automatically satisfying the actual deferral percentage nondiscrimination test and will not be treated as a top-heavy plan.

Section 529 Plan Roth IRA Rollovers
Starting in 2024, owners of Section 529 college savings plans can roll over unused funds to the plan beneficiary’s Roth IRA tax-free. You can move up to $35,000 lifetime, but rollovers are subject to the regular annual Roth contribution limits (the limit for 2024 has not been released as of the time of writing). In addition, the Section 529 plan must have existed for at least 15 years, and contributions made in the previous five years are not eligible.

Roth RMDs
Since their inception in 2006, designated Roth accounts — also known as Roth 401(k)s — have been subject to annual RMDs. SECURE 2.0 eliminates the RMD requirement after 2023. The accounts will not be subject to RMDs until the death of the owner.

Related Read: How will SECURE 2.0 Affect Your Retirement Plan Administration?

Stay Tuned

The provisions outlined above represent only a sampling of those in SECURE 2.0, some of which will not kick in until after 2024. Beginning in 2025, for example, new retirement plans generally must have automatic enrollment, and 2026 will bring important changes to the tax treatment of catchup contributions. We can help you prepare for and take advantage of the changes that affect you.

For more information, contact Heather Smelley at 312.670.7444 or [email protected]. Visit to learn more about our Employee Benefit Plans Services.

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