Secure 2.0 Act of 2022 – Changes to Retirement Savings Accounts

Enacted in 2022, the Secure 2.0 Act codified changes for retirement accounts that may affect your financial plan. Below we summarize some of these major changes. As always, please do not hesitate to reach out to any member of our team with questions or to schedule a meeting to discuss any issue in greater detail.

Rules Effective 2023

New RMD Commencement Age

Beginning in 2023, the age at which required minimum distributions must begin increased from 72 to 73. In 2033, the mandatory RMD starting age increases to 75. Therefore, if you are turning 72 in 2023 (born in 1951), you are not required to take an RMD until 2024.

Relaxed missed RMD Penalty

The excise tax imposed for not taking an RMD from a qualified plan or IRA has been reduced from 50% of the required amount not taken to 25%. However, if the under-distribution is corrected in a timely manner, the excise tax is further reduced from 25% to 10%.

Roth option available for employer contributions

Currently, employer matching contributions are not permitted on a Roth basis and must be made on a pre-tax basis. Employers now have the option to allow employees to decide whether to take employer matching and nonelective contributions on a pre-tax or Roth after-tax basis. The employer may deduct Roth contributions, but employees take Roth contributions as income. Contributions and earnings would be subject to normal Roth rules thereafter.

Rules Effective 2024

Required Automatic 401(k) Plan Enrollment

Unless employees opt out, new 401(k) and 403(b) plans must automatically enroll participants in the plan with a beginning salary deferral of 3% – 10%. Existing plans will not be subject to this provision.

Required Roth treatment for catch-up contributions.

For certain highly compensated employees, catch-up contributions to qualified retirement plans for higher earners are required to be Roth after-tax contributions, even if regular contributions are pretax. Participants with compensation below $145,000 (to be adjusted for inflation) are exempt and can elect pretax or Roth catch-up contributions.

Tax- and penalty-free rollovers from 529 plans to Roth IRAs

Up to $35,000 (lifetime limit) in unused 529 funds may be contributed to a Roth IRA in the name of the beneficiary.

The 529 plan must be open for greater than 15 years

These rollovers will be subject to annual IRA contribution limits.

Student loan payment match

Allows employer matching contributions to be made with respect to qualified student loan repayments rather than (or in addition to) employee elective deferrals. Such matching contributions will count toward safe harbor 401(k) plan requirements and safe harbor automatic enrollment 401(k) plan requirements.

Rules Effective 2025

Increased Catch Up Contributions

The catch-up contribution maximum for employees age 50+ is $7,500 for 2023 ($3,500 for SIMPLE plans) and adjusted for inflation annually. Beginning in 2025, employees age 60–63 will have a higher catch-up limit — 50% more than the regular catch-up limit or $10,000 more, whichever is greater.

Secure 2.0 Act of 2022 – Changes to Retirement Savings Accounts

Rules Effective 2023

Rules Effective 2024

Rules Effective 2025

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