Secure 2.0 Act in Omnibus Bill

In December 2022, the Secure Act 2.0 was passed. As we get farther into 2023 more conversations are developing around the topic, so we wanted to provide you with a reminder of some of the big takeaways.

Required minimum distribution ages increased starting on 1/1/2023:

• Increased to 73 years old until 2032
• Will be increased yet again to 75 on 1/1/2033

Changes to catch-up contributions:

• Anyone making over $145,000 will be taxed on their catch-up contributions in the year that they are contributed to the account (treated as ROTH) beginning in 2024.
• In 2025 the limit for catch-up contributions will be increased to $10,000 to 401(k) and SIMPLE plans for individuals ages 60, 61, 62, and 63.

Automatic enrollment is required for 401(k) and 403(b) plans:

• Plans must start with at least 3% (maximum of 10%) in year 1.
• Each year after that amount is increased by 1% until it reaches at least 10%, but not more than 15%.

Credit for small employe pension plan startup costs:

• 100% of startup costs credit for employers joining a MEP with up to 50 employees
  • Phase out begins after 50 employees
• Startup tax credit only applies to the first 3 years that a plan is in existence for tax years beginning in 2020.

Employer matching contributions for student loan payments:

• Employers are permitted to make matching contributions to a 401(k), 403(b), or SIMPLE IRA plan to employees who are repaying their student loans starting in 2024.

Emergency expense withdrawals:

• An exception to the 10% tax penalty for early distributions from 401(k) and traditional IRA plans now exists.
  • The exception is for distributions for emergency expenses.
    • Limited to $1,000 per year
    • Repayment must be made within 3 years
    • No additional emergency distributions are permissible during the 3-year period until repayment occurs.

Retirement plans for part-time workers:

• Employers with 401(k) plans are required to maintain dual eligibility requirements for employees to qualify.
  • Employees must complete either 1 year of service (1000 hours)
  • Or complete 2 consecutive years of service (500 hours)

Please reach out to our experts with any questions, or if you would like expanded information on anything listed.