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Secure Act 2.0



In December 2022, Congress passed an Omnibus appropriations bill for the remainder of Fiscal Year (FY) 2023, and President Joe Biden signed it into law. The Omnibus included the bipartisan SECURE 2.0 Act of 2022, which aims to bolster Americans’ retirement savings.

Building on the bipartisan Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, SECURE 2.0 is the product of four bipartisan legislative proposals coming out of the tax and labor committees of the House and Senate. Together, the 2019 and 2022 Acts are widely seen as the most significant reform to retirement policy in over a decade, impacting virtually all types of retirement plans.

At a high level, SECURE 2.0 contains a number of broadly applicable changes for employers and plan sponsors. Generally, the majority of the changes under the legislation do not take effect until 2024 or 2025, but some provisions will impact plans in 2023.


Key Provisions

  • Automatic enrollment (2025). Section 101 requires certain newly established 401(k) and 403(b) plans to automatically enroll participants when they become eligible (although employees may opt out at any point). The initial automatic enrollment amount is at least 3% but not more than 10%. Each year thereafter, that amount is increased by 1% until it reaches at least 10%, but not more than 15%.


  • Small business startup credit (2023). Section 102 increases the startup credit from 50% to 100% for employers with up to 50 employees to cover administrative costs associated with setting up retirement plans.


  • Saver’s match (2027). Section 103 repeals and replaces the Saver’s Credit with respect to Individual Retirement Account (IRA) and retirement plan contributions, changing it from a credit paid in cash as part of a tax refund into a federal matching contribution that must be deposited into a taxpayer’s IRA or retirement plan.


  • Secure 2.0 allowed retroactive first year 401(k) elective deferrals for Sole Proprietors. Now businesses that are set up as sole proprietorships can make 401(k) contributions before the tax return deadline of the business as if they have been funded before the end of the year.


  • Mandatory distribution age (in phases). The bill increases the required minimum distribution (RMD) age from 72 to 75 through a phased-in implementation – 73 for a person who attains age 72 after Dec. 31, 2022, and age 73 before Jan. 1, 2033, and then 75 for an individual who attains age 74 after Dec. 31, 2032.


  • IRA catch-up limits (in phases). Under current law, the limit on IRA contributions is increased by $1,000 (not indexed) for individuals who have attained age 50. There will be a special catch-up contribution for a certain age group of participates – age 60, 61, 62 and 63. It increases the catch-up limits to the greater of $10,000 or 50% more than the regular catch-up amount in 2025.


  • Treatment of student loan payments as elective deferrals for the purposes of matching contributions (2024). When it comes to student loan payments, employers will be able to amend the plan to allow matching contributions to those individuals that are paying off their student loans.


  • Emergency withdrawals (2024). Section 115 provides for an exception from the 10% tax on early distributions for certain distributions used for emergency expenses, which are unforeseeable or immediate financial needs relating to personal or family emergency expenses. Only one distribution is permissible per year of up to $1,000, and a taxpayer has the option to repay the distribution within three years.


  • Starter 401(k) plans (2024). Section 121 permits an employer that does not sponsor a retirement plan to offer a starter 401(k) plan (or safe harbor 403(b) plan).


  • Part-time workers (2025). As established in the 2019 SECURE Act, employers maintaining a 401(k) plan must have a dual eligibility requirement under which an employee must complete either one year of service (with the 1,000-hour rule) or three consecutive years of service (where the employee completes at least 500 hours of service). Section 125 reduces the three-year rule to two years.


  • Rollover of excess 529 assets to a Roth IRA (2024). Certain assets in a 529 qualified tuition program will be allowed to be directly rolled over tax-free to a Roth IRA mainly for the benefit of the beneficiary of the 529 account. Such rollovers would only be permitted from 529 accounts that have been maintained for at least 15 years. The rollovers from 529 accounts would be subject to a lifetime limit of $35,000.