The SECURE 2.0 and RILA Acts were signed into law on December 29, 2022 as part of the FY23 Omnibus Appropriations Act, signed by President Biden. The SECURE 2.0 Act has 92 provisions and affects most employers and employees participating in workplace retirement plans. Clarifications are expected from regulatory agencies in the coming months.
Some of the 2023 provisions include:
- The required minimum distribution age will be raised to 73 (effective January 1, 2023) and 75 (effective January 1, 2033).
- The individual tax penalty for failing to take the required minimum distribution will be reduced to 25% (possibly 10% if corrected within 2 years).
- The limit for purchasing qualified longevity annuity contracts is increased to $200,000 (adjustable for inflation) and is no longer limited to 25% of assets.
- Participants age 50+ can contribute an extra $7,500 in catch-up contributions (increased annually for inflation starting in 2024).
- Employers can give the option to receive matching contributions on a Roth (after-tax) basis.
- Employers can offer incentives to encourage employees to join retirement plans.
Future provisions include:
- Highly compensated participants must make catch-up contributions on a Roth (after-tax) basis starting January 1, 2024.
- Employers can offer student loan repayment instead of contributing to a 401(k) with an employer match.
- Employees can take up to $2,500 per year to pay for long-term care insurance (income tax due on amounts withdrawn).
- Plan sponsors can offer non-highly compensated employees an emergency savings account starting January 1, 2024.
- Most businesses must automatically enroll employees in group retirement plans starting in 2025 (employees can opt-out). The contribution will increase annually to reach 10% (up to 15%) and the federal government will provide a 50% match up to $2,000 for workers earning less than $71,000. Part-time employees can participate if they work 1 year with 1,000 hours or 2 years with 500 hours.
- The catch-up contribution for participants 60-63 will increase to $10,000 starting in 2025 and will be indexed for inflation.