On December 29, 2022, President Joe Biden signed into law SECURE 2.0, a landmark retirement package. The SECURE 2.0 Act includes many new provisions that become effective over various dates through 2026. Some of the most notable provisions include:
- Required Minimum Distributions (RMDs): Under current law, RMDs must begin at age 72. Under SECURE 2.0, this is increased to 73 beginning in 2023.
- 401(k) Financial Incentives: SECURE 2.0 allows employers to offer small financial incentives, such as low-value gift cards, to boost participation rates effective for plan years after December 2022.
- Emergency Distributions: Starting in 2024, SECURE 2.0 allows participants to take early emergency distribution from their retirement plan to cover immediate and unforeseen financial needs. These distributions may be up to $1,000, can be taken once per year and will not be subject to the usual 10-percent tax penalty for early distributions. If such distributions are not repaid within a certain window, another may not be taken for three years.
- Automatic Enrollment: Starting in 2025, SECURE 2.0 expands automatic enrollment. 401(k) and 403(b) plans will be required to automatically enroll eligible participants unless they opt out of participation.
- Catch-Up Contributions: SECURE 2.0 increases allowable catch-up contributions beginning in 2025. Participants that are 60-63 years old can contribute $10,000 or 50 percent more (whichever is greater) than the regular catch-up amount. After 2025, such amounts will be indexed for inflation.
- Coverage for Part-Time Workers: SECURE 2.0 reduces the three-year service requirement for long-term, part-time employees to two years and expands this requirement to ERISA 403(b) plans.
SECURE 2.0 promises to have a significant impact on retirement planning and retirement plan administration.
For further questions, please contact a member of GHJ’s Employee Benefit Plan team.