THE SECURE ACT 2.0

Just before the end of last year, Congress passed an expanded version of the SECURE Act of 2019, its major retirement plan legislation. President Biden signed the bill into law on December 29, 2022. Known as the SECURE Act 2.0, this update continues with the intent to improve retirement security for more Americans.

What do you need to know about the latest version? How will it affect your retirement planning?

As usual, lawmakers passed the update at the last moment before year end, and there’s a lot to unpack in its 92 provisions. Financial advisors and employers are working through all the information so we can communicate the broad-reaching implications to customers and employees.

The bigger takeaways include:

• Another increase of the starting age for Required Minimum Distributions (RMDs)

• More employer plan options and contribution opportunities

• New and enhanced tax credits

• Certain rollovers from 529 accounts to Roth IRAs

What has changed on RMDs?

The initial SECURE Act raised the age at which retirement plan distributions must begin from 70 ½ to 72. SECURE 2.0 further increases the age to 73 for individuals who reach age 72 after 2022.

So if you’ll celebrate your 72nd birthday any time after December 31, 2022, you won’t have to take an RMD from your retirement plan until your 73rd birthday.

by JACOB HOVENDICK rjfs branch manager

For those who reach age 74 after 2032, the age will be increased to age 75. So if you’re 64 or younger now, your RMD age will be 75.

Here is a quick look at some of the provisions, applicable plans, and effective dates:

Provision Applicability Effective Date

Increase the starting age for RMDs

Enhance the new plan startup credit for small employers

Provide tax credits for plan contributions made by small employers

Permit employer matching contributions on a Roth basis

Give small incentives for contributing to a plan

Require catch-up contributions to be made on an after-tax Roth basis

Permit matching contributions on behalf of employees who are repaying student loans

Increase the catch-up amount for individuals aged 60, 61, 62 and 63

Create in-plan emergency savings accounts

Permit certain rollovers from 529 accounts to Roth IRAs

Qualified plans (e.g., 401(k) plans), traditional IRAs, 403(b) and 457(b) plans

Qualified plans, SIMPLE IRA and Simplified Employee Pension (SEP) plans

Qualified plans, SIMPLE IRA and Simplified Employee Pension (SEP) plans

401(k), 403(b) and 457(b) plans

401(k) and 403(b) plans

401(k), 403(b) and 457(b) plans

401(k), 403(b), 457(b) and SIMPLE IRA plans

401(k), 403(b), 457(b) and SIMPLE IRA plans

401(k), 403(b) and 457(b) plans

529 plans

Age 73 for individuals who reach age 72 after 2022; age 75 for those who reach age 74 after 2032

Tax years beginning after 2022

Tax years beginning after 2022

December 29, 2022

Plan years beginning after December 29, 2022

Tax years beginning after 2023

Plan years beginning after 2023

Tax years beginning after 2024

Plan years beginning after 2023

Distributions after 2023

Source: JPMorgan.com