Big Changes To Retirement Plan Rules with SECURE 2.0
In December of last year, Congress passed the so-called SECURE 2.0 Act of 2022. SECURE 2.0, which had rare bipartisan support, was enacted as part of a larger omnibus spending bill. The goal of the new law is to help Americans save and prepare for retirement.
The following highlights some of the major provisions of SECURE 2.0:
- Required Minimum Distributions Are Pushed Back
- The age at which owners of qualified retirement accounts are required to take minimum distributions have been pushed back from the current age of 72 to:
- For those born between 1951-1959, the new RMD age is 73
- For those born after 1960, the new RMD age is 75
- The age at which owners of qualified retirement accounts are required to take minimum distributions have been pushed back from the current age of 72 to:
- Roth accounts associated with employer plans (Roth 401ks, Roth 403bs) will no longer be subject to RMDs, putting them on par with Roth IRAs, effective 2024.
- Authorizes Roth SIMPLE IRA and SEP IRA accounts.
- Allows employers to provide employees with the option of receiving matching retirement account contributions in Roth IRA accounts.
- Higher Catch-Up Contributions for Older Savers
- Starting in 2025, individuals ages 60-63 will be able to make catch-up contributions up to $10,000 per year to a workplace plan (from the current $7,500 available to those 50 and older). However, if you earn more than $145,000 (adjusted for inflation) in the prior calendar year, all catch-up contributions will need to be made in a Roth IRA account with after-tax dollars.
- Limited transfer of 529 plan assets into Roth IRAs.
- Beginning in 2024, assets in 529 accounts that have been opened for at least 15 years, may be eligible for transfer to a Roth IRA. There are limitations:
- The Roth IRA must be in the name of the beneficiary of the 529 plan;
- Any contributions made to the 529 plan within the last 5 years are ineligible to moved to a Roth IRA;
- The annual limit for the transfer is the IRA contribution for the year;
- The aggregate lifetime limit for 529 plan to Roth IRA transfers is $35,000.
- Beginning in 2024, assets in 529 accounts that have been opened for at least 15 years, may be eligible for transfer to a Roth IRA. There are limitations:
- Authorizes employers to establish Emergency Savings Accounts associated with defined contribution plans (like 401ks) that is a designated Roth account for non highly-compensated employees, effective 2024. Contributions would be limited to $2,500 annually, and first 4 withdrawals in a year would be tax- and penalty-free.
In all, there are over 90 new provisions that make up SECURE 2.0. If you have questions on how SECURE 2.0 may impact you, please contact us.
