On December 29, 2022, President Biden signed into law the SECURE Act 2.0 of 2022. SECURE 2.0 builds on the reforms included in the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, the most comprehensive changes to the U.S. private retirement system in over a decade.
Best practices: Mandatory Roth Catch-Up Contributions under SECURE 2.0
Beginning January 1, 2026, plan sponsors must implement Roth catch-up contributions for retirement plan participants age 50 or older earning over $145,000 in FICA wages, as mandated by SECURE 2.0. The IRS’s final regulations emphasize good faith compliance, coordination among stakeholders, and proactive communication. This guide outlines best practices for payroll providers, recordkeepers, and plan sponsors to ensure operational efficiency and regulatory adherence.
IRS Releases Guidance on Mandatory Roth Catch-ups, Autoenrollment
On January 10, 2025, the IRS issued proposed regulations regarding the planned restriction of catch-up contributions to Roth accounts beginning in 2026 for certain individuals. It also released notice of proposed auto-enrollment requirements under the SECURE 2.0 Act.
IRS Releases Guidance on Retirement Plan Student Loan Matching
On August 19, 2024, the Internal Revenue Service (IRS) released Notice 2024-63, providing much-anticipated guidance on employer retirement plan contributions as they relate to qualified student loan payments (QSLPs).
IRS Issues Fact Sheet on Disaster Relief Distributions and Loans
On May 3, 2024, the Internal Revenue Service (IRS) issued a fact sheet explaining some of the rules for distributions from retirement plans and individual retirement accounts (IRAs), and for retirement plan loans, for certain individuals impacted by federally declared major disasters under section 331 of SECURE Act 2.0.
Department of Labor Issues Proposal for SECURE 2.0 Lost and Found Database
On April 15, 2024, the Department of Labor (DOL) released a proposed procedure regarding the Retirement Savings Lost and Found database through which individuals can search for missing retirement plan benefits. The DOL was directed by the SECURE 2.0 Act to create such a database by December 29, 2024.
IRS Issues Fact Sheet on Disaster Relief Distributions and Loans – Additional Resource
SECURE Act 2.0 Federal Disaster Distributions and Loans Chart – Additional Resource
** denotes a mandatory provision
** denotes a mandatory provision
** denotes a mandatory provision
** denotes a mandatory
IRS Releases Guidance on Mandatory Roth Catch-ups, Autoenrollment – Additional Resource
** denotes a mandatory provision
** denotes a mandatory provision
With more than 90 provisions, the impact on the retirement industry is extensive. Much of the legislation is focused on increasing retirement savings and coverage. Expand the provisions below to learn more.
Requires catch-up contributions to be made as Roth only. An exception is provided for those who make $145,000 or less (dollar amount is indexed).
IRS Releases Guidance on Mandatory Roth Catch-ups, Autoenrollment – Additional Resource
Increases the limits to the greater of $10,000 or 50% more than the regular indexed catch-up amount for ages 60, 61, 62, and 63.
Permits employers to offer participants the option to have employer contributions treated as Roth or pre-tax.
Allows employers to treat student loan repayments as elective deferrals for the purposes of matching contributions (which can be made at a different interval than current match but must be made at least annually). Allows participants to self-certify and receive a matching contribution to their retirement plan for qualifying student loan repayments.
Increases the cap to $7,000 for employers to transfer former employee accounts to an IRA. The current law allows for balances between $1,000 and $5,000. Any balances under $1,000 can be sent a check.
Allows employers to accept written certification from the employee describing that the hardship is immediate, a heavy financial need, that the requested amount is no more than necessary, and that there are no alternative means.
Makes 403(b) hardship distribution rules the same as those for 401(k) plans.
Permits employers to offer an emergency savings distribution option of $1,000 per year that can be repaid to the plan over a three-year period. Participants can self-certify.
Allows employers to offer an emergency savings account linked to a defined contribution plan for non-highly compensated employees. Employers may automatically enroll participants at up to 3% of salary for a total contribution amount of $2,500. Contributions are made as Roth, and participating employees may take tax- and penalty-free distributions at least once per calendar month.
Reduces the long-term part-time required years of service from three years to two. The SECURE Act of 2019 required employers with a 401(k) plan to permit employees with at least 500 hours of service in three consecutive years to participate in the plan. This bill also extends this rule to ERISA 403(b) plans.
Extends the 401(k) rule allowing long-term part-time employees to make elective deferrals to 403(b) plans.
Increases the RMD age to 73 for those who attain age 72 between 01.01.23 and 12.31.32, and to age 75 for those who attain age 74 after 12.31.32. (Note: 74 is assumed to be a drafting error and that it should be 73.)
Reduces the excise tax for a missed RMD from 50% to 25% and further reduces the excise tax to 10% if an individual corrects the shortfall during a two-year correction window.
Extends the pre-death RMD exemption to Roth amounts in retirement plans. Under current law, Roth IRAs (but not Roth amounts in retirement plans) are exempt from pre-death RMD rules.
Creates an exception to the 10% early withdrawal penalty for distributions to individuals whose physician certifies that they have an illness or condition that is reasonably expected to result in death in 84 months or less.
Permits domestic abuse distributions of up to the lesser of $10,000 or 50% of a participant’s vested account balance to be exempt from the 10% premature distribution penalty. Distributions can also be repaid to the plan within three years.
Requires QBAD distributions to be repaid to a retirement plan within three years in order to qualify as rollover contributions.
Eliminates the case-by-case easing of plan distributions and loan rules with respect to federally declared disasters in favor of automatically effective rules. Retroactive to January 26, 2021, up to $22,000 can be distributed to a participant per federally declared disaster, with no 10% premature distribution penalty and tax liability spread out over three years. The maximum loan amount is increased from $50,000 to $100,000 with the repayment period extended by one year. Home purchase amounts can be recontributed to a retirement plan if those funds are used to purchase a home in a disaster area and not because of the disaster.
Creates a national database to collect information on missing, lost, or non-responsive participants and beneficiaries that helps savers locate their benefits.
Helps reduce the plan sponsor burden of notice requirements for unenrolled participants. An unenrolled participant is defined as an employee who is eligible to participate in the plan and has been furnished the summary plan description and other required plan notices. For eligible participants, the plan is still required to distribute an annual reminder notice of eligibility and applicable plan deadlines, and any other requested documents.
Requires plan sponsors to provide a paper benefit statement at least annually (unless the participant elects.
Makes taxpayers with qualified retirement contributions who meet certain gross income requirements eligible to receive a government match contribution of up to $2,000 to an eligible IRA or retirement plan. Matching amounts do not count toward annual plan contribution limits and are treated as pre-tax.
Moves the deadline for required amendments of these acts to the end of the 2025 plan year (2027 for governmental and collectively bargained plans).
Creates an exemption from the prohibited transaction rules under the Code for auto-portability transactions where a past automatic cash-out is restored to the account of the affected individual’s current employer.
Raises permissible cap on auto-escalation for safe harbor plans to 15%. Raises the cap for non-safe harbor plans to 10% in any year ending before 2025 and 15% in 2025 and after.
Allows employers to provide small financial incentives (e.g., low-dollar gift cards) to boost plan participation. Incentives cannot be paid from plan assets.
Allows plans to test otherwise excludable employees separately for top-heavy testing purposes.
Expands the Employee Plans Compliance Resolution System (EPCRS) to allow more plan errors to be self-corrected.
Allows spouse to treat deceased employee’s retirement plan benefit as his/her own for RMD purposes.
Permits 403(b) plans to participate in collective investment trusts (CITs).
Eliminates the requirement that participants request deferral changes prior to the beginning of the month in which the deferral would be made.
Permits 403(b) plans to participate in multiemployer plans (MEPs) and pooled employer plans (PEPs).
Excludes service-connected, disability pension payments for first responders (from a 401(a), 403(a), governmental 457(b), or 403(b) plan) from gross income after reaching retirement age, up to an annualized excludable disability amount.
Increases the three-year small business start-up credit from 50% of expenses with a cap of $5,000 to 100% for employers of 50 employees or fewer. Applies to new plans.
Additional credit for those plans that decide to provide an employer contribution of up to $1,000 per employee. The credit is calculated by multiplying the amount contributed to each employee by that year’s applicable percentage (100% in years one and two, 75% in year three, 50% in year four, and 25% in year five).
Permits employers that do not sponsor a plan to offer a starter 401(k) (or safe harbor 403(b)) plan. The starter plan requires an auto-enrollment deferral rate between 3% and 15%. The maximum deferral amount is the same as the IRA contribution limit ($6,000 with a $1,000 catch-up at age 50 or older for 2022).
Requires new 401(k) and 403(b) plans (and plan sponsors who newly adopt a multiemployer plan, or MEP) to include automatic enrollment (minimum default rate at 3% up to a maximum of 10%). The escalation cap is raised by 1% each year until it reaches a minimum of 10% but no more than 15%.
Please contact your Relationship Manager for current Secure 2.0 resources and thought leadership.
Please contact your Relationship Manager for current Secure 2.0 resources and thought leadership.
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