SECURE 2.0

All new 401(k) and 403(b) plans are required to automatically enroll participants and auto-escalate savings. The employer will set the introductory deferral amount between 3 – 10% and the deferral amount increases by 1% up to 10 – 15% retirement savings per year.

Individuals 60-63 years old are eligible to contribute a supplemental "super catch-up" amount to their retirement plans in addition to the regularly permitted age-based catch-up contributions. For more information on plan limits, click here.

Catch-up contributions made beginning in 2026 by participants with income that exceeded $145,000 (as indexed) in the prior calendar year must be made to a designated Roth contribution account and cannot be made on a pretax basis. 

As part of the mission of SECURE 2.0 Act, the Saver's Match sections are to increase access to savings opportunities and to increase retirement savings. The Saver's Match is designed to help low-to-moderate income workers save more for retirement through a Treasury matching program. To qualify for the match, employees must be 18 years or older and make up to $41,000 but not more than $71,000. Treasury to match 50% of their retirement plan contribution up to $2000. Stated another way the Treasury will put $1000 in “free” money into that participant’s account.

The original program, called the Saver’s Credit, is available now. For more information, visit IRS’ website.

Starting in 2024, employers must allow Long-Term Part-Time employees to participate in 401(k) and 403(b) plans if they meet the criteria (500 hours for 3 consecutive years, reduced to 2 consecutive years in 2025). 

Starting in 2024, SECURE 2.0 modifies family attribution rules for retirement plans, mainly impacting spouses and their minor children who own separate businesses. Specifically, it removes the attribution of ownership in community property states and between parents and their minor children (under 21), preventing these businesses from being considered related employers. This means that spouses in community property states and parents with minor children can more independently manage their retirement plans without needing to treat the plans as a single entity. 

For employees who are paying down student loans, employers will have the option to apply the retirement plan’s matching formula to the loan repayments, as if they were 401(k) deferrals. This may help an employee save for retirement while getting out of debt.

Under the previous law, employers may transfer (force out) a former employees’ retirement accounts into an IRA if their balances are between $1,000 and $5,000. Starting in 2024, the upper limit will increase from $5,000 to $7,000 next year.

Repayment of Qualified Birth or Adoptions Distributions is limited to three years for distributions made after December 29, 2022, and retroactively to the three-year period beginning on the day after the date on which the distributions were received. 

Starting in 2033, the age requirement to take a mandatory retirement savings withdrawal will increase, as scheduled by birth year. For those born:

• Before 1951: age 72
• 1951-1959: age 73
• 1960 or later: age 75

Employers can claim up to a $500 retirement plan tax credit if they allow employees who are spouses of uniformed services to save through the company’s retirement plan.

Starting in 2024, an employer who does not sponsor a retirement plan, may offer a starter 401(k) plan. A starter 401(k) plan would generally require that all employees be automatically enrolled in the plan at a 3 to 15 percent of compensation deferral rate. The limit on annual deferrals would be the same as the IRA contribution limit, which for 2025 is $7,000 with an additional $1,000 in catch-up contributions beginning at age 50.

Missing an RMD can cost older people greatly. New provisions reduce this pricey penalty from 50% to 25% and if the failure is corrected in a timely manner, the penalty is reduced to 10%. 

A new national online searchable database to locate retirement accounts. Click here to access. 

Allows for easier plan corrections of loans through the Employee Plans Compliance Resolution System(“EPCRS”). 

SECURE 2.0 allows as an option if elected by the plan sponsor, for 401(k) plan participants to self-certify their need for a hardship withdrawal meaning they don't need to provide extensive documentation to their plan sponsor. Instead, participants can declare that the withdrawal is for a qualified hardship reason, the amount is necessary, and they have no other reasonable means to cover the expense. 

Domestic abuse survivors may withdraw the lesser of $10,000 or 50% of their retirement account.

Terminally ill individuals may withdraw retirement funds without being subject to the 10% early distribution tax penalty. 

Permanent rules go into effect that allow up to $22,000 to be distributed from a retirement plan or IRA for affected individuals and are not subject to the 10% early distribution tax penalty. Retroactively effective to January 26, 2021.

New rules clarify and cap the maximum interest rate at 6%, which will provide larger pay credits for older, longer service workers.