In the final days of 2022, President Biden signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act, a substantial piece of legislation that builds upon the SECURE Act of 2019 and expands new and existing tax-friendly retirement savings options for both individuals and their families.
The new act, with nearly 100 provisions, makes significant changes to the retirement environment by expanding contribution limits and credits, linking emergency savings accounts to individual account plans, eliminating unnecessary plan requirements, focusing on Roth accounts, and more.
The list of changes is extensive, and provisions take effect as soon as January 1, 2023 and as late as January 1, 2027. To help you understand which changes will impact you or your company now, here are five provisions that officially went into effect January 1, 2023:
Section 107 – Increase in Age for Required Beginning Date for Mandatory Distributions
Currently, participants are generally required to begin taking distributions from their retirement plans at age 72 per the SECURE Act of 2019. Section 107 further increases the required minimum distribution age to 73 and increases the age even further to 75 beginning January 1, 2033. This increase in age for the mandatory distributions will help ensure that individuals spend their retirement savings during their lifetime rather than utilizing their retirement plans for estate planning purposes.
Section 303 – Retirement Savings Lost and Found
The Department of Labor will create a national online database for Americans’ retirement plans in order to collect information regarding benefits owed to missing, lost, or non-responsive participants and beneficiaries in tax-qualified retirement plans. This will enable retirement participants and beneficiaries, who might have lost track of their pensions or 401(k) plans, to search for the contact information of their plan administrators.
Section 305 – Expansion of Employee Plans Compliance Resolution System
The Employee Plans Compliance Resolution System will now allow additional types of errors to be corrected through self-correction and can also be applied to inadvertent IRA errors. It was taken into consideration that plan loans are a frequent area of error that previously required correction through the IRS. Now many of these errors can be resolved through self-correction.
Section 312 – Certification of Hardship Distribution Conditions
Under certain hardship circumstances, employees are now permitted to self-certify a hardship for purposes of taking a hardship withdrawal. This applies to 401(k) and 403(b) plan hardships and to 457 plan unforeseeable emergencies.
Section 320 – Eliminating unnecessary plan requirements related to unenrolled participants
Employers are no longer required to provide certain intermittent ERISA or Code notices to unenrolled participants who have not elected to participate in a workplace retirement plan. However, to encourage participation in the retirement plan, the employer is required to send one annual reminder to unenrolled participant for plan eligibility and election deadlines.
For a list of all provisions outlined in the legislation and their anticipated start dates, please download our SECURE 2.0 Act One-Sheet.
Planning for your retirement is not one size fits all. Every situation is unique. Our experts are here to provide you with the guidance and expertise you need to ensure you’re making the right decisions for your retirement savings strategy. We will continue to update this article as new information becomes available.