Five Significant Provisions Under Secure Act 2.0 That Changes Retirement Planning

Five Significant Provisions Under Secure Act 2.0 That Changes Retirement Planning

On March 29, 2022, the House of Representatives passed (with almost unanimous bipartisan support) a bill (commonly referred to as SECURE Act 2.0) that builds on the SECURE Act that was passed a couple of years ago. The bill (which has now been submitted to the Senate for its suggested changes) gives incentives for U.S. citizens to save more for retirement.

Some of the changes that became effective in 2020 include: (1) the right to delay making required minimum distributions from 70½ to age 72 for those not 70½ before January 1, 2020; (2) permitting contributions to a traditional IRA without age barrier as long as the individual is still receiving compensation for working (3) eliminating the ability of a beneficiary to “stretch” retirement income distributions over the beneficiary’s lifetime to only 10 years unless the beneficiary is (a) a surviving spouse, (b) less than 10 years of age younger than the retirement account owner, (c) a minor child of the retirement account owner, (d) disabled or (e) chronically ill;.

Some of the main proposals passed by the House of Representatives (the “House”) in the SECURE Act 2.0 include the following:


Under the bill passed by the House, a required minimum distribution is not required until age 73 beginning on January 1, 2023 (for those who become 72 after December 31, 2022, and age 73 before January 1, 2030); to 74 as of January 1, 2030 (for those who are age 73 after December 31, 2029, and age 74 before January 1, 2033), and to 75 on January 1, 2033 (for those who are age 74 after December 31, 2032). This particularly helps those who don’t need to make distributions (i.e., they don’t need the money). However, this would result in higher distributions over a shorter period of time increasing the amount of tax when withdrawn.


Although employers presently have an automatic enrollment of employees in 401(k) and 403(b) plans upon vesting, the new proposal would mandate that the plan have employees deferring 3% of their income annually into the retirement account which would be increased 1% each year until it reaches 10% (but not more than 15%). Employees could choose a different amount to contribute (they may need the money for day-to-day living expenses). Nonetheless, more employees would likely save for retirement due to the mandate. Existing plans are grandfathered from the mandate. Small businesses (less than 10 employees), new businesses (less than three years), church plans and governmental plans would not be mandated to follow this requirement.


Many younger workers do not make contributions to save for retirement since they have student loan debts. The bill passed by the House permits the employer to contribute to the employee’s retirement plan matching the amount the employee pays for qualified higher education expenses – even though the employee makes no contribution to the 401(k), 403(b) or SIMPLE IRA.


Employees age 50 or older are allowed to contribute more (an additional $1,000 indexed for inflation beginning in 2024) to their retirement plan (if they think they haven’t saved enough for retirement). Employees who are 62, 63 and 64 (but not age 65) could additionally contribute would be increased from the current limit of $6,500 to $10,000 per tax year beginning in 2024. However, the catch-up contributions would be subject to Roth tax treatment (thus the government would be paid taxes up front). The House bill also provided that any plan participant receiving matching contributions must be made on a Roth basis (whether catch-up or not) unlike current law which requires contributions on a pre-tax basis.


Presently a part-time employee can participate in a plan if employed by the business for three consecutive years of service if they worked 500 hours each year, but SECURE 2.0 would reduce the requirement to two years to encourage more part-time workers to save for retirement.

Although the Senate will likely make some changes to the bill passed by the House, it is clear due to bipartisan support that retirement savings plans will likely be changed this year. This will encourage more retirement savings.

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