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What Is Included in the SECURE Act 2.0? Thumbnail

What Is Included in the SECURE Act 2.0?

On December 23, 2022, President Biden signed into law that contains a new set of retirement rules designed to make it easier to contribute to retirement plans and access those funds that have been set aside for retirement.  The law is called SECURE 2.0, and it's a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019.  The sweeping legislation has dozens of significant provisions and I've summarized them into 4 key provisions described below.

New Distribution Rules

The Required Minimum Distribution (RMD) age will rise to 73 in 2023.  Then, ten years from now, those turning 73 in 2033 will have their RMD age increased again to age 75.  By far, one of the most critical changes of this new law was increasing the age at which owners of retirement accounts must begin taking required minimum distributions (RMDs).   If you have already turned 72, you must continue taking distributions. But if you are turning 72 this year, you can wait to take distributions until you turn 73 in 2024.  Keep in mind that the age in which you can begin taking distributions from your retirement accounts have not changed which is 59½ years old.

Access to funds. Plan participants can use retirement funds in an emergency without penalty or fees.  For example, starting in 2024, an employee can get up to $1,000 from a retirement account for personal or family emergencies without having to incur a 10% early withdrawal penalty. Other emergency provisions exist for terminal illnesses and survivors of domestic abuse.

Reduced penalty.  Starting in 2023, if you miss an RMD for some reason, the penalty tax drops down from 50% to 25%.   In addition, if you fix the mistake promptly and make your RMD, the penalty may drop to 10%.

New Accumulation Rules

Catch-Up Contributions. Starting January 1, 2025, people aged 60 through 63 can make catch-up contributions of up to $10,000 annually to workplace retirement plans. The catch-up amount for people aged 50 and older in 2023 is $7,500. However, the law applies certain restrictions to individuals earning more than $145,000 annually.

Automatic Enrollment. Beginning in 2025, the Secure Act requires employers to enroll employees into workplace plans automatically. However, employees can choose to opt-out of their company sponsored retirement plan.

Student Loan Matching. In 2024, companies can match employee student loan payments with retirement contributions.   Historically, high student loan debt has made it difficult to save for retirement.  The rule change offers workers an extra incentive to save for retirement while paying off student loans.

Revised Roth Rules

529 to a Roth. Starting in 2024, pending certain conditions, people can roll a 529 education savings plan into a Roth IRA.  This change will be beneficial to parents whose child gets a scholarship, goes to a less expensive school, or doesn't go to college.  Prior to the new law, parents who wanted to utilize the unused 529 plan money for retirement would incur a 10% penalty fee.  With the change in the law, this money can now be repurposed for retirement without penalty. However, the Act limits 529 to Roth rollovers to a maximum of $35,000 per beneficiary over their lifetime and rollovers are subject to the annual Roth IRA contribution limit.  In order to qualify for this tax and penalty free rollover, the 529 plan must have been open for 15 years.  In addition, contributions or earnings made in the 529 plan for the previous five years are not eligible for the rollover.

SIMPLE and SEP. From 2023 onward, employers can make Roth contributions to Savings Incentive Match Plans for Employees or Simplified Employee Pensions.

Roth 401(k)s and Roth 403(b)s. The new legislation aligns the rules for Roth 401(k)s and Roth 403(b)s with Roth Individual Retirement Account (IRA) rules. From 2024, the legislation no longer requires minimum distributions from Roth Accounts in employer retirement plans.

More Highlights

Support for Small Businesses. In 2023, the new law will increase the credit to help with the administrative costs of setting up a retirement plan. The credit increases to 100% from 50% for businesses with less than 50 employees. By boosting the credit, lawmakers hope to remove one of the most significant barriers for small businesses offering a workplace plan.

Qualified Charitable Distributions (QCD).  Prior to the new law, individuals 70½ or older were limited to a maximum annual QCD donation of $100,000 from their IRA to a qualified charitable organization.  From 2024 onward, the maximum donation amount will be adjusted for inflation. The limit applies on an individual basis, so for a married couple, each person age 70½ and older can make a QCD as long as it remains under the limit.  Also, starting in 2023, individuals have a one-time opportunity to direct up to $50,000 of their QCD into a Charitable Remainder Trust (CRUT), a Charitable Remainder Annuity Trust (CRAT), or Charitable Gift Annuity.

Consider your Own Retirement Plan

As a result of this new law, the rules around retirement savings and distributions will evolve of the next few years. The provisions are complex so be sure to connect with a financial professional to understand how Secure Act 2.0 will impact your individual situation.

Keep in mind that retirement rules can change without notice and there is no guarantee that the treatment of specific rules will remain the same. This article is intended to give you a broad overview of SECURE 2.0 and is not a substitute for individual professional financial and tax advice.


This content is developed from sources believed to be providing accurate information and provided by Attune Financial Planning.  It may not be used for the purpose of avoiding any federal tax penalties.  Please consult legal or tax professionals for specific information regarding your individual situation.  The opinions expressed and material provided are for general information only.