Gary W. Pelletier, CLU, ChFC, AIF®

Northeast Planning Associates, Inc.

Corporate, Estate

& Financial Planning


SECURE Act 2.0 is Here

| January 25, 2023
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In late 2022, the SECURE Act 2.0, a bill three years in the making, was signed into law.  While there are several provisions in this bi-partisan-supported bill, we’ll highlight just a few that may be particularly interesting with effective dates this year:

  • The required beginning date (RBD) for Required Minimum Distributions (RMDs) will increase to 73 for individuals who attain age 72 after 12/31/2022. Down the road a bit, for those who attain age 74 after 12/31/2032, the RBD increases to 75. 
  • The penalty for a missed RMD, or an RMD shortfall will be reduced to 25%, from 50%. If, however, the shortfall is rectified within a set “correction window”, the penalty can be reduced further to 10%. 
  • Employers may provide employees with the option to receive matching or non-elective contributions as Roth. Matching or non-elective contributions to a designated Roth account may not be subject to a vesting schedule.  A plan amendment is required. 
  • Taxpayers will have two new opportunities for Roth contributions due to the creation of both Simple Roth IRA, and SEP Roth IRA accounts. We expect that employers, custodians and the IRS will need time to implement this change. 
  • For small employers with 50 or fewer employees, the retirement plan start-up credit will now be allowed for up to 100% of start-up costs (up from the previous limit of 50%). An additional credit of $1,000 per employee for eligible employer contributions may apply.  This per employee credit phases out between 51-100 employees. 

 Additionally, there are several provisions that have effective dates in the future.  These include:

  • All catch-up contributions for those age 50+ and high income earners (exceeding $145,000) are subject to Roth treatment. Effective 1/1/2024.
  • The SECURE Act 2.0 made a path for some individuals to transfer 529 funds to a Roth IRA, which has garnered quite a bit of press. This will be intriguing to many, especially those with unused funds in their college savings plans.  There are several conditions to this provision however, including that the receiving Roth IRA must be in the name of the 529 beneficiary, and the 529 plan must have been maintained for 15 years or longer.  Effective 1/1/2024.
  • Increases in catch up contributions for employees who have attained ages 60, 61, 62, and 63 to the greater of (1) $10,000, or (2) 150% of regular catch-up contribution limit. Effective 1/1/2025. 
  • Automatic enrollment in 401k and 403b plans is required for newly established plans after 12/31/2022. This excludes plans adopted prior to 1/1/2023, governmental and church plans, SIMPLE 401k plans, new businesses in existence for less than three years, and small employers (10 or fewer employees).  Auto enrollment begins for impacted plans upon effective date.  Effective 1/1/2025.

For more details, you can check out the Top 10 Provisions in SECURE 2.0.  In the meantime, should you or your friends and family be curious about how this legislation may affect them, or planning opportunities, please don’t hesitate to reach out to us.

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