Massive Changes to Retirement Planning

The Secure Act 2.0 passed Congress today (December 23rd) and it includes a massive amount of change to retirement planning. This 358-page law includes:

  • Increases the age for mandatory RMDs from age 72 to age 73 starting in 2023, and to age 75 starting in 2033;
  • Increases the 401(k) and 403(b) plan catch-up contribution limits;
  • Requires all catch-up contributions to qualified retirement plans by employees with compensation in excess of $145,000 (indexed) be subject to mandatory Roth tax treatment (after-tax), effective for post-2023 taxable years;
  • Increases the annual contribution for employee deferral and catch-up contributions to SIMPLE plans by 10% (employers with more than 25 employees would also have to increase their matching contributions) and allows employers to make additional nonelective contributions to SIMPLE plans, effective beginning with the 2024 taxable year;
  • Allows for the creation of Roth SIMPLE IRAs and Roth SEP IRAs beginning with the 2023 taxable year;
  • Removes the RMD requirement for employer-sponsored Roth accounts, such as Roth 401(k)s;
  • Allows sole proprietors (and SMLLCs) who set up solo 401(k) plans after the end of the taxable year to make both deferral and matching contributions by the due date of the owner’s income tax return;
  • Replaces the IRC §25B Qualified Retirement Savings Contribution Credit with a federal government matching fund program for low and middle-income individuals that contribute to a qualified retirement program, effective beginning with the 2027 taxable year;
  • Makes it easier for an individual to purchase a qualifying longevity annuity contract (QLAC) with retirement savings by easing current limitations;
  • Allows penalty-free rollovers from IRC §529 accounts that have been open for more than 15 years to Roth IRAs (subject to annual Roth contribution limits and a $35,000 lifetime cap), effective for distributions made after 2023;
  • Expands the list of exceptions from the 10% early withdrawal penalty for various types of retirement distributions; and
  • Expands the income exclusion for health insurance premiums of retired public safety officers.

For employers, the SECURE 2.0 Act also:

  • Mandates automatic enrollment for new 401(k) and 403(b) plans offered by employers (with the option for employees to opt out) for plan years beginning after 2023;
  • Expands the mandated 401(k) coverage for long-term, part-time workers enacted by the SECURE Act by shortening the three years of service eligibility rule to two years, effective for plan years beginning after 2024 and extends the mandate to 403(b) plans; and
  • Allows employers to replace SIMPLE retirement accounts with safe harbor 401(k) plans that require mandatory employer contributions, effective for post-2023 plan years.


Special thanks to Spidelll Publishing for this summary.

Share the Post:

Related Posts

Skip to content