The SECURE Act 2.0 was signed into law on December 29, 2022, and it is aimed at promoting retirement savings and improving the financial security of Americans. The Act expands upon the original SECURE Act of 2019 and includes a number of provisions aimed at making it easier for individuals to save for retirement and receive retirement benefits.
The Act increases the age for Required Minimum Distributions (RMDs) to age 73 starting in 2023 and to age 75 starting in 2033. Further, starting in 2024, lifetime RMDs will no longer be required from Roth accounts in employer plans.
The SECURE Act 2.0 allows long-term, part-time employees to participate in 401(k) plans. Part-time employees become eligible once they complete at least 500 hours of service per year for two consecutive twelve-month periods. The purpose of this provision is to expand access to retirement benefits for workers who may not have been eligible for these plans in the past.
New 401(k) and 403(b) plans will be required to automatically enroll eligible employees into the plans, unless the employee opts out of the auto enrollment after December 31, 2024. The auto enrollment shall start with a contribution rate of 3% of the employee’s wages and automatically escalate the contribution percentages.
Under the SECURE Act 2.0, small businesses would be eligible for tax credits to offset some of the costs of starting a new retirement plan. The amount of the credit would depend on the size of the business and the number of employees participating in the plan. This tax credit is designed to help small businesses overcome the financial barriers to offering retirement plans and encourage them to provide this valuable benefit to their employees.
The SECURE Act 2.0 is designed to help address the retirement savings deficiencies in the United States and assist individuals with their financial future in retirement. By making it easier for individuals to save and providing more options for retirement benefits, the Act aims to help Americans in achieving retirement goals.