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Build a Stronger Future: Unveiling the SECURE 2.0 Act

The SECURE (Setting Every Community Up for Retirement) 2.0 ACT is a law that was designed to improve individuals’ ability to save for retirement as well as providing tax incentives. The new law contains 92 separate provisions that make changes to the laws governing employer plans and IRAs. 

Below are just some of the highlights of the SECURE 2.0 Act.

Provisions Effective Immediately 

1. Optional Roth treatment on an employer match  
  • Employers’ retirement plans can add a feature that allows employer matching contributions on a Roth after tax basis.
  • Employees must be 100% vested. 
2. RMD age was increased, and penalty decreased 
  • The age at which an account owner must begin taking the required minimum distribution is raised to age 73. 
  • The penalty for failing to take RMD was decreased to 25% from 50%. 
3. Credit for small employers’ plan startup costs 
  • Tax credit of 100% of administrative costs for first three years 
  • Applies to employers with up to 50 employees

Provisions Effective January 1, 2024 

4. Catch up contributions for participants earning more than $145,000 
  • Catch up contributions made by plan participants earning more than $145,000 in the prior calendar year must be made to the plan’s Roth account on a post-tax basis. 
5. Matching contributions for participants with student loan payments 
  • Employers may make matching contributions to 401(k), 457(b) 403(b) or SIMPLE IRA plans for employees that are paying off student loans and do not contribute to their retirement plan. 
  • The match will be based on the loan payment amounts. 
6. Emergency savings accounts linked to retirement plans 
  • Employers may offer emergency savings accounts that are linked to retirement plans for non-highly compensated employees. The employee contributions are made to a Roth (post-tax) account. 
    • Balances will be eligible for distribution at least once a month
    • Contributions are limited to $2,500 or less and stop until the account falls below the $2,500 or limit set.

Provisions Effective January 1, 2025 

7. Higher catch-up limits for participants age 60 to 63.

  • Limits are increased to $10,000 or 50% more than the catch-up amount in 2025. 
  • The increased amounts are indexed for inflation after 2025. 

8. Automatic enrollments and plan portability required for new plans

  • Business adopting new 401(k) and 401(b) plans will be required to automatically enroll eligible employees at a rate of at least 3%. 
  • Retirement plan service providers can offer plan sponsors automatic portability services to a new plan when an employee change jobs. 

9. Long term part-time employees plan eligibility

  • Part-time employee participation was reduced from three years and at least 500 hours of service to two years of service.

Next Steps

You can review the full SECURE 2.0 Act document here. 

Namely is waiting for more guidance from the IRS regarding all the details. As soon as our software is ready to support these changes, we will let you know. If you have questions concerning changes to your retirement plan documents, we suggest reaching out to your provider for guidance. 

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