Bell Wealth How SECURE 2.0 Could Affect You

4/27/2023 9:00:00 AM

NEWSLETTER Bell Wealth Q2 2023

How SECURE 2.0 Could Affect You

There are several ways SECURE 2.0 changes affect people with individual retirement accounts (IRAs), retirees and small-business owners.

Here are nine standout new provisions:

  1. Effective this year, taxpayers may create simplified employee pension (SEP) IRAs for household employees, such as gardeners, chauffeurs and nannies.
  2. Starting this year, Savings Incentive Match Plan for Employees (SIMPLE) and SEP IRAs may receive Roth-style contributions (which offer tax-free growth and tax-free withdrawals in retirement).
  3. Also starting this year, a retroactive deferral may be allowed if you own an unincorporated trade or business and you’re the only employee.
  4. Starting next year, employers may replace SIMPLE IRAs mid-year with 401(k) plans that require mandatory employer contributions.
  5. In 2024, 529 college savings plans may be convertible to Roth IRA dollars, under certain conditions, such as the account must have been open for more than 15 years.
  6. Because there are 25 million 401(k) accounts in the U.S. that employees either forgot about or didn’t know they had, the U.S. Department of Labor must set up a “retirement savings lost and found” of sorts.
    By 2024, the department must establish an online searchable database with information on the location of unclaimed vested benefits of missing, lost and non-responsive participants and beneficiaries in ERISA-governed plans.
  7. RA catch-up contributions will adjust for inflation annually in intervals of $100.
  8. Qualified charitable distribution limits have increased and are tied to inflation. Funding certain types of trusts is also allowed for a limited amount and time.
  9. Updates to 72(t) rules allow annuities to qualify for early withdrawal with no pre-payment penalty – if they’re annuitized.

We expect the combination of SECURE and SECURE 2.0 changes could play a major role in spurring a wave of new plan formation among small businesses, with rising participation and savings rates across the system. If adopted by plan sponsors, this paradigm shift could help close the gap on retirement savings shortfalls.

Products and services offered through Bell Bank Wealth Management are: Not FDIC Insured | No Bank Guarantee | May Lose Value | Not a Deposit | Not Insured by Any Federal Government Agency

This article has been written for the general information of clients and friends of Bell Bank. It is not intended, nor may it be relied upon, as tax or legal advice with respect to any matter. This article also cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by the Internal Revenue Service or other taxing authority.

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Matt Gromek, QKA®, CPFA, CRPS

VP/Senior Retirement Plan Sales Consultant