Bell Wealth SECURE 2.0 Act Unpacked

Top 5 Takeaways of the Major Retirement Plan Overhaul

SECURE 2.0 became law on December 29, 2022, as part of the larger Consolidated Appropriations Act, 2023. With 92 new or enhanced provisions, SECURE 2.0 contains nearly three times as many changes as the original Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE).

To help you better understand SECURE 2.0’s potential impact, here’s a high-level overview of SECURE 2.0’s top five takeaways you should know:

1. SECURE 2.0’s provisions were designed to:
• Help Americans save more for retirement.
• Improve retirement rules across the board.
• Lower employer costs for establishing retirement plans.

2. These changes impact all account types, including:
• 401(k) and 403(b) accounts.
• SIMPLE, SEP, Traditional and Roth IRAs.
• 529 plans.
• Annuities.

3. Not all changes are effective immediately.
• 50 provisions take effect retroactively and through this year.
• 23 provisions take effect in 2024.
• 19 provisions take effect in 2025 and beyond.

4. While most changes are required, some are optional.

Examples of optional changes include:

• Emergency “sidecar” savings accounts linked to qualified plans.
• Employers may match employees’ qualified student loan payments.
• Ability for eligible participants to take a one-time emergency withdrawal (qualified disaster recovery distribution) from the plan.

5. The changes will impact employees participating in company-sponsored retirement plans as well as the companies that sponsor those plans.

Examples of participant impacts include:

• Certain new plans established after December 29, 2022, will be required to incorporate automatic enrollment provisions on or before January 1, 2025. The initial automatic enrollment rate starts at 3% and increases by 1% each year – up to 10% and maxing out at 15%. (Employees may still opt out of participating.)

• RMDs are eliminated for Roth 401(k)s, effective for taxable years beginning after December 31, 2023.

RMD Starting Age by Birth Year
6/30/1949 or earlier: 70½
7/1/1949-12/31/1950: 72
1951-1959: 73
1960 or later: 75

Examples of plan sponsor impacts include:

• The tax credit for starting a new plan is increasing from 50% to 100% per year for three years, making it nearly free for many small employers to start a retirement plan.
• Starting in 2024, employers that do not offer a retirement plan may offer starter 401(k) or 403(b) plans.

SECURE 2.0 is more than 400 pages, so we expect further guidance will be issued to help with understanding SECURE 2.0 and all of its technicalities. Watch our upcoming Bell Wealth newsletters for continued updates, key dates and timely provision changes. Your retirement plan consultants also will keep you informed.

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_{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.}