On December 29, 2022, President Biden signed into law the Secure Act 2.0, which contained more than 70 provisions impacting retirement plans.
While many of the changes are good, a large amount of them have left us needing more guidance. While most provisions are not effective until 2024 and later, there are several that became effective with the enactment of the bill.
Key provisions effective in 2023 include:
- Required minimum distribution (RMD) age increases to age 73 for anyone who attains age 73 beginning in 2023. This age further increases to age 75 for anyone attaining age 74 after 2032.
- For 401(k), 403(b) and 457(b) plans that have a hardship withdrawal provision, employers may rely on an employee’s self-certification that the distribution requested is related to an eligible hardship.
- In general, notice and disclosure requirements are limited for unenrolled participants. However, the plan is now required to send an annual notice informing the unenrolled participants of their eligibility to participate and of any election deadlines.
- 401(a), 403(b), or governmental 457(b) plans may permit an employee to elect to designate vested matching or nonelective contributions as designated Roth contributions.
- Start-up tax credit changes: Employers with 50 or fewer employees will receive a tax credit of up to 100% of any employer paid cost of starting a retirement plan, up to a maximum of $5,000 per year for 3 years.
- New Start up plan credit for employer contributions: Employers with 50 or fewer employees may receive a tax credit for the first 5 years the plan is in existence to offset up to $1,000 of employer contributions made to each employee earning $100,000 (as index) or less in years 1 and 2, 75% in year 3, 50% in year 4 and 25% in year 5. This credit does not apply to Defined Benefit plans and is phased out for employers with 51-100 employees. Employer contributions that receive this credit are not deductible.
Other provisions include the prerequisite of having automatic enrollment in new plans, allowing employer to elect to match college tuition payments, domestic abuse withdrawals, increase in catch up contribution amounts, requiring all catch up contributions for employees earning at least $145,000 to be funded as Roth contributions, changes to the Long-Term Part-Time employee rule and many, many more new options and changes.