In the final days of 2022, after months of back and forth, Congress adopted a myriad of law changes for qualified retirement plans, collectively known as the SECURE 2.0 Act of 2022 (“SECURE 2.0”). SECURE 2.0 builds on the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”), with the goal of making it easier for employees to save for retirement and for employers to establish and administer qualified retirement plans.
Many of the changes made by SECURE 2.0 are optional for plan sponsors and will not be effective until 2024 or later, giving plan sponsors at least a year to consider and prepare for the changes. However, some of the changes are effective immediately. The immediate changes that we believe may have the most significant relevance to plan sponsors are as follows:
SECURE 2.0 Provisions that are Immediately Effective:
- Employees who are eligible for a defined contribution plan, but do not actually participate, may be provided a single annual reminder notice about the plan in place of other ongoing notices and disclosures.
- Plan sponsors may amend their qualified retirement plans to increase the required minimum distribution age to (i) age 73 for participants who reach age 72 on or after January 1, 2023, and (ii) age 75 for participants who reach age 74 on or after January 1, 2033.
- Plan sponsors may allow employees to designate employer matching and nonelective contributions to a 401(k) or 403(b) plan as Roth contributions.
- The IRS correction program for qualified retirement plans is expanded to allow plan sponsors to self-correct operational errors under more circumstances than are currently permitted under IRS rules.
- Plan administrators may rely on a participant’s self-certification as to eligibility for an in-service hardship withdrawal, codifying informal IRS rules.
Summary of Key Provisions of SECURE 2.0:
More detailed information about these and each of the other key SECURE 2.0 changes is included in the chart linked here.