The SECURE ACT is a law designed to help more Americans save for retirement. At the end of 2022 revisions were made to this law creating the SECURE ACT 2.0. See below for more information on the changes made and how they may affect you or your business.   

Table of Contents

Required Minimum Distributions (RMDs):

RMD age:

  • RMD age is raised from 72 to 73 beginning on Jan. 1, 2023.
  • RMD age will again increase from 73 to 75 beginning in 2033.

RMD penalties:

  • 50% excise tax assessed on missed RMDs is reduced to 25%.

– Penalty is further reduced to 10% if the necessary RMD is taken by the end of the second year following the year it was due.

  • Penalty reduction provisions apply beginning in 2023.

Roth Retirement Plan RMDs:

  • 401(k) and 403(b) Roth balances will no longer be subject to RMDs before the account holder dies.

RMDs on qualified longevity annuity contracts (QLACs):

  • Previously, someone could invest up to $130,000 or 25% of a retirement account – whichever is less – and shield those funds from RMDs.

-The 25% limit has been removed, and the dollar amount is increased to $200,000, with the limit being adjusted for inflation each year.

Emergency Savings Initiatives:

$1,000 penalty free withdrawals

  • Starting in 2024, DC Plan Sponsors can allow participants to withdraw up to $1,000 penalty free per          calendar year for emergency personal expenses.

-The individual must replenish the withdrawal before another emergency distribution is allowed during any of the following three years.

Pension-Linked Emergency Savings Accounts (PLESAs)

  • DC Plan Sponsors can automatically enroll non-highly compensated workers into PLESAs at up to 3% of post-tax pay alongside retirement account contributions.

-Employees can opt out or change their contribution rate.

  • Employees can withdraw funds from their PLESA tax and penalty free at any time.
  • Automatic deductions end at an account balance of $2,500 by default, but a plan can set a lower ceiling.

– Once the ceiling is met, contributions can be paused or directed to one’s Roth retirement account.

  • Contributions are treated as retirement contributions for purposes of employer matches.

General Retirement Plan Provisions:

Automatic Enrollment:

  • Starting in 2025, 401(k) and 403(b) plans must automatically enroll eligible employees at between 3% and 10% of wages.

-Employees have the option to opt out.

  • Auto enroll contribution rate must increase by 1% per year until it reached at least 10%, and not more  than 15%.
  • Businesses with 10 or fewer employees, businesses that have been open for less than 3 years, and church  and government plans are exempt.

Increased Portability and Reduced Leakage:

  • Service providers can facilitate automatic transfers from a participant’s old retirement plan into their new plan.

– Employees are entitled to opt out of this.

  • Force out to IRA account balance threshold is increased from $5,000 to $7,000.
  • A searchable online lost & found database for retirement savings will be established by 2025.

Increased Catch-Up Contribution Limits:

  • Starting in 2025, catch-up contribution limits increase for those aged 60-63

 – 401(k), 403(b), and 457(b) catch-up contribution limits increase from $6,500 to $10,000

 – SIMPLE Plans catch-up contribution limits increase from $3,000 to $5,000

– Limit increases are still based on cost-of-living adjustments

Enhanced Incentives to Save:

  • Existing Saver’s credit is transformed into a Saver’s Match, starting in 2027

– One credit rate of 50%, as opposed to the current tiered credit percentage based on AGI that currently exists

– The credit will become a refundable credit

– Credit amount is deposited directly into an individual’s DC account or IRA, as opposed to being delivered as part of a tax refund

  • Allows employers to offer small “de minimis” financial incentives to boost employee participation in retirement plans

 – Low-dollar gift cards are an example of an allowed incentive

  • Starting in 2024, DC Plan Sponsors are allowed to treat student loan payments as elective deferrals eligible for employer matching contributions to the retirement plan.
  • Starting in 2024, 529 account owners are eligible to rollover up to $35,000 over the course of a lifetime into a Roth IRA, subject to annual contribution limits

– Accounts must have been open for at least 15 years to qualify

Expansion of Roth Options:

    • Employers can allow employees to elect for a SEP or SIMPLE IRA to be designated as a Roth IRA
    • Employers can allow employees to receive 401(k), 403(b), and 457(b) matching contributions on a Roth basis

Small Business and Non- Profit Focused Retirement Plan Provisions:

Part Time Workers:

  • Starting in 2025, employers will be required to allow part-time workers (at least 500 hours per year) to participate in their retirement plan following two years of service

– Employees who work at least 1,000 hours must be included after one year of service

Military Spouses:

  • Tax credit available for employers with up to 100 employees and military spouse employees.

– Credit is available to employers who:

 – Make military spouses eligible to participate in their retirement plan within two months of their hire date

– Ensure that military spouses are 100% vested in all employer contributions

– Guarantee that every military spouse is eligible for any matching or non-elective contribution that they otherwise would have only qualified for at two years of service

– Tax credit is equal to $200 per military spouse plus up to $300 in employer contributions per individual for up to three years


  • Starting in 2024, employers with a SIMPLE IRA plan are able to make uniform additional nonelective contributions beyond 2% of compensation or 3% match, up to the lesser of 10% of compensation or $5,000
  • Starting in 2024, SIMPLE annual limits are raised by 10% for employers with no more than 25 employees.

 – Also increased for employers with 26-100 employees if they make 3% non-elective contributions or 4% matching contributions

Tax Credits:

  • Increases the small business startup credit to cover 100% (up from 50%) of administrative expenses up to $5,000 for the first three years of a plan established by employers with up to 50 employees

 – Small businesses joining a MEP are eligible for this credit

  • Provides an additional annual tax credit to employers with up to 100 employees for employer contributions to DC plans of up to $1,000 per employee

 – Credit phases out over five years and for employers with between 51 and 100 employees


  • 403(b) plans are now allowed to participate in MEPs

Small Businesses without a current retirement plan:

  • Starting in 2024, a Starter 401(k) plan can be an option for employers not currently offering a plan to their workers

 – Employees must be automatically enrolled

 – Contribution limits are that of IRAs

 – No employer contributions are allowed

Increased Access to Guaranteed Lifetime Income Options:

  • Treasury department is directed to dramatically reduce the limitations on purchasing Qualified Longevity Annuity Contracts (QLACs)

 – New regulations will allow savers to use up to $200,000 of their account balances to purchase a QLAC

 – 90 day “free-look” period is permitted for QLACs

  • “Minimum Income Threshold Text” is loosened to allow more flexibility in the structure of annuities in compliance of RMD rules
  • Treasury department is directed to remove a disincentive for annuitization by reforming RMD rules for individuals with partially annuitized accounts

If you have any questions regarding the SECURE ACT 2.0 schedule an appointment with us by clicking the icon below

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