The SECURE 2.0 Act of 2022 was signed into law on December 29, 2022, and introduces over 90 changes to the federal rules governing workplace retirement plans.
This landmark legislation, which aims to expand coverage and increase retirement savings while simplifying and clarifying retirement plan rules, will bring sweeping changes for employers over the next several years.
The legislation builds upon changes established by the 2019 Secure ACT and includes both mandatory and optional changes effective immediately through 2025. Please see the selection of highlighted SECURE 2.0 provisions below that may directly impact you. The included provisions are excerpted from the BDO Alliance USA, and do not comprise the entirety of the changes. For the full text click here.
Key changes include:
- Employers may allow plan participants to designate employer matching and nonelective contributions as after-tax Roth contributions.
- The start-up credit for adopting a workplace retirement plan increases from 50% to 100% of administrative costs for small employers with up to 50 employees.
- Employers may treat an employee’s qualified student loan payments as employee contributions to a 401(k) plan, 403(b) plan, governmental 457(b) plan or SIMPLE IRA that is entitled to an employer matching contribution.
- New 401(k) and 403(b) plans adopted after December 29, 2022, must provide for automatic contributions for plan years starting after December 31, 2024.
Provisions in SECURE 2.0 will bring numerous changes to retirement plans, both now and for years to come. Almost all workplace plans will need to be reviewed for possible amendments and operational changes. While these revisions may be a heavy lift, employees will ultimately benefit from expanded coverage and increased retirement savings.
Employers should carefully review their plan document and operations to determine what, if any, amendments will be needed, what operations need to be changed and what systems or processes should be updated. Please reach out to your advisors at Pivot with any questions about the changes. We are always happy to help!