SECURE Act 2.0 Is On Its Way!

After much anticipation, Congress recently passed the “SECURE Act 2.0 of 2022" (SECURE 2.0) as part of the 2023 Consolidated Appropriations Act, which President Biden is expected to sign into law.

The text of SECURE 2.0 exceeds 300 pages, and most of its provisions deal with technical aspects of retirement plan implementation and administration. However, many of its provisions will directly impact retirement savers and retirees. Here are a few highlights:

Increases age for required beginning date for mandatory retirement account distributions: SECURE 2.0 increases the required distribution age from 72 to 73 for those who attain age 72 after 2022 and age 73 before January 1, 2033, and further raises the required distribution age to 75 for those who attain the age of 74 after December 31, 2032.

Indexes IRA catch-up limit: Beginning after 2023, the IRA catch-up amount for individuals who have attained the age of 50 will be indexed for inflation (under current law, the catch-up amount is a non-indexed $1,000).

Increases catch-up limits for employees ages 60, 61, 62, and 63: Beginning after 2024, the limit on catch-up contributions to employer-sponsored plans will increase to the greater of $10,000 or 50% more than the regular catch-up amount in 2025 for individuals who have attained the ages 60, 61, 62, and 63. These increased amounts are indexed for inflation after 2025.

Exempts certain “emergency withdrawals” from the otherwise applicable 10% penalty on early withdrawals: Beginning after 2023, an individual may take distributions of up to $1,000 per calendar year for certain emergency expenses with the opportunity for repayment within a 3 year period. (No further emergency withdrawals may be taken within the 3 year repayment period unless prepayment occurs.)

Introduces special rules for certain rollovers from 529 plan accounts to Roth IRAs. SECURE 2.0 will allow for tax and penalty free rollovers from 529 college savings accounts to Roth IRAs. A beneficiary of a 529 account will be able to rollover up to $35,000 from any 529 account in their name to a Roth IRA over the course of their lifetime. The rollovers are subject to Roth IRA annual contribution limits, and the 529 account must be open for more than 15 years.

There is a lot here to digest. We’re going to dive deeper into the various provisions of SECURE 2.0 and report here with further updates and analysis.

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