Secure 2.0 Act of 2022 Designed to Improve Retirement Savings Options
The SECURE 2.0 Act offers incentives for employers, especially small to mid-size employers without a current retirement plan in place, to establish and maintain retirement plans. From expanding coverage to simplifying plan rules, the objective is to make it more attractive for employers to offer retirement plans and improve retirement outcomes for employees.
SECURE 2.0 attempts to accomplish three goals: Get people to save more for retirement, improve retirement rules, and lower the employer cost of setting up a retirement plan. Some provisions have already gone into effect (starting Jan. 1, 2023), while others will go into effect in 2024, 2025, and even later. In pursuit of these goals, the new statute is packed with 92 retirement-savings provisions, including the following:
- Expanded Credit for Retirement Plan Administrative Costs
- Automatic Enrollment
- Automatic Escalation
- Catch-Up Contributions Increased; Must be Made on a Post-Tax (“Roth”) Basis
- Optional Roth Treatment of Employer Contributions
- Expanded Eligibility for Long-Term, Part-Time Employees
- Treatment of Student Loan Payments for Matching Contributions
- Emergency Savings Accounts Linked to Retirement Plans
- Penalty-free Withdrawals for Certain Emergency Expenses
- Saver’s Match
- Required Minimum Distributions
- Immediate Incentives for Participation
Again, the SECURE 2.0 Act contains changes to retirement savings plans which should be reviewed in depth for applicability. Some provisions may require amendments to existing retirement plans and offerings. Employers should consult with their legal counsel and financial professionals to identify any changes that must be made and determine what optional provisions may be beneficial.
Source: National Association of Tax Professionals