SECURE 2.0 is passed by the House

On March 29, 2022, the House of Representatives passed H.R. 2954, Securing a Strong Retirement Act of 2022, also known as SECURE 2.0. The bill, which has bipartisan support, builds upon the SECURE Act of 2019 with the goal “to increase retirement savings, simplify and clarify retirement plan rules, and for other purposes.” SECURE 2.0 expands and clarifies certain provisions of the SECURE Act. Next, the bill will go to the Senate where provisions from the Senate’s version, the Retirement Security and Savings Act of 2021, may be included.

The following highlights the primary changes within SECURE 2.0:

Increase in beginning age for required minimum distributions

The required minimum distribution (RMD) age would increase gradually from 72 to 75, as follows:

• Age 73, beginning on Jan. 1, 2023
• Age 74, beginning on Jan. 1, 2030
• Age 75, beginning on Jan. 1, 2033

The objective is to ensure that individuals have retirement savings to use during their lifetime.

Catch-up contributions

• Certain catch-up contributions required to be Roth contributions: All catch-up contributions to employer-sponsored qualified retirement plans would be subject to after-tax Roth treatment effective Jan. 1, 2023. Catch-up contributions to IRAs would continue to be pre-tax, but are significantly less than catch-up contributions to employer-sponsored plans ($1,000 versus $6,500.) This provision is not included in the Senate’s version.
• IRAs: Individuals who have attained age 50 are permitted to contribute a catch-up contribution to their IRAs. Under existing law, the catch-up amount is $1,000 and is not indexed. SECURE 2.0 would index the catch-up amount beginning in 2024.
• Increases catch-up limits for ages 62, 63 and 64: Current law permits employees who have attained age 50 to make catch-up contributions to a retirement plan in excess of certain limits. SECURE 2.0 would allow individuals who have attained ages 62, 63, or 64 (but not 65) during the year to make larger catch-up contributions to their retirement plans. The annual limit would increase to $10,000 compared to the 2022 limit of $6,500, and in the case of SIMPLE plans, the limit would increase to $5,000 from $3,000. Both limits would be indexed. This provision would be effective for taxable years beginning in 2024.