Article
SECURE act 2.0 and its effects on employee benefit plans
April 20, 2023 · Updated Nov. 1, 2023 · Authored by Lisa Todd
The Consolidated appropriations act of 2023 was signed into law by President Joe Biden on Dec. 29, 2022. The bill is known as Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 of 2022, because its provisions aim to enhance the 2019 SECURE Act.
The bill contains sweeping changes designed to make benefit plans more attractive to employers and employees.
While some provisions took effect Jan. 1, 2023, many will continue to roll out over the next few years and plan amendments will generally not need to be made until 2025. Below is a summary of some of the effects of the act on employee benefit plans:
Effective immediately
The following provisions are effective immediately.
Self-correction
The act expands self-correction options under Employee Plans Compliance Resolution System (EPCRS) to allow for more types of errors to be corrected internally and to exempt certain failures from excise tax.
Roth matching contributions
Employers have the option to permit employees to elect all or some of their matching and nonelective contributions to be treated as Roth contributions.
Required minimum distributions (RMDs)
The age requirement to begin taking RMDs increased from 72 to 73 in 2023. The age will then gradually increase to age 75 in 2033. The penalty for not taking an RMD decreased from 50% to 25%. In some cases, the penalty is 10% if corrected within two years.
Effective for plan years beginning in 2024
The following provisions are effective in 2024.
Employer matching on student loan payments
Employers have the option to make matching contributions to 401(k) plans, 403(b) plans, or SIMPLE IRAs on employees’ qualified student loan payments. Employees who receive student loan matching contributions are required to certify annually that they made such student loan payments, and the employer may rely on that certification.
Emergency withdrawals and expenses
The act allows certain distributions for emergency expenses due to immediate and unforeseen financial needs relating to personal or family expenses. Only one distribution, not to exceed $1,000, is permissible per year and the employee must repay the distribution within three years and can’t take another distribution until the repayment is complete. Employers may rely on employee certification of such emergency needs.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.