Gavel with Affordable Care Act

On December 29th, President Joe Biden signed a massive year-end $1.7 trillion budget bill that includes bipartisan retirement savings legislation named the SECURE 2.0 ACT of 2022.

These provisions build on changes made by the Setting Every Community up for Retirement Enhancement (SECURE) Act of 2019 and seek to expand retirement plan coverage and increase savings for U.S. workers. With almost 100 provisions, here is a snapshot of a dozen high impact provisions to most DC retirement plans.

Important Provisions

  1. Automatic Enrollment Requirement: Beginning in 2025, mandates that all new 401(k) and 403(b) plans must automatically enroll and escalate new workers at a minimum 3% contribution but not more than 10% with exceptions.
  2. Expansion of Part-Time Workers' Participation: For plan years beginning after 2024, shortens dual eligibility requirement from three consecutive years created as part of Secure 1.0 to two consecutive years. This rule will also apply to 403(b) plans that exclude part-time employees from deferring their pay.
  3. Student-Loan Matching: Beginning in 2024, Plan Sponsors are able to make matching contributions to employees in 401(k), 403(b), governmental 457(b) and savings incentive match plans for employees (SIMPLE plans) for the intention of repaying qualified student loan payments.
  4. Expand Catch-Up Contributions & Roth Requirement of Catch Up: Beginning in 2025, increases catch-up limits for employees that have attained age 60 through age 63 to the greater of $10,000 or 50% more than the "regular" catch-up amount. Beginning in 2024, mandates all catch-up contributions be Roth for employees with compensation above $145,000 in the prior year.
  5. Allow Roth Matching Contributions: Beginning after the date of enactment of SECURE Act 2.0, plans may allow employees to elect for some or all of the matching or nonelective employer contributions to be characterized as Roth contributions.
  6. Required Minimum Distribution Age: Required age for beginning retirement plan distributions increases to age 73 on January 1, 2023, and then further increases to age 75 on January 1, 2033.
  7. Emergency Savings Account Withdrawal: Beginning in 2024, provides an exception that certain withdrawals or distributions from eligible retirement plans for emergency expenses will not be subject to the 10% tax penalty.
  8. Mandatory Cashout Limit: Beginning in 2024, increases this automatic cashout limit from $5,000 to $7,000.
  9. Hardship Certifications: Effective for plan years after the date of enactment of SECURE Act 2.0, allows plans to rely on an employee's self-certification that they had an event constituting a hardship for purposes of taking a hardship withdrawal from a 401(k) or 403(b) plan.
  10. Penalty-Free Distributions for Domestic Abuse: Beginning January 1, 2024, plans can permit participants to self-certify that they have experienced domestic abuse to withdraw a portion of their retirement plan account.
  11. Paper Statement Requirement: Beginning in 2026, DC plans must furnish a paper benefit statement at least once per year.
  12. CIT’s in 403(b) Plans: Effective for calendar years ending after the date of enactment, eliminates barriers to allow 403(b) custodial accounts to participate in group trusts with other tax-preferred savings plans and IRAs.

If you have any questions regarding how these law changes may impact your plan please reach out to your Plan Consultant.