In recognition of the growing retirement savings crisis in America, Congress has made improving the retirement industry landscape a top priority. This has culminated in two landmark pieces of retirement-related legislation passing in the past three years. In 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act introduced changes ranging from pushing back the age for Required Minimum Distributions to encouraging more lifetime income solutions within retirement plans. Now, at the close of 2022, Congress has just passed the Consolidated Appropriations Act of 2023, within which is SECURE Act 2.0 with wide ranging implications for the retirement industry.
What is SECURE Act 2.0?
Three retirement-focused bills were introduced into Congress by members of the Senate and House of Representatives. After going through the reconciliation process, these three bills were combined to form SECURE Act 2.0, ultimately containing more than 90 provisions related to the retirement industry. The goals of these provisions can be best summarized into these four central themes:
- Theme 1: Expanding Coverage and Increasing Retirement Savings
- Theme 2: Preservation of Income
- Theme 3: Simplification and Clarification of Retirement Plan Rules
- Theme 4: Technical Amendments, Administrative Provisions, and Revenue Provisions
In the coming weeks, Lebel & Harriman Retirement Advisors will be releasing articles summarizing the provisions contained in each of these four themes, when they each become effective, and what they will mean. In the meantime, here are what we would consider some of the most important and impactful provisions.
Key Provisions in SECURE Act 2.0
- Enhancing tax credits for small businesses starting an eligible retirement plan including tax credits to help offset the cost of an employer contribution to the plan
- Requiring that all new 401(k) and 403(b) plans include automatic enrollment and automatic escalation provisions
- Increasing the catch-up contribution limit for participants age 60-63
- Requiring that catch-up contributions be made on a Roth basis for those earning > $145,000
- Increasing the Requirement Minimum Distribution (RMD) age from 72 to 73 and eventually to 75
- Eliminating the RMD requirement for Roth 401(k) accounts
- Allowing employers to treat employee student loan payments as elective deferrals for purposes of employer matching contributions to the retirement plan
- Allowing employees to elect to receive the employer contribution on a Roth basis
- Allowing 403(b) plans to invest in Collective Investment Trusts (CITs) and participate in Multiple Employer Plans (MEPs)
- Allowing Roth contributions to SIMPLE IRAs and increase contribution limits for businesses below a certain employee threshold
- Streamlining and consolidating plan sponsor notice requirements
- …and many more!!
How can Lebel & Harriman Retirement Advisors help?
Lebel & Harriman Retirement Advisors remains deeply committed to helping our clients and their employees navigate the complex journey of preparing for retirement. This means staying on top of any legislative and industry updates as they come out. Throughout 2023 and the coming years, we will be providing education on the ramifications of this legislation and will also be assisting you in implementing the relevant provisions for your organization.
Our February Newsletter will include four articles summarizing the different provisions in the plan, broken out by major theme. Additionally, we will be conducting two webinars focused on SECURE Act 2.0—one for employers and one for employees (as part of our monthly Financial Wellness@Work Webinar Series). Lastly, we will be reviewing the implications for your plan as part of our 2023 fiduciary reviews.
The material contained in this document is for informational purpose only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation or needs of individual investors. The information provided has been derived from sources believed to be reliable but is not guaranteed the accuracy and does not purport to be a complete analysis of the material discussed.