SECURE Act 2.0: Expanding Coverage and Increasing Retirement Savings (Pt. 1)

Summary and L&H’s Perspective
March 2023

Secure Act 2.0 of 2022 continues momentum from the initial SECURE Act of 2019. SECURE Act 2.0’s landmark legislation will have lasting impacts on both individual plan participants and plan sponsors. SECURE Act 2.0 contains more than 90 sections in 7 broad categories.

This article will begin the discussion of Theme 1: Expanding Coverage and Increasing Retirement Savings, the first of four essential themes of SECURE Act 2.0. Highlighted in this article are sections and strategies we believe will likely be of interest as the law phases into effect. Our March newsletter will continue our review of this theme.

Section 101 – Expanding Automatic Enrollment in Retirement Plans.1


Section 101 requires that new 401(k)s & 403(b)s offer automatic enrollment with an opt out provision to employees. Plans currently in existence and smaller employers are either grandfathered or exempted from this rule. Congress is likely aware that access to a qualified plan at work creates better outcomes for retirees, on average. This provision requires new plans to overcome participant inertia and get participants saving early and often. This provision takes effect on plan years beginning after 12/31/2024.

L&H’s Perspective

Congress has been moving consistently towards increasing retirement plan access for employees. Academic and industry studies continue to support the premise that overcoming participant inertia results in longer-term financial security. While the intention of the law is admirable, recordkeepers/custodians have struggled to accommodate technological advances in recordkeeping to ensure compliance. Plan Sponsors remain responsible for the proper administration of automatic enrollment—which is automatic generally only from the participant’s perspective. Hopefully, this requirement will facilitate the necessary resources for recordkeepers/custodians to make the plan sponsor’s responsibility easier. Although Congress has not yet done so, it would appear to be a small jump in the future for Congress to mandate this requirement for existing plans.

Section 102 – Modification of Credit for Small Employer Pension Plan Startup Costs.2


The Internal Revenue Code (IRC) provides a business tax credit under Section 45E – Small Employer Pension Plan Startup Costs.3 Section 102 changes Section 45E for certain qualified employers (generally those with less than 100 employees) providing them with two additional business credits. The credits: (i) increase the amount of pension plan startup credit – limited up to $5,000 to 100% of the related startup costs; and (ii) provide additional credits for employers making employer contributions to their employees’ accounts – reduced by an applicable percentage over a 5-year period. This credit is effective for taxable years beginning after 12/31/2022.

L&H’s Perspective

This provision should dovetail nicely with Maine’s (and other states’) recent enactment of a mandatory payroll deduction IRA for most employers.4 For plan sponsors wishing to establish plans that provide employer contributions, now is a good time to discuss this business credit with your tax-adviser. For employers with less than 100 employees, and especially those with less than 50 employees, this federal tax incentive should prove helpful to allay some of the upfront costs associated with plan administration and contributions.5 Plans established prior to enactment of SECURE 2.0 and within the applicable percentage timeframe should review the credit with their tax-advisers.

Section 107 – Increase in Age for Required Beginning Date for Mandatory Distributions.6


Under current law, participants are generally required to begin taking distributions from retirement plans at age 72 – known generally as RMD age. SECURE Act (2019) increased the age to 72 from 70 ½. SECURE Act 2.0 of 2022 moves the applicable age to 73, effective starting on 01/01/2023.

L&H’s Perspective

Required minimum distribution (RMD) rules are complex. The applicable age increase allows an individual to extend the potential investment horizon prior to being compelled to take a distribution. This rule is in-line with the expanding average life-expectancy of retirees. Because RMD rules are complex, individuals are encouraged to reach out to their financial and tax advisers to discuss the requirement.

Section 109 – Higher Catch-Up limit to apply at age 60, 61, 62, and 63.7


Participants inside many qualified plans (like 401(k)s) can defer into the plan additional amounts upon attainment of age 50. For 2023, the indexed amount for deferrals for participants having attained age 50 and greater is $7,500, allowing for a total employee deferral of $30,000 – comprised of the basic deferral of $22,500 plus $7,500. For 2023, this amount is allowed either as pre-tax deferral or as Roth or any combination thereof limited to $30,000. Participants eligible in an appropriate qualified plan having attained the ages of 60, 61, 62, and 63, will have, in taxable years after 2024, the ability to defer $10,000 (indexed for inflation). This provision is effective for tax years after 2024.

L&H’s Perspective

Catch-up contributions provide a strategy to increase deferrals into retirement plans for individuals approaching social security retirement age. These additional amounts can assist individuals, especially those who began saving later in their careers, to enhance their retirement savings. While L&H supports the increase in elective deferrals, Congress also passed Section 603, which generally limits the amount of pre-tax catch-up contributions for individuals in taxable year after 12/31/2023.[8] Section 603 and implications are discussed below, but for some individuals any catch-up contribution after age 50 may be subject only to Roth contribution treatment.   

Section 603 – Elective Deferrals Generally Limited to Regular Contribution Limit.9


Under current law, catch-up contributions can be deferred on a pre-tax or Roth basis (provided the plan document permits). For taxable years after 12/31/2023, all catch-up contributions to a qualified retirement plan must be made on a Roth basis. An exception is provided for pre-tax catch-up contributions for employees with compensation less than $145,000 (indexed).10

L&H’s Perspective

For individuals with compensation greater than $145,000 (and the age requirement for catch-up at 50) the assumptions for utilizing Roth deferrals should be carefully considered. Many businesses may want to review utilization of a Cash Balance Plan or other type of qualified plan for individuals restricted from utilizing a pre-tax catch-up contribution. Historically, 401(k) deferrals, especially Roth 401(k) deferrals, have been at the discretion of the individual. SECURE 2.0 will soon require all catch-up contributions to be made on a Roth basis unless an individual’s compensation is less than $145,000. 11 For many plan sponsors, Roth likely should be added to the plan document (if it hasn’t already).

Roth certainly has some interesting tax efficiencies, one of the most interesting being tax-free withdrawal of investment gain upon certain requirements.12 The beneficial review of Roth versus Pre-tax has long been debated. Two commonly cited advantages to Roth are: (i) certainty of tax rates; and (ii) tax-free gain of the investments’ appreciation (investment gain not subject to capital gains).13 One of the major assumptions, however, regarding the benefit of Roth is that tax-rates are likely to increase. 14 Paying the tax now avoids the increase in tax later. The compounding effect of the time value of money of the potential investment gain, which is ultimately not subject to capital gain or ordinary tax treatment, is generally more favorable for individuals with longer investment time-horizons.

Coming up…

We will continue to focus on Theme 1 in our next article, to be featured in the March newsletter. This article will address the following and more: (i) student loan elective deferrals; (ii) improving coverage for part-time workers; and (iii) the introduction of certain types of withdrawals. If you have any questions in the meantime, please reach out to us!

For more information, contact Matt Arey, JD or Nate Moody, CPFA® at (207) 773-5390 or |


  1. Consolidated Appropriations Act, 2023, P.L. 117-328, Division T SECURE Act 2.0 Act of 2022, Title I, Section 101 (hereafter referenced as SECURE Act 2.0 and the appropriate section).
  2. SECURE Act 2.0 Section 102
  3. 26 U.S.C 45E
  4. 5 M.R.S.7-A (PL 2021, c. 356, Section 1)
  5. L&H does not practice law or tax. Please consult with your appropriate tax adviser to review your specific facts and circumstances. Although licensed to practice law, the author of this article, does not provide legal services to clients. Attorney client privilege does not apply to communications.
  6. SECURE Act 2.0 Section 107
  7. SECURE Act 2.0 Section 109
  8. SECURE Act 2.0 Section 603
  9. SECURE Act 2.0 Section 603; See also Congressional Summary SECURE Act 2022 Section 603 Summary.
  10. SECURE Act 2.0 Section 603; See also Congressional Summary SECURE Act 2022 Section 603 Summary
  11. SECURE Act 2.0 Section 603; See also Congressional Summary SECURE Act 2022 Section 603 Summary
  12. General requirements for treatment of tax free Roth withdrawals include attainment of age 59.5, and having held the account for 5-years.
  13. Kaplan, Richard, “To Roth or Not to Roth: Analyzing the Conversion Opportunity for 2010 and Beyond,” Daily Tax Report Vol. 9, No. 181 (Sep. 22, 2009)
  14. Kaplan, Richard, Daily Tax Report Vol. 9, No. 181, p.3 (Sep. 22, 2009)

This document is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

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