Happy almost spring! As the weather is changing, we are making changes as well! This year we’re trying something new. Instead of saving all of our news and updates for the end of the year, we’re planning on reaching out to you more often, with smaller, more digestible and more targeted messages.
If you’d prefer not to receive these messages, you can unsubscribe at any time. We will still, of course, reach out to you for information and actions required with respect to your plan.
The big news is that at the end of 2022, the president signed the “SECURE 2.0 Act” into law. This law contains a large number of retirement plan-related provisions. In this email, we’ll give you an overview of the most critical ones that you need to know about.
Effective now
Required Minimum Distributions at age 73 Increased from age 72. Effective for individuals born in 1951 or later.
Penalty on Missed RMDs Reduced to 25% Previously 50%. Can be reduced as low as 10% under certain circumstances. We still advise taking RMDs timely!
Roth Employer Contributions If a participant elects, they may have their match, profit sharing or other employer contributions made on a Roth basis. Only available if the contribution is 100% vested. This is an optional provision.
Qualified Disaster Recovery Distributions and Loans This is similar to the special distributions and loans that were available during 2020 for COVID. It would take effect for any FEMA-declared disaster. This is an optional provision.
Unenrolled Participant Notice For employees who are eligible for the plan but have never contributed, they may optionally be provided with an annual “reminder” notice in lieu of certain other plan-related notices and disclosures.
Effective later
Roth-ification of Catch-Ups Starting in 2024, anyone with wages over $145,000 in the prior year may only make a catch-up contribution if the contribution is Roth.
Force Out Limit increased to $7,000 Currently $5,000. Terminated employees with vested accounts less than this amount can be transferred out to an IRA if they do not return their distribution paperwork timely. Effective 2024.
No RMDs from Roth 401(k) Accounts Similar to Roth IRAs, Roth 401(k) accounts will no longer be required to be distributed while the participant is still alive. Effective 2024.
Top Heavy Minimum Employees who have less than 1 year of service will no longer have to receive a 3% top heavy minimum contribution merely because they are eligible to contribute to their employer’s 401(k) plan. Effective 2024.
Increased 401(k) Catch-Up Limit for ages 60-63 For plan participants who will be at least age 60 but not age 64 by the end of the year, their catch-up limit is increased to $10,000 (indexed). Effective starting in 2025.
Long-Term Part-Time Employees SECURE 1.0 added a rule that employees who work more than 500 hours for 3 consecutive years must be allowed to participate in their employer’s 401(k) plan, starting in 2024. SECURE 2.0 modifies that from 3 years to 2 years, effective starting in 2025.
Required Minimum Distributions at age 75 Further increased from age 73 to 75 starting in 2032. Note that due to the wording of the law, there is currently some ambiguity regarding whether individuals born in 1959 will have RMDs starting at age 73 or 75. We expect this to be resolved by the IRS before any of these individuals are required to start distributions.
We will all be hearing more about these provisions, and others, over the next months and years. If you have any questions before our next newsletter, don’t hesitate to reach out to us!