Secure 2.0: What Do You Need To Know

In 2019 Congress took an important step in improving retirement opportunity for Americans by passing the Secure Act that incentivized saving for retirement and increasing access to workplace plans. The legislation proved to need further refining and direction to reach its true goals. In December 2022, Secure Act 2.0 was passed by Congress.

Below are the important takeaways:

• • • Increased Small Business Tax Credits
      • Beginning 2023
      • Companies with less than 50 employees
      • Contribution tax credit up to $1000/employee
        • 100% first 2 years
        • 75% third year
        • 50% fourth year
        • 25% fifth year
    • Delayed Start of Required Minimum Distributions (RMDs)
      • From age 72 to 73
        • Beginning 2023
      • From age 73 to 75
        • Beginning in 2033
    • Decreased Tax Penalty for Failing to Take RMD
      • Beginning 2023
      • Reduced from 50% to 25%
      • Reduced from 25% to 10% if corrected in a timely manner
    • Improved Catch-Up Contributions
      • Individuals making over $145k, contributions to be made on a Roth Basis
        • Beginning 2024
      • Individuals between the ages of 60-63 are eligible for a higher catch-up
        • Increased from $7,500 to $10,000 or 150% of regular IRA catch-up & from $3,500 to $5,000 or 150% of regular SIMPLE catch-up
        • Beginning in 2025
    • Eliminated Self-Correction Submission
      • Previously required correction reports for inadvertent plan & IRA violations no longer need to be submitted to the IRS
    • Improved Matching Employer Contributions
      • Beginning 2024
      • Student loan payments can be employer matched to employee’s retirement plans
    • Required Auto-Enrollment
      • Beginning in 2025
      • Minimum contribution of 3% of employee’s income
      • Maximum contribution of 10% of employee’s income
    • Required Auto-Escalation
      • Beginning in 2025
      • 1% per year increase in employee contribution rate
      • Up to at least 10%, but no more than 15%
    • SIMPLE & SEP Roth Contributions
      • Beginning 2023
      • Both employee and employer can contribute to Roth plan
    • 401(k) Emergency Savings & Distributions
      • Beginning 2024
      • 2 New ways to provide for emergencies
        • Creation of 401(k) Emergency Savings Account
        • Yearly Emergency IRA Distributions of $1000 without penalty
    • Roth Employer Contributions Permitted
      • Beginning 2023
        • 401(k)
        • 403(b)
        • 457(b)
    • Excess 529 Rollover
      • Beginning 2024
      • Excess assets in a 529 qualified tuition program will be eligible for a tax-free rollover to a Roth IRA

Here at Arbor we are happy to help with any investment advice regarding the above changes. Please reach out to us via email or phone, 630.701.9080

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.