Everhart Advisors "Highlights of SECURE Act 2.0"

As you’ve heard by now, Congress recently passed significant retirement-related legislation referred to as SECURE Act 2.0, which builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019. This massive piece of legislation is actually a package of several bills, totaling nearly 400 pages with 92 provisions—3 times larger than the original SECURE Act. 

SECURE 2.0 was designed to expand access, increase retirement savings, and simplify retirement plan rules. There is a lot of information to distill—some of the provisions are effective immediately, while others are effective in 2024 and later years. Many of the provisions are voluntary or do not apply to employers with already existing retirement plans—yet others require further guidance from regulators. 

Everhart Advisors is here to help you make sense of it and understand your responsibilities as an employer. You can take a deeper, more detailed dive into SECURE 2.0 by reading a regulatory update produced by the American Retirement Association here. The summary chart is organized in the order the provisions become effective. 

Effective Immediately - January 1st, 2023

• Raised the required minimum distribution (RMD) age to 73 for 2023 and reduces the penalty for failure to take an RMD to 25%.
• The penalty is further reduced to 10% if corrected within a two-year correction window.
• Plan administrator may rely on the employee’s certification of qualifying conditions for hardship distribution.
• Treasury may provide regulations for exceptions in cases where there is actual knowledge to the contrary.
• Increased startup tax credit to 100% of the administrative costs for companies with 50 or fewer employees. 
• Eligible businesses with 51-100 employees remain subject to a tax credit equal to 50% of administrative costs per the original SECURE Act and the existing cap of $5,000 per employer is retained for all.
• Additional startup 401(k) tax credit for employer contributions up to a cap of $1,000 per employee times applicable percentage.
• Applicable percentage: 100% in the first and second years, 75% in the third year, 50% in the fourth year, 25% in fifth year, and no credit for tax years thereafter.

Highlights of SECURE 2.0 

• Creates a "starter 401(k) plan" with reduced contribution limits and nondiscrimination safe harbors. 
• Increases the small employer startup credit to 100% for certain employers 
• Expands automatic enrollment in retirement plans. 
• Creates new emergency savings accounts linked to individual account plans. 
• Allows workers to participate in employer plans after two consecutive 12-month periods of 500 hours of service, beginning in 2025. 
• Allows student loan payments to be treated as elective deferrals for purposes of receiving matching contributions. 
• Provides more financial incentives to plan sponsors setting up a retirement plan.