By: Braden Priest, CFA®, Retirement Plan Consultant
The SECURE Act 2.0 was signed into law by President Biden in December 2022 and is guaranteed to impact your retirement plan. Here are 3 key provisions you should be aware of to keep your retirement plan in compliance:
- Increased Participation for Long-Term Part-Time Workers
Many plans exclude employees who work less than 1,000 hours from participating in their retirement plan. Beginning in 2024, any employee who has worked at least 500 hours in the prior 3 consecutive years must be allowed to participate. The lookback period decreases to only 2 years beginning in 2025.
2. Catch-up Contributions for High Earners Are Changing
Beginning in 2024, all catch-up contributions for workers with wages over $145,000 (adjusted for inflation) during the previous year must be deposited into a Roth (i.e., after-tax) account. If your retirement plan does not currently offer a Roth contribution source, you may need to act quickly to ensure participants in this group may continue to make catch-up contributions.
3. Required Minimum Distributions (“RMDs’) Are Getting a Facelift
Several welcome changes are coming to RMDs. Already effective in 2023, the age at which a participant is required to begin taking RMDs has been increased from 72 to 73, and the age will ultimately rise to 75 in 2033. Beginning in 2024, participants will no longer be forced to take RMDs on any Roth balances in their account. This is great news for participants looking to avoid RMDs for retirement or estate planning purposes.
Optional Provisions to Enhance the Competitiveness of your Retirement Plan
SECURE Act 2.0 also affords plan sponsors a swath of new provisions that could benefit your employees. Items like higher catch-up contribution amounts, the ability to make employer contributions on a Roth basis, and providing employer matching contributions on student loan payments, might be of interest to your employees.
There are over 90 provisions included in this recent legislation, so speak with one of our Retirement Plan Advisors today to get more information on how you can take advantage of the SECURE Act 2.0 and turbocharge your retirement plan.
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