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The U.S. House of Representatives recently passed the Securing a Strong Retirement Act of 2022 (SECURE 2.0) by a 414-5 vote. The bill now moves to the Senate, where it is expected to be addressed in the coming months.
SECURE 2.0, as passed by the House, expands on certain aspects of the Setting Every Community Up for Retirement Enhancement (SECURE Act) that became law in 2019. SECURE 2.0 similarly intends to give American workers greater access to retirement savings opportunities.
Mandating Automatic Retirement Plan Enrollment
For plan years beginning after December 31, 2023, SECURE 2.0 would require new 401(k) plans to automatically enroll participants upon becoming eligible. Employees would be permitted to decline participation. All current 401(k) plans, and plans sponsored by businesses with 10 or fewer employees, businesses in existence for fewer than three years, church plans, and governmental plans would be exempt.
Creating Student Loan Repayment “Matching” Contributions
SECURE 2.0 would allow an employer to make contributions under a 401(k) plan to match certain student loan repayments made by employees as if the repayments were elective deferrals to the 401(k) plan. Only payments made by an employee solely to pay for certain qualified higher education expenses would be eligible for this treatment. The new rule would apply to contributions made for plan years beginning after December 31, 2022.
Raising Required Minimum Distribution Age
SECURE 2.0 would increase the required minimum distribution (RMD) age on a sliding scale as follows:
- Age 73 starting on January 1, 2023, for anyone who turns 72 after December 31, 2022, and turns 73 before January 1, 2030)
- Age 74 starting on January 1, 2030, for anyone who turns 73 after December 31, 2029, and turns 74 before January 1, 2033
- Age 75 starting on January 1, 2033, for anyone who turns 74 after December 31, 2032
These changes would apply starting with distributions required to be made after December 31, 2022, for anyone who turns 72 after that date.
Increasing Catch-up Limits
For tax years starting after December 31, 2023, the current $1,000 catch-up IRA contribution allowed for those 50 and older would be indexed and increased for inflation. Additionally, the current catch-up contribution limits on retirement plans would increase to $10,000 ($5,000 for SIMPLE plans) and be indexed to account for inflation for individuals who are at least 62 but not yet 65.
Expanding Eligibility for Certain Part-time Employees
The SECURE Act requires employers to let long-term, part-time workers into their 401(k) plans except for collectively bargained plans. Employers must have a dual eligibility requirement whereby an employee must complete either one year of service under the standard 1,000-hour rule or three consecutive years of service where the employee completes at least 500 hours of service. SECURE 2.0 would shorten that period for part-time workers to two years for plan years starting after December 31, 2022.
Creating Retirement Savings “Lost and Found”
SECURE 2.0 would, as of its enactment date, create a virtual lost and found where workers would be able to potentially locate retirement funds they might have forgotten they had. The Act also requires the U.S. Department of Labor, along with the Department of the Treasury, to issue regulations on how plan fiduciaries can meet their fiduciary duties to locate missing participants.
Expanding Employee Plans Compliance Resolution System
SECURE 2.0 would, as of its enactment date, expand the Employee Plans Compliance Resolution System (EPCRS) to permit employer plan sponsors to correct more types of errors (such as plan loan errors) via self-correction. SECURE 2.0 also would remove certain errors (such as failure to make required minimum distributions) from otherwise applicable excise tax liability.
This information has been prepared for UBA by Fisher & Phillips LLP. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.
