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SECURE Act 2.0: An Overview for the Plan Sponsor

January 11, 2023
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SECURE Act 2.0 was signed into law in late December 2022. This complex retirement reform package includes many changes that will impact plan administration and employees’ saving habits. Some of these provisions are effective as of Jan. 1, 2023, while others are delayed to 2024 and beyond.

At nearly 400 pages in length, I think there are many provisions of interest to retirement plan sponsors and service providers.   

I have compiled the below list highlighting some of the most significant changes for you to be aware of by their effective date. While this list does not cover every provision in SECURE Act 2.0, it highlights those likely to be of the most interest and importance.  

It is important to also keep in mind:

  • Many of these provisions are optional.
  • Employers can operate their plans according to the law changes and adopt a written plan amendment as late as the end of the 2025 plan year.
  • The law is large and new. It will be followed by IRS and DOL regulations and other guidance. So, expect changes and clarity. 


Provisions effective in 2023

  • Roth matching and non-elective employer contributions
    • Under prior law, employees could only make Roth deferrals to the plan. Employer matching and non-elective contributions (sometimes generically referred to as profit sharing contributions) were required to be pre-tax.
    • Beginning January 1, 2023, employees in a qualified plan, 403(b) plan or governmental 457(b) plan can choose to treat matching and non-elective contributions as Roth contributions.
      • The provision is optional. Employers determine whether to allow Roth matching or non-elective contributions in the plan.
      • Immediate vesting. If used, the Roth employer contributions must be 100% vested.
      • Tax considerations. The Roth matching/non-elective contribution amount is taxable income to the employee.

  • New tax credit for small employers providing benefits to military spouses
    • Employers with no more than 100 employees may receive a tax credit equal to $200 per each military spouse employee in the plan and an additional credit of $300 for related employer contributions.

  • Changes to required minimum distribution (“RMD”) rules
    • Raises age to 73 for people who turn 72 after 12/31/22 and 73 before 1/1/2033.
    • Raises age to 75 for people who turn 74 after 12/31/32.
    • Reduces excise tax for failure to take RMD from 50% to 25%, which can be further reduced to 10%.
    • Allows certain special needs trusts to be treated as designated beneficiaries.

  • Optional de minimis financial incentives for plan participation
    • Permits small incentives to be given to employees to join a 401(k) or 403(b) plan so long as the incentive is not paid from plan assets.

  • Hardship distribution rules
    • IRS guidance previously permitted employees to self-certify that they qualified for a hardship distribution. The new law confirms that retirement plans may use this approach.
    • Also conforms 403(b) plan hardship rules to 401(k) plan rules effective in 2024.

  • Eliminating the need to provide certain notices to unenrolled employees
    • Permits employers to use a single annual “reminder notice” to eligible employees who do not enroll in the plan. The notice replaces IRS and DOL notices that the employer otherwise would have to deliver.

  • Expansion of permitted 403(b) plan investments to collective trusts
    • Permits 403(b) plans to invest in certain collective investment trusts.

  • Governmental 457(b) plan deferral rule change
    • Participants can change deferral rate any time before compensation made available and do not have to do so before first of the month.

  • New distribution option for participants with terminal illness
    • Permits plans to allow distributions to terminally ill participants (with physician certification).

  • New benefit options for participants affected by certain qualified natural disasters
    • Permits distributions to participants impacted by a Presidentially declared disaster.
    • Distributions may be repaid.
    • Plans may allow increased loan amounts (to $100,000) and relax repayment terms for participants affected by disaster.

  • Recognition of Tribal Authority domestic relations orders
    • Makes a domestic relations order of a Tribal Court eligible to be considered a QDRO.

Provisions effective in 2024 and future years

  • Long-term, part-time employees (2024/2025)
    • The original SECURE Act required employers to offer “long-term, part-time” (LTPT) employees the deferral option in the plan beginning January 1, 2024. A LTPT employee is defined as an employee who has attained age 21 and worked at least 500 hours for three consecutive 12-month periods following the date of hire. Employers must count service beginning January 1, 2021. The employer is not required to provide a match or other employer contribution to the LTPT employees.
    • Beginning January 1, 2025, SECURE Act 2.0 reduces the service requirement from three to two years. Employers must count service for this purpose beginning as of January 1, 2023. In addition, these rules are now extended to 403(b) plans subject to ERISA.

  • Matching contributions on qualified student loan payments (2024)
    • Permits plans to treat qualified student loan payments as elective deferrals for purposes of determining matching contributions.

  • New withdrawal options for participants with emergency expenses or affected by domestic violence (2024)
    • Permits plans to allow for distributions to participants with certain emergency expenses or affected by domestic violence.

  • Permitting emergency savings accounts within the plan (2024)
    • Permits plans to introduce an emergency savings account feature inside the plan.

  • Increasing dollar limit for mandatory cash-outs (2024)
    • Increases limit for mandatory cash-outs from $5,000 to $7,000.

  • Safe harbor process to correct deferral failures (2024)
    • Creates statutory process to correct certain deferral failures.

  • Roth catch-up contributions for participants with wages over $145,000 (2024)
    • Requires catch-up contributions for participants over wage limit to be made on a Roth basis and plans to accept Roth contributions if catch-up allowed.

  • Higher catch-up limits (2025)
    • Increases catch-up contribution limit for participants ages 60-63.

  • New withdrawal option for qualified long-term care distributions (2026)
    • Permits plans to allow for distributions for payment of certain long-term care expenses.

  • Requirement to provide one paper statement per year (2026)
    • Creates requirement that certain participants be sent one paper statement per year unless they consent to receiving all disclosures electronically.

If you have further questions or wish for clarifcation on any of these provisions, please feel free to reach out to me at whitney@reserveinvestments.com or (949) 777-0311.