SECURE 2.0 – A brief look at some key retirement provisions
March 6, 2023
Mike Hurd, CPA/PFS, CCIFP
Principal
Whether you are 19 or 92 years old, saving for retirement is imperative and with the SECURE 2.0 Act signed into law, it’s hopefully easier. The SECURE 2.0 Act, passed on December 29, 2022, expands retirement plan coverage, increases retirement savings opportunities and simplifies retirement plan rules. Although SECURE 2.0 covers a lot, here is a brief overview of some significant provisions.
Automatic enrollment
The first major provision of the SECURE 2.0 Act is the expansion of automatic enrollment, requiring all 401(k) and 403(b) retirement plans established on or after December 29, 2022, to provide automatic enrollment of eligible employees. However, employees have the option to elect out. Companies with less than ten employees, businesses less than three years old and church and government plans are exempt from this automatic enrollment.
Small business tax credit
The SECURE 2.0 Act also modifies a tax credit available to small businesses with less than 51 employees (for those with more than 51, the credit begins to phase out). The modified tax credit allows employers to claim up to 100% of startup costs for the first two years after the retirement plan was established, 75% in the third, 50% in the fourth and 25% in the fifth year.
Student loans
For those with student loans, the act includes a provision permitting employers to make matching retirement plan contributions based on an employee’s student loan payments. This is available for plans beginning after 2023 and allows individuals to simultaneously save for retirement while paying off loans.
Catch-up contributions
Another significant change comes into play after 2024 when additional catch-up contributions will be available for individuals 60 to 63. This increased contribution limit is $10,000 for most plans and $5,000 for SIMPLE plans.
Regardless of your retirement investment goals, the SECURE 2.0 act likely includes something that may affect you – so to maximize your retirement savings, consider consulting a tax professional about how you can utilize provisions from SECURE 2.0 to your advantage.