An Update on SECURE 2.0
During 2022 the House of Representatives passed legislation entitled: Securing a Strong Retirement (SSR) Act. Not to be outdone, the Senate advanced retirement savings-focused legislative proposals as well. Perhaps we'll see a combination of these acts as SECURE 2.0!
To keep you updated, we wanted to summarize several of the main provisions of what was contained in these acts:
Roth Matching Contributions Would be Permissible
- Employers could have the option of permitting employees to elect some or all of their matching contributions to be treated as Roth contributions for 401(k) plans.
- Employer matching contributions designated as Roth contributions would not be excludable from employees’ gross income.
Expansion Of Catch-Up Contributions & Roth Tax Treatment
- Increasing the annual catch-up amount to $10,000 for participants ages 62 through 64 beginning in 2023. This higher limit would also be indexed for inflation in future years.
- Currently, catch-up contributions to qualified retirement plans offered by employers can be made on a pre-tax or Roth basis (if the employer permits). SECURE Act 2.0 provides that starting in 2023, all catch-up contributions to employer-sponsored qualified retirement plans would be subject to Roth tax treatment.
Delaying Mandatory Distributions
- The SECURE Act increased the age at which plan participants are required to begin taking mandatory distributions to 72.
- SECURE Act 2.0 could increase the required minimum distribution age to 73 in 2022, 74 in 2029, and 75 in 2032.
Mandatory Automatic Enrollment & Escalation
- Employers that establish defined contribution plans could be required to automatically enroll newly eligible employees at a pre-tax contribution amount of 3% of pay.
- Contributions would automatically increase annually by 1% up to at least 10% but not more than 15% of pay.
- Exceptions are made for small businesses with 10 or fewer employees, new businesses (those in business for less than 3 years), church plans, and governmental plans.
- Employees could opt out of automatic enrollment and/or escalation at any time.
Expediting Part-Time Workers’ Participation
- The SECURE Act expanded eligibility for long-term, part-time workers to contribute to their employers’ 401(k) plan after 3 years of service, beginning January 1, 2021.
- SECURE Act 2.0 could expedite the addition of long-term, part-time workers as eligible participants by shortening the period for eligibility from 3 to 2 years, beginning January 1, 2021.
Authorize Student Loan Matching
- While the IRS has opened the door to allowing employers to make 401(k) matching contributions based on employees’ student loan payments, even if employees are not making retirement contributions themselves, compliance concerns have been a sticking point due to the absence of authorizing legislation.
- SECURE Act 2.0 could provide the needed statutory basis for employers to adopt this feature. The matching contributions for student loan payments would be required to vest under the same schedule as other matching contributions.
Bipartisan support for many of these provisions make it likely that a bill will end up on the president’s desk by year end.
How Stonebridge Can Help
It can be a bit overwhelming to administer a company retirement plan, given all the documentation nuances let alone the deadlines! At Stonebridge Financial Group, we work exclusively with retirement plans and can help you with everything from designing to running your plan. Delegating fiduciary responsibilities can be a great solution for plan sponsors who lack time and the knowledge of ever-changing requirements to manage a retirement plan -- it's is all we've done since our inception back in 2004! Our robust service offering starts with ERISA 3(21) and 3(38) services and is the tip of the iceberg. We are consultants that help you with every aspect of your plan:
- Plan governance including board resolutions, committee charter, and more
- Implementing cybersecurity best practices
- Plan design including student debt benefits
- Complete IRS and CPA audit support - we have ex-auditors on staff!
- Participant 1:1 and group education
- Fee benchmarking
- Ensuring participant retirement readiness
- Consulting on financial wellness
- Committee fiduciary training
- Process creation and documentation
- Plan design
- Contribution match modeling
- Annual plan compliance review
We become your outsourced retirement plan officer who dives into the morass of retirement plan details and resolves issues so you don't have to!
Please click here to schedule a short call, give us a call at (855) 530-0500 x601 or email info@stonebridgefinancialgroup.com. We look forward to helping your committee successfully fulfill their fiduciary duties with ease and excellence!