The original SECURE Act (Setting Every Community Up for Retirement Enhancement Act of 2019) became law on December 20, 2019 and changed laws related to tax-advantaged retirement accounts.
See our previous articles on SECURE 1.0 here:
There is now a new SECURE ACT 2.0 being proposed.
The House approved SECURE 2.0 in a 414-5 vote on March 29, 2022 (see H.R. 2954).
The Senate has not approved the act that the House passed. In the Senate, there is a similar (but different) bill currently in the Finance Committee pending a vote (see (S. 1770).
Some highlights that are currently in either the House or the Senate version are as follows:
- Creating a way to find “lost” retirement savings accounts (it turns out many people have forgotten about some of their old retirement accounts). The Department of Labor would be required to create a national online lost and found database for retirement plans.
- Allowing certain part-time employees who work at least 500 hours for two years to be eligible for their company 401k plans.
- Provisions making it easier for companies to contribute to 401k plans on behalf of their employees who are making student loan payments instead of contributing to their 401k plans.
- Automatic enrollment in 401k plans, which would require companies to automatically enroll employees in 401k plans at a rate of at least 3% and then increase each year until employees are contributing 10% of their pay.
- Increasing the amount allowed to be contributed as catch-up contributions (Example: as of today, someone 50 years old or older can make catch-up contributions to their retirement savings in addition to the standard annual contribution limits of $20,500 for 401(k) plans and $6,000 for individual retirement accounts in 2022. Currently, a catch-up contribution of an extra $6,500 in a 401(k) or $1,000 in an IRA is allowed.)
- The SECURE ACT 1.0 changed required minimum distributions to begin at age 72 instead of age 70 ½ . SECURE 2.0 is proposing mandatory distributions wouldn’t have to start until ae 73 in 2023; age 74 in 2030; and age 75 in 2033.
- Changes to the Required Minimum Distribution (RMD) penalty. Currently, if you don’t properly take your full RMD, you are taxed with a 50% tax penalty. The proposed change makes that penalty a 25% tax with the option to timely correct the issue with only a 10% tax penalty.
Crain & Wooley will continue to update our clients as more information becomes available. Our next client quarterly webinar is coming up in June. Keep your eyes out for the registration invitation.