With the passing of the SECURE Act 2.0, we are sharing a few of the legislative highlights that may play an important role in your financial plans. If you have any questions about your specific situation, please contact your advisor.
Effective in 2023
- Required minimum distribution (RMD) age changes to 73. The RMD age will change again in 2033 to age 75. Those who turned 72 in 2022, are still, in general, under the old rules and must distribute their RMD by April 1, 2023.
SECURE Act 2.0 Phased-In Timeline for RMD Beginning Ages
- Employer matching contributions to 401(k) plans can now be made to an employee’s Roth account within the employer’s plan. The contributions will be added to the employee’s income for the year.
- SIMPLE and SEP retirement plans can now have a Roth component. Although this is officially the law, it will likely take employers and custodians some time to catch up to its actual implementation.
Effective in 2024
- RMDs will no longer be required from Roth accounts in employer retirement plans such as 401(k)’s, 403(b)’s, etc. This now streamlines the rules to be the same as individual Roth IRAs.
- High wage earners in a qualified plan (defined as those with prior year wages over $145,000) are required to use the Roth option for catch-up contributions. If a plan does not have a Roth component but there are employees over age 50 with more than $145,000 in prior year wages, a catch-up contribution will not be allowed for anyone (based on current interpretations).
- A surviving spouse who is the beneficiary of a decedent’s IRA can elect to use the decedent’s RMD age for distribution purposes. This is advisable when the surviving spouse is older than the decedent. This allows the surviving spouse to delay the RMD, thereby allowing the account to grow tax-deferred until the decedent’s RMD age is reached.