While it came down to the wire, both the House and Senate have now approved the much-anticipated SECURE 2.0 Act of 2022 as part of the mammoth $1.7 trillion omnibus spending bill.
For months, it was anticipated that Congress would attach a final SECURE 2.0 package to a year-end spending bill, but that wasn’t confirmed until earlier this week, and even then, it wasn’t necessarily guaranteed. Congress had faced a Dec. 23 deadline to approve the legislation to fund the government for the remainder of fiscal year 2023 (which began Oct. 1) and prevent a government shutdown. And for a short while, it appeared that lawmakers might not beat the deadline and would punt the funding bill until next year, meaning the SECURE 2.0 would have to start over from scratch.
But the U.S. Senate approved the 4,000-page “Consolidated Appropriations Act, 2023” (H.R. 2617 as amended) on Dec. 22 by a vote of 68-29. The House followed suit, approving the legislation Dec. 23 by a near party-line vote of 225-201, with one member voting present and nine Republican members voting in support of the bill. With final congressional passage now in hand, the legislation is cleared for President Biden’s signature. In the meantime, Congress also approved another short-term continuing resolution (until Dec. 30) to give lawmakers time to prepare and enroll the final bill before sending it to President Biden.
Plan advisors and other retirement professionals will want to pay close attention to when the legislation is signed. As explained in our “What Else Is in the New SECURE 2.0?” post, the date that President Biden signs the legislation will serve as the “date of enactment,” and several of the provisions contained in the legislation become effective on that date. Many other provisions have effective dates in 2023 or later years.
As a top priority of the American Retirement Association, enactment of the SECURE 2.0 Act, which builds off the 2019 SECURE Act, will further improve upon the success of the private employer-based retirement system by making it easier for businesses to offer retirement plans and for individuals to save for retirement.
A sampling of the key retirement provisions among the 90-plus contained in the final spending bill include:
- Establishing a new “Starter K,” supported by the ARA which will allow employers that do not currently sponsor a retirement plan to offer a starter 401(k) plan (or safe harbor 403(b) plan);
- Providing a 100% tax credit for the start-up of new retirement plans among small businesses;
- Requiring new 401(k) and 403(b) plans to automatically enroll employees in the respective plan upon eligibility, subject to certain conditions;
- Providing an enhanced Saver’s match that modifies the existing Saver’s Credit by changing it from a credit paid in cash as part of a tax refund to a government matching contribution that must be deposited into a taxpayer’s IRA or retirement plan;
- Allowing the establishment of new emergency savings accounts linked to individual account plans;
- Allowing employers to treat student-loan payments as elective deferrals for purposes of matching contributions;
- Implementing higher catch-up limits at age 60, 61, 62 and 63 (beginning after Dec. 31, 2024);
- Gradually increasing the required minimum distribution (RMD) age from the current 72 to age 75;
- Allowing 403(b) plans to participate in multiple employer plans (MEPs) and pooled employer plans (PEPs);
- Easing the current restrictions and expanding the current limits for qualified longevity annuity contracts (QLACs) and eliminating a penalty on partial annuitization;
- Allowing for the establishment of auto-portability arrangements and increasing the dollar limit for mandatory distributions;
- Establishing a Retirement Savings Lost and Found;
- Providing permanent rules for the use of retirement funds in connection with qualified federally declared disasters;
- Providing a safe harbor for corrections of employee elective deferral failures; and
- Expanding the Employee Plans Compliance Resolution System (EPCRS) to, among other things, allow more types of errors to be corrected internally through self-correction.
Upcoming NAPA Webcast
To learn more about what’s in the new SECURE 2.0 Act of 2022, register now for a special webcast on Thursday, Jan. 26, 2023, at 2:00 p.m., ET, where ARA CEO Brian Graff and Chief Government Affairs Officer Will Hansen will discuss and analyze the effects major provisions will have on plan design, administration and operations. Register today.