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What’s in the New SECURE Act 2.0?


The “SECURE Act 2.0” legislation that the House Ways & Means Committee will mark up May 5 includes several new provisions, including those championed by the ARA, as well as changes to some of the existing provisions. Here’s a closer look.

Committee Chairman Richard Neal (D-MA), along with the Committee’s ranking Republican, Rep. Kevin Brady (R-TX), first introduced the bill, Securing a Strong Retirement Act (SSRA), last October as a sequel to the 2019 SECURE Act. While that version of the bill included some 36 provisions, the new Securing a Strong Retirement Act of 2021 (H.R. 2954) now contains about 45 provisions, including new revenue offsets to pay for the bill. 

In with the Old…

Most of the provisions that were contained in the earlier version of are retained in the new one. They include: 

  • expanding automatic enrollment in retirement plans by enrolling employees automatically in their company’s 401(k) plan when a new plan is created;
  • modifying the credit for small employer pension plan startup costs; 
  • clarifying that a 403(b) plan may be established and maintained as a MEP; 
  • allowing a higher catch-up limit (with changes);  
  • increasing the required minimum distribution age (with changes);
  • creating a retirement plan matching program to encourage employees to pay off student loans (including a solution that ARA identified about the impact this new retirement plan design feature could have on the ADP test);
  • providing a safe harbor for corrections of employee elective deferral failures; 
  • reducing the excise tax on certain accumulations in qualified retirement plans; 
  • establishing a new retirement savings lost and found; and
  • expanding the Employee Plans Compliance Resolution System.

And in with the New

Following are summaries of some of the additional changes and new provisions in the SSRA.

Discretionary Retirement Plan Amendments: Among the items championed by the ARA is a provision that would give employers more time to adopt beneficial discretionary retirement plan amendments up until the due date of the employer’s tax return. This new deadline is consistent with the deadline to adopt a new retirement plan that was provided for in the SECURE Act. The provision would also give employers with existing plans the flexibility to make their 401(k) plans more generous to rank-and-file workers after the end of the year. 

Under the proposal, if an employer amends a stock bonus, pension, profit-sharing or annuity plan to increase benefits accrued under the plan effective for the preceding plan year (other than increasing the amount of matching contributions), the amendment would not otherwise cause the plan to fail to meet any of qualification requirements. Moreover, if the amendment is adopted before the legal deadline for filing the return of the employer for a tax year (including extensions) during which the amendment is effective, the employer may elect to treat such amendment as having been adopted as of the last day of the plan year in which the amendment is effective. The proposal applies to amendments made in plan years beginning after Dec. 31, 2022. 

Family Attribution Rules: Another item championed by the ARA corrects and modernizes the outdated and unfair family attribution rules to ensure that women business owners are not penalized if they happen to have minor children or live in a community property state. Under existing tax law, spouses in the nine community property states are automatically considered to own half of all property obtained during the marriage. As a result, business owners must bundle their business with those of their spouse when performing retirement plan coverage and nondiscrimination tests, which can be particularly troublesome if there is a family dispute or separation. Instead, the legislation addresses two inequities in the stock attribution rules by removing attribution:

  • for spouses with separate and unrelated businesses who reside in community property states; and
  • between parents with separate and unrelated business who have minor children.

This provision would apply to plan years beginning on or after the date of enactment. This issue was also addressed in bipartisan legislation recently introduced by Reps. Jimmy Panetta (D-CA) and Jodey Arrington (R-TX).

Student Loan Payments: Last Octobers SECURE Act 2.0 included a provision to create a retirement plan matching program to encourage employees to pay off student loans. As such, employers would be allowed to match employee student loan payments with a contribution to the employee’s retirement plan. The latest version of the legislation addresses a problem the ARA identified about the impact this new feature could have with the average deferral percentage (ADP) test that applies to 401(k) plans. It now allows participants receiving a matching contribution for student loan repayments to be separated or disaggregated from the rest of the employee population for purposes of the ADP test. This change would be effective for contributions made beginning with the 2022 plan year.

Promoting the Existing Saver’s Credit: Instead of significantly increasing and modernizing the Saver’s Credit, as the October 2020 version sought to do, the new version simply requires the Treasury Secretary to take steps to increase public awareness of the credit. Further, it would require the Treasury Secretary to report back to Congress within 90 days of enactment summarizing the anticipated promotion of those efforts. This provision was likely scaled back from the proposed original expansion due to the estimated revenue loss to the Treasury.  

New Required Beginning Dates for RMDs: Instead of immediately increasing the required minimum distribution age to 75, the new legislation would phase in the increase in the required beginning date from the calendar year in which the employee or IRA owner attains age 72 to the calendar year in which the employee or IRA owner attains age 73, for individuals who attain age 72 after Dec. 31, 2021, and who attain age 73 before Jan. 1, 2029. In addition, the proposal changes such age from 73 to 74 for individuals who attain age 73 after Dec. 31, 2028, and who attain age 74 before Jan. 1, 2032. Such age is further increased to age 75 for individuals who attain age 74 after Dec. 31, 2031. The new legislation also appears to have removed a proposed exemption from the RMD rules for individuals with certain account balances.

Higher Catch-up Limit to Apply at Age 62, 63 and 64: While the earlier legislation would have increased the catch-up limit at age 60, the new legislation instead raises catch-up contributions to $10,000 for those who have attained age 62, 63 or 64 (but not older than 64) by the end of the tax year for those who participate in employer-sponsored 401(k) and 403(b) plans. Participants in SIMPLE plans would be allowed to contribute an additional $5,000. The provision retains the existing catch-up contribution limits for those aged 50. In addition, both the $10,000 amount and the $5,000 amount would be indexed for inflation beginning in 2023. The provision applies to tax years beginning after Dec. 31, 2022.

Deferral of Tax for Certain Sales of Employer Stock to ESOPs Sponsored by S Corporations: A provision in the October 2020 version that would have expanded Code Section 1042 to include sales of employer stock to S corporation ESOPs appears to have been dropped from the new proposal. 

Additional New Provisions: Other new provisions in the legislation include: 

  • Separate application of top-heavy rules to DC plans covering excludible employees, which is included in the Portman-Cardin Retirement Security and Savings Act
  • Repayment of qualified birth or adoption distribution is limited to three years
  • Self-certification for deemed hardship contributions
  • Penalty-free withdrawals from retirement plan in case of domestic abuse
  • Retroactive first year elective deferrals for sole proprietors
  • Limiting cessation of IRA treatment to portion of account involved in a prohibited transaction

Revenue Provisions

The legislation also includes an estimated $27 billion in new revenue raisers over a 10-year period. They include the following. 

SIMPLE and SEP Roth IRAs: The mandate under current law that a Simplified Employee Pension (SEP) and a SIMPLE IRA may not be designated as a Roth IRA would be changed so that they could be designated as Roth IRAs, such that contributions to a SEP or SIMPLE IRA that is a designated Roth IRA would not be excludable from income (employer contributions as well as elective deferrals), while qualified distributions would be excludable. The proposal applies to tax years beginning after Dec. 31, 2021.  

Hardship Withdrawal Rules for 403(b) Plans: The proposal conforms the hardship distribution rules for 403(b) plans to those of 401(k) plans. It provides that in addition to elective deferrals, a 403(b) plan may distribute, on account of an employee’s hardship, qualified nonelective contributions, qualified matching contributions, and earnings on any of these contributions (including on elective deferrals). The proposal is effective for plan years beginning after Dec. 31, 2021.

Elective Deferrals Generally Limited to the Regular Contribution Limit: A Section 401(a) qualified plan, 403(b) plan or 457(b) plan that permits an eligible participant to make catch-up contributions must require such contributions to be designated Roth contributions. The proposal would not apply to a SIMPLE IRA or SEP. The proposal applies to tax years beginning after Dec. 31, 2021.

Optional Treatment of Employer Matching Contributions as Roth Contributions: Under the proposal, a Section 401(a) qualified plan, a 403(b) plan or a 457(b) plan may permit an employee to designate matching contributions as designated Roth contributions. An employer matching contribution that is a designated Roth contribution shall not be excludable from gross income. This proposal would apply to contributions made after the date of the enactment. 

What’s Next?

It’s important to note that this is a preliminary assessment of the changes from the SECURE Act 2.0 that was first introduced in October 2020 versus the legislation that was released this week. Also note that these provisions are subject to change as the legislation moves through the legislative process—starting with the Ways & Means Committee markup, which will be live-streamed at 11:00 ET on May 5 here.

Source Material

More detailed information about the SSRA is available online:


All comments
Dbie Johnson
2 years 4 months ago
I would love to see CIT/CIFs made available for all retirement accounts, not just qualified plans.