Secure Act 2.0 Summary

Secure Act 2.0 Summary

Secure Act 2.0 Summary

The Secure Act 2.0 was signed into law in late December 2022, creating numerous new retirement planning provisions. The new rules are intended to enhance your ability to save for retirement and simplify existing IRS rules.

In this Secure Act 2.0 summary, we discuss changes in employer-sponsored retirement plans, qualified charitable distributions (QCDs), earlier part-time employee 401(k) participation and student loan debt retirement plan matching.

Read the post, Secure Act 2.0 and Your Retirement.

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Secure Act 2.0 Summary

Small Business Tax Credit Increase for Pension Plan Startup Costs

Secure 2.0 increases tax credits for small businesses with 50 employees or fewer.

The initial Secure Act provided a three-year startup credit for 50% of administrative costs with an annual cap of $5,000.

Secure 2.0 increases this credit to 100%.

According to Senate.gov, “The amount of the additional credit generally will be a percentage of the amount contributed by the employer on behalf of employees, up to a per-employee cap of $1,000.

This full additional credit is limited to employers with 50 or fewer employees and phased out for employers with between 51 and 100 employees. The applicable percentage is 100 percent in the first and second years, 75 percent in the third year, 50 percent in the fourth year, 25 percent in the fifth year – and no credit for tax years thereafter, effective for taxable years beginning after Dec. 31, 2022.”

Employers May Contribute To Roth 401(k) Accounts

Starting this year, employers may “match” your retirement savings in a Roth 401(k) account, where your money grows tax-free.

Previously, employers could only contribute matches to pre-tax plans, like traditional 401(k)s. Keep in mind, your employer’s match is considered taxable income in the year of the contribution.

One caveat: You’ll need to pay RMDs on your employer-sponsored Roth account until 2024.

Employers may also now offer Roth SIMPLE and SEP IRAs in addition to traditional SIMPLE and SEP IRAs.

Tip: Explore our detailed and complimentary guide, Why Convert From a Traditional IRA to a Roth IRA?

If your employer is not offering a Roth 401(k) yet, it’s still advantageous to check with your human resources department now in preparation for a potential change. The ability to participate in a Roth likely changes your tax situation and, therefore, you’ll want to plan ahead.

To understand why Roths are smart investment vehicles, check out our detailed resources:

The ‘Mega Backdoor’ Roth IRA (Blogpost)

Roth Conversion Checklist (Blogpost)

All About Roth IRAs (Podcast)

IRAs Information Center (Recently Published Articles)

Retirement Plan Contributions and Student Loan Debt

Beginning 2024, employers may match in retirement plan contributions what an employee pays in qualified student loan debt for any given year, even if the employee isn’t contributing to the plan.

Employers are often using this benefit as a recruiting tool.

Qualified Charitable Distributions (QCDs) One-Time $50,000 Gift

Starting in 2023, those age 70½ and older may make a one-time, $50,000 distribution (adjusted annually for inflation) to charities through charitable gift annuities, charitable remainder unitrusts and charitable remainder annuity trusts.

A qualified charitable distribution (QCD) is a direct transfer of money from an individual retirement account (IRA) to an eligible charitable organization. QCDs are a philanthropic tool that also helps you meet your annual RMDs.

Tip: Learn how to maximize your charitable impact while reducing taxes. Download our complimentary special report, Making the Most of Your Charitable Giving.

Expedited Part-Time Employee 401(k) Participation (also extended to 403(b) plans)

The initial Secure Act created the opportunity for long-time, part-time employees to contribute to their employer’s 401(k) plans. Initially, employees qualified if they worked 1000 hours in one year or 500 hours in three consecutive years.

Secure 2.0 now enables employees to start contributing after two years with the same 500-hour requirement, effective for plan years beginning after Dec. 31, 2024. Secure 2.0 also extends the long-term, part-time coverage rules to 403(b) plans, subject to ERISA rules.

This benefit does not apply to employees covered by collective bargaining agreements.

In Summary

This Secure 2.0 Act summary only touches on a few significant portions of the more than 90 changes impacting qualified retirement plans, IRAs, SEPs, 529 plans and more.

These changes are intended to make it easier for Americans to save more. Nevertheless, there is a myriad of caveats, income limitations and other restrictions associated with many of these changes and, therefore, we encourage you to consult with your wealth adviser or tax preparer.

Contact Adviser Investments anytime for assistance. We pride ourselves on being The Planner You Can Talk To.


Tax and legal information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice. Always consult a licensed attorney or tax professional regarding your specific legal or tax situation.

Our statements and opinions are subject to change without notice. All investments carry risk of loss and there is no guarantee that investment objectives will be achieved.

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