With SECURE Act 1.0 (officially titled “Setting Every Community Up for Retirement Enhancement Act”) still implemented by many plan sponsors, Congress is now considering a new set of laws designed to help close the savings gap. country retirement, called the SECURE Act. 2.0 (officially titled “Securing a Strong Retirement Act”).
Although the House Ways and Means Committee unanimously approved the SECURE 2.0 law, it has still not been voted on by the entire House and some representatives may wish to see changes implemented. artwork. And it was not approved by the Senate either. So while SECURE Act 2.0 appears to have bipartisan support, switching to its current form is not a sure thing.
Below is a brief overview of some of the highlights of SECURE Act 2.0 for defined contribution plan sponsors (again, the provisions outlined below are subject to change):
- Increase in the minimum age required for distribution: SECURE Act 1.0 increased the age at which minimum required distributions (RMDs) must begin from 70.5 to 72 years of age as of 2020. SECURE Act 2.0 would increase the age of RMDs to 73 as of January 1, 2022, at age 74 from January 1, 2029, and 75 years from January 1, 2032.
- Increased catch-up contributions: SECURE Act 2.0 would increase the contribution limit for catch-up contributions (currently $ 6,500 for those 50 or older) to $ 10,000 for those who are 62, 63 or 64 (returning to the limit of $ 6,500 l year when a person turns 65).
- Catch-up contributions as Roth only: As of January 1, 2022, catch-up contributions would only be Roth.
- Corresponding contributions as Roth: Upon adoption, plan sponsors could choose to make matching contributions as Roth contributions.
- Student loan matching contributions: SECURE Act 2.0 would allow plans to treat student loan contributions as optional deferrals for the purpose of providing a matching contribution under Code § 401 (m). SECURE Act 2.0 also contains changes to the non-discrimination tests which would alleviate the problems of implementing this type of service.
- New plans – Mandatory automatic enrollment and automatic increase: Applies only to new defined contribution plans (including 401 (k) and 403 (b) plans) established after the adoption of SECURE 2.0. SECURE 2.0 requires that new plans automatically enroll participants between 3% and 10% of compensation and automatically increase their contributions by 1% until they reach at least 10% and no more than 15% of compensation. Exceptions apply to this requirement. SECURE Act 2.0 also codifies the self-correction of automatic enrollment errors.
- Accelerate the participation of long-term part-time workers in 401 (k) diets: The SECURE 1.0 law has a requirement in place that long-term part-time workers (anyone who has worked 500 hours or more in the last three years of the scheme, starting in the 2021 scheme year) be allowed to participate in the employer’s 401 (k) plan. SECURE Act 2.0 reduces the period required to just two years to work 500 hours or more.
- Easier plan administration: SECURE Act 2.0 contains a number of provisions designed to facilitate the administration of defined contribution plans. Some examples include: changes to the recovery requirements for benefit overpayments; reduction of excise duties for non-payment of RMD from 50% to 25% (with an additional reduction if corrected within certain deadlines); and a reduced notice requirement for unregistered plan members.
- Creation of lost and found objects for missing participants: Within 3 years from the date of promulgation, the Department of Labor, the Department of the Treasury and the Department of Commerce will coordinate the creation of a searchable database for the benefits of lost participants.
The above points are just a few of the elements of SECURE Act 2.0 and we will continue to issue more detailed alerts on specific topics as SECURE Act 2.0 is near enactment.