SECURE Act 2.0 Passes the House

Important changes to 401(k) and similar defined contribution retirement plans are again moving forward in Congress. On March 29, the House overwhelmingly approved the bipartisan Securing a Strong Retirement Act by a vote of 414 to 5. See the bill here.

The bill, known as "SECURE Act 2.0," builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law in December 2019. Before it becomes law, the bill needs to be reconciled, pass the Senate and be signed by the President. While this legislation is not yet law, we wanted to provide you with an overview of its provisions as the bill advances through Congress.

The key retirement plan changes included in the proposed SECURE Act 2.0, as passed by the House, are highlighted below.

• Mandatory Automatic Enrollment/Escalation for new plans with a start date on or after January 1, 2024. Initial automatic enrollment would be 3% with annual increases to 10%.
• Expand Catch-Up Contributions beginning in the 2024 tax year to permit those ages 62 through 64 to contribute up to $10,000 as compared to the current maximum of $6,500. Require all Catch-Up Contributions to be Roth beginning in 2023.
• Allow Roth Matching Contributions to be chosen at an employee’s discretion.  If chosen as a plan feature by the Employer, this provision would become effective as early as 2022.
• Delay the Required Minimum Distribution Age to 73 for those attaining age 72 during 2022, to 74 in 2029 and to 75 in 2032.
• Expedite Part-Time Workers Participation to make employees with two consecutive years of at least 500 hours eligible to defer as early as January 1, 2023 rather than the current law which calls for eligibility after 3 consecutive years effective January 1, 2024.
• Authorize Student-Loan Matching by treating student loan payments as deferrals allowing the Employer to match the loan payments.  If chosen as a plan feature by the Employer, this provision would be effective as early as January 1, 2023. 
• Increase Plan Start-Up Credit effective for start-up plans beginning in the 2022 tax year.
• Create a New Additional Tax Credit for Small Employers of up to $1,000 of Employer contributions per Employee.