The SECURE 2.0 Act of 2022, part of the Consolidated Appropriations Act (CAA) of 2023, includes incentives for plan sponsors and features for plan participants, like automatic enrollment, which encourage retirement saving.
Aimed at expanding plan coverage, preserving retirement income and simplifying administrative rules, the Act has something for everyone—including increases in catch-up contribution limits for older participants, matching contributions based on participants’ student loan repayments, and a Saver’s Match tax credit that helps lower- and middle-income Americans.
Employees 50+
Starting this year, employees aged 50 and older benefit from higher catch-up contribution limits and later age requirements for required minimum distributions (RMDs). The 2023 contribution limit for 401(k) and 403(b) plans has been raised to $22,500.
The catch-up contribution rate is capped at $7,500,* meaning that employees age 50 and over will be able to contribute up to $30,000. Full details on 2023 limits can be found in IRS Notice 2022-55.
The RMD age limit increased from age 72 to 73, and it will increase to age 75 in 2033.
Employees with Student Loan Debt
Intended to help younger employees, a key part of the SECURE 2.0 Act addresses student loan debt and other barriers to saving, including allowing employers to make matching contributions based on participants’ student loan repayments beginning in 2024.
The Act also requires new 401(k) and 403(b) plans established on or after January 1, 2025, to include automatic enrollment and automatic escalation features.**
Saver’s Match Helps Lower- and Middle-Income Americans
The current Saver’s Tax Credit helps lower- and middle-income Americans who contribute to a retirement plan by cutting up to $1,000 ($2,000 for married couples) off their tax bill.
Effective January 1, 2027, the SECURE 2.0 Act converts the Saver’s Tax Credit into a government matching program for retirement plan contributions, referred to as the “Saver’s Match,” through which the federal government deposits a matching contribution directly into an employee’s retirement account.
Of course, these are only some of the enhancements of the SECURE 2.0 Act; approximately ninety provisions in the Act affect qualified retirement plans, with various compliance dates. For example, there are provisions related to emergency savings and withdrawals. Watch a replay of “SECURE 2.0 Act: What Plan Sponsors Need to Know.”
So, what steps should you take to bring your plan into compliance with the SECURE 2.0 Act? Please reach out to me at [email protected]. I’m ready to help with strategizing a plan design that complies with applicable regulations and introduces enhanced provisions to your plan.
*Contributions for employees earning more than $145,000 in the prior calendar year will need to be made in a Roth account as after-tax dollars. Employers will be able to offer vested matching contributions to Roth accounts.
**There are exceptions for small employers, new employers, and non-ERISA church and governmental plans.
Steven Ortiz is the Vice President of National Accounts at Mutual of America Financial Group.
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