The SECURE 2.0 Act of 2022, building upon Setting Every Community Up for Retirement Enhancement Act of 2019, is comprised of 90 provisions focused on modernizing the retirement system, promoting additional savings and easing administrative requirements.
Some of the provisions are mandates. But many are optional adds for which only time will tell if they take off among retirement plan advisers and sponsors.
The graph below and downloadable PDF explain current laws and how they compare to changes going live in 2024—in order of section number. The information was provided by Groom Law Group, Chartered.
Sec. 108. Indexing IRA catch-up limit
PRE-2024:
Annual IRA catch-up contributions for those who are age 50 or over are a flat $1,000 and are not indexed for inflation.
2024: Indexes IRA catch-up contributions in $100 increments in the same manner as the indexing for regular IRA contributions.
Sec. 110. Student loan payments as elective deferrals for purposes of matching contributions
PRE-2024:
A matching contribution cannot be made based on student loan repayments.
2024:
Employer contributions made on behalf of employees for “qualified student loan payments” are treated as matching contributions, so long as certain requirements are satisfied. Applies to 401(k), 403(b), SIMPLE IRAs and governmental 457(b) plans.
Sec. 115. Withdrawals for emergency expenses
PRE-2024:
Law imposes a 10% penalty on early withdrawals before normal retirement age from tax-preferred retirement accounts.
2024:
Allows one penalty-free withdrawal of up to $1,000 per year for “unforeseeable or immediate financial needs relating to personal or family emergency expenses.”
Sec. 117. Contribution limit for SIMPLE IRAs
PRE-2024:
The annual contribution limit for employee elective deferral contributions to a Simple IRA plan is $15,500 (2023), and the catch-up contribution limit beginning at age 50 is $3,500 (for 2023).
2024:
Increases the annual deferral limit to 110% of the 2024 Simple IRA plan limit (as indexed) and the catch-up contribution limit at age 50 to 110% of the 2024 Simple IRA plan limit (as indexed) in the case of an employer with no more than 25 employees.
Sec. 121. Starter 401(k) plans for employers with no retirement plan
PRE-2024:
N/A
2024:
Creates two new plan designs for employers that do not sponsor a retirement plan: a “starter 401(k) deferral-only arrangement” and a “safe harbor 403(b) plan.”
Sec. 126. Special rules for certain distributions from long-term qualified tuition programs to Roth IRAs
PRE-2024:
Code Section 529 qualified tuition programs permit contributions to tax-advantaged accounts that can be invested and used to pay for the qualified education expenses of a designated beneficiary.
2024:
Allows certain assets in a 529 qualified tuition program account maintained for at least 15 years for a designated beneficiary to be directly rolled over on a tax-free basis to a Roth IRA maintained for the benefit of the beneficiary.
Sec. 127. Emergency savings accounts linked to individual account plans
PRE-2024:
Some employers have begun offering emergency savings accounts (“ESAs”) both inside and outside qualified plans. The “in plan” approach is complicated by a lack of clarity with respect to certain ERISA and Code issues.
2024:
Permits a plan sponsor to amend its plan to offer short-term emergency savings accounts (“ESAs”) as part of a defined contribution plan. ESAs must be funded post-tax with Roth contributions, and participants may be automatically enrolled at a rate of up to 3% of compensation.
Sec. 304. Updating dollar limit for mandatory distributions
PRE-2024:
Employers may immediately distribute without the consent of the participant and directly roll over former employees’ retirement accounts from a workplace retirement plan into an IRA if their balances are no more than $5,000.
2024:
Increases the involuntary cash-out limit to $7,000 from $5,000.
Sec. 310. Application of top-heavy rules to defined contribution plans covering excludable employees
PRE-2024:
Generally, for a defined contribution plan, the top-heavy minimum contribution is 3% of the participant’s compensation. A defined contribution plan is top-heavy if the aggregate of accounts for key employees exceeds 60% of the aggregate accounts for non-key employees.
2024:
Can disregard otherwise excludable employees (employees that do not satisfy the Code’s minimum age and service eligibility rules—age 21 and one year of service) from receiving the top-heavy contribution.
Sec. 314. Penalty-free withdrawal from retirement plans for individual in case of domestic abuse
PRE-2024:
N/A
2024:
Permits certain penalty-free early withdrawals in the case of domestic abuse in an amount not to exceed the lesser of $10,000 (indexed) or 50% of the value of the employee’s vested account under the plan.
Sec. 315. Reform of family attribution rule
PRE-2024:
The law provides family attribution rules to address scenarios in which a person, such as a family member, is treated as having an ownership interest in a business.
2024:
Adds special rules to address family attribution and to disregard community property laws for purposes of determining ownership of a business.
Sec. 316. Amendments to increase benefit accruals under plan for previous plan year allowed until employer tax return due date.
PRE-2024:
The law provides a remedial amendment period for plans to meet qualification requirements. In general, a discretionary plan amendment (which would include an increase in benefit accruals) must be adopted by the end of the plan year in which it is effective.
2024:
Allows plans to make discretionary plan amendments (subject to satisfaction of applicable Code requirements) to increase benefits until the employer’s tax filing deadline (including extensions) for the immediately preceding taxable year in which the amendment is effective.
Sec. 325. Roth plan distribution rules
PRE-2024:
Roth IRAs—but not Roth amounts in 401(k), etc. plans—are exempt from pre-death RMD rules.
2024:
Extends the pre-death RMD exemption to Roth amounts in plans.
Sec. 327. Surviving spouse election to be treated as employee
PRE-2024:
The law allows a sole designated spousal beneficiary to treat a deceased IRA owner’s IRA as their own for purposes of RMD rules.
2024:
Provides similar post-death spousal RMD rules to plans: Allows a spousal beneficiary to irrevocably elect to be treated as the employee for RMD purposes and if the spouse is the employee’s sole designated beneficiary, the applicable distribution period after the participant’s year of death is determined under the uniform life table.
Sec. 332. Employers allowed to replace SIMPLE retirement accounts with safe harbor 401(k) plans during a year
PRE-2024:
The law prohibits the mid-year replacement of a Simple IRA plan with a 401(k) plan. Rollovers from the SIMPLE IRA to the 401(k) plan can take place if the SIMPLE IRA has been in place for at least two years.
2024:
Permits an employer to elect to replace a SIMPLE IRA plan with a safe harbor 401(k) plan at any time during the year, provided certain criteria are met. The 2-year rollover limitation in SIMPLE IRAs converting to a 401(k) or 403(b) plan is waived.
Sec. 335. Corrections of mortality tables
PRE-2024:
Mortality rates used to calculate minimum funding for defined benefit plans are based on mortality tables, which are updated by applying “mortality improvement rates.”
2024:
Directs the Secretary of the Treasury to update the minimum funding regulations to apply a cap on mortality improvement rates. For valuation dates occurring on or after 2024, the mortality improvement rates cannot assume for years beyond the valuation date future mortality improvements at any age which are greater than 0.78%
Sec. 343. Defined benefit annual funding notices
PRE-2024:
Administrators of all defined benefit plans that are subject to Title IV of ERISA are required to provide an annual funding notice to the PBGC, to each plan participant and beneficiary, to each labor organization representing such participants or beneficiaries and, in the case of a multiemployer plan, to each employer that has an obligation to contribute to the plan.
2024:
Amends existing defined benefit plan notices to require additional information regarding plan funding status. This includes a statement of the value of the plan's assets and liabilities for the preceding two years in addition to the already required plan year to which the notice relates.
Sec. 350. Safe harbor for correction of employee elective deferral failures
PRE-2024:
The IRS’ Employee Plans Compliance Resolution System (EPCRS) contains rules allowing plans to correct errors, including with respect to missed deferrals under automatic enrollment or automatic escalation features. EPCRS currently contains a safe harbor for correcting automatic enrollment failures, which is set to expire on December 31.
2024:
Creates a safe harbor that a plan will not fail to be a qualified plan merely because of a corrected error. A “corrected error” is a reasonable administrative error made in implementing automatic enrollment, automatic escalation features, or by failing to offer an affirmative election due to the employee’s improper exclusion from the plan.
Sec. 602. Hardship withdrawal rules for 403(b) plans
PRE-2024:
Prior to the Bipartisan Budget Act of 2018, the hardship rules for 401(k) plans and 403(b) plans were generally the same. The BBA created some differences, primarily allowing 401(k) plans to make hardship distributions from more contribution sources, such as qualified nonelective contributions and earnings on elective deferrals.
2024:
Conforms the hardship distribution rules for Section 403(b) plans to those of Section 401(k) plans. Therefore, a 403(b) plan may distribute QNECs, qualified matching contributions and earnings on any of these contributions (including elective deferrals). Also confirms that distributions from a 403(b) plan are not treated as failing to be made upon hardship solely because the employee does not take available loans.
Sec. 603. Elective deferrals generally limited to regular contribution limit
POSTPONED UNTIL 2026:
Catch-up contributions to Section 401(k), 403(b) and governmental 457(b) plans (if age 50 or older) may be made on either a pre-tax or Roth basis.
2026:
Catch up contributions to Section 401(a) qualified plans, Section 403(b) plans and governmental Section 457(b) plans must be made to on a Roth basis, except for eligible participants whose prior year wages do not exceed $145,000 (indexed for inflation).