Secure Act 2.0

There are good things on the table in Washington with regard to retirement planning.  

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Securing a Strong Retirement Act of 2021 is the next chapter to the original Secure Act passed in 2019.  The proposed act was unanimously approved by the Ways and Means Committee in early May and is headed to the House for its approval.

The provisions of 2.0 are laser-focused on providing opportunities for Americans to power up their retirement efforts.  Keep in mind that there could be several modifications before the bill is approved.

Key provisions that could directly affect clients include:

• Increasing the RMD age from 72 to 73 in 2022, 74 in 2029, and age 75 in 2032. 
• Automatic enrollment for 401(k) and 403(b) participants when they become eligible.  These employees can opt out at any time.  The minimum contribution is 3%.  There is an exception for small businesses with 10 or fewer employees, new businesses, church plans, and governmental plans.

Catch up provisions:

Under current law, at age 50:

• 401(k) and 403(b) plans: participants may save an additional $6,500 per year 
• SIMPLE plans: participants may contribute an additional $3,000 per year
• IRAs: the catch-up contribution limit is $1,000
  

The Secure Act 2.0 would keep the age 50 catch-ups and allow new ones starting in 2023.

• 401(k) and 403(b) plans: an additional $10,000 per year at age 62, 63, and 64 
• SIMPLE plans: an additional $5,000 per year at age 62, 63, and 64 
• IRAs: no change to the $1,000 catch-up limit, though it would index the amount by inflation
• The new limits on catch-up contributions would be indexed to inflation beginning in 2023.

Other provisions

• Allow companies to make 401(k) matching contributions based on student loan payments.  This incents students to pay their debt and accrue retirement savings in the interim.
• The Secure Act 2.0 would permit employers to make matching contributions to an employee's retirement plan, even if the worker isn't saving themselves. In the bill, workers facing the decision to pay off student loans or save for retirement could have a portion of their student loan payments matched by their employer and contributed to their retirement plan.

These new provisions provide additional planning opportunities.  Once the bill is approved, we will bring to your attention any appropriate modifications to your plan.