Late in 2022, Congress passed the Consolidated Appropriations Act, containing provisions for reformed retirement planning for employers. On December 29th, 2022, President Biden signed it into law. Referred to as SECURE 2.0 Act of 2022, this new legislation adds valuable benefits to retirement plan sponsors and their employees.
The objective is to simplify the process of making retirement programs available to employees and expand coverage. According to Fidelity, “From RMDs to student debt, the new law has something for everyone.” They list these key takeaways:
- The age to start taking RMDs increases to age 73 in 2023 and to 75 in 2033.
- The penalty for failing to take an RMD will decrease to 25% of the RMD amount, from 50% currently and 10% if corrected in a timely manner for IRAs.
- Starting in 2024, RMDs will no longer be required from Roth accounts in employer retirement plans.
- Catch-up contributions will increase in 2025 for 401(k), 403(b), governmental plans, and IRA account holders.
- Defined contribution retirement plans will be able to add an emergency savings account associated with a Roth account. Read the full article here.
SECURE 2.0 expanded the annual tax credit available to employers with 100 employees or less for the first three years for qualified plans. Under previous law, the credit was applicable to only 50% of startup costs up to US $5,000. SECURE 2.0 increased the limitation for employers with no more than 50 employees to 100% of the startup cost. It also provides an additional credit for eligible employers for the first five years of a new plan equal to a percentage of contributions made by the employer up to a maximum of US $1,000 per employee.
With these changes, there has never been a better time to develop a retirement plan for your valuable employees. Contact one of our account managers today, and let’s get started.