Get informed on the SECURE 2.0 Act
The SECURE 2.0 Act is a bipartisan comprehensive retirement legislation signed into law on December 29, 2022.

Here are some interesting takeaways that might impact you:

Required minimum distribution (RMD) age increases from 72 to 73

The age 72 trigger for taking RMDs is raised to age 73 for individuals who attain age 72 on or after January 1, 2023. Under that effective date, an individual who attains age 72 on or before December 31, 2022, must take an RMD for 2022 and 2023. An individual who turns 72 in 2023 is not required to take an RMD until they turn 73. Custodians are awaiting clarification, but SECURE 2.0 also appears to indicate that the RMD age is pushed back to 75 for individuals who turn 75 in 2033 or later.

Penalty for failure to take RMDs reduced from 50% to 25%

  • If the missed RMD is corrected in a timely fashion—defined in SECURE 2.0 as a “correction window”—the penalty is further reduced to 10%. This is effective for the taxable years beginning after December 29, 2022, and impacts the individual taxpayer only.
    Recovery of retirement plan overpayments
  • SECURE 2.0 allows retirement plan fiduciaries to decide not to recoup overpayments mistakenly made to retirees. If plan fiduciaries choose to recoup overpayments, limitations and protections apply to safeguard innocent retirees. This protects the benefits of future retirees and benefits of current retirees.
    New exceptions to the penalty for pre-59½ withdrawals
  • SECURE 2.0 creates some additional exemptions to the penalty for the pre-59½ withdrawals from qualified retirement accounts. These include exemptions relating to terminal illnesses, emergency expenses up to $1,000 per year, federally declared disasters, public safety officers, and distributions to pay for long-term care insurance.
  • For distributions in connection with qualified federally declared disasters, permanent rules relating to the use of the funds allows up to $22,000 to be distributed penalty free. The distributions can be repaid and are taken into account as gross income over three years. This is effective for disasters occurring on or after January 26, 2021.
  • Early distributions from a government plan to a public safety officer—who is at least age 50—are also exempt from the pre-59½ early withdrawal penalty. SECURE 2.0 extends this exception to public safety officers with at least 25 years of service with the employer sponsoring the plan. It also extends the public safety officer exception to correction officers who are employees of state and local governments.
    Changes to Roth accounts

Beginning January 2023, employers are now able to offer Roth accounts for simplified employee pension plan (SEP) and SIMPLE IRAs.

Effective immediately, employers have the option to make matching contributions into employees’ designated Roth accounts. Please note that these contributions are taxable to employees and cannot be subject to a vesting schedule. However, they are able to grow tax-free* similar to other Roth accounts.

Qualified charitable distributions (QCDs)

SECURE 2.0 Act expands the IRA charitable distribution provision to allow for a one-time transfer of up to $50,000 to charities through charitable gift annuities, charitable remainder unitrusts, and charitable remainder annuity trusts.

Although the annual limit for QCDs is currently at $100,000, beginning in 2024 the maximum QCD amount will be indexed to inflation. Please refer clients to a tax financial professional for any questions on how this may apply to their situation.

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This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

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