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Thin(k) About Your 401(k) Plan Congress Passes Secure 2.0 Act of 2022!

 

On December 23, Congress passed and soon thereafter President Biden signed into law the latest spending bill, which included the Secure 2.0 Act of 2022.  This is good news for retirement savers.  The bill includes hundreds of provisions that take effect at differing times.  Here are some of the key provisions:

Those that impact your savings:

  • Employers will be able to provide a new benefit tied to student loan payments in the form of a matching contribution to the employee’s retirement account.
  • The Required Minimum Distribution age will increase to 73 in 2023 and to 75 in 2033.
  • After 12/31/24, for those aged 60-63 catch-up contributions will increase to at least $10,000.
  • Employees earning $145,000 or more must designate their catch-up contributions as Roth.

Those that impact the administration of the plan:

  • Participants will be allowed to judge for themselves whether or not a distribution qualifies as a hardship.
  • Mandatory cash-out threshold will increase from $5,000 to $7,000.
  • Terminated employees should have a more automated way to move their accounts to their new employer’s plan.
  • Sponsors will be allowed to combine certain required notices and disclosure notices to participants.
  • Small businesses starting a plan will be able to claim additional tax credits.

These are just a few of the ways the Secure 2.0 Act of 2022 aims to make saving for retirement easier.  401(k) Plans and other qualified defined contribution plans offer employers the opportunity to provide employees with a measurably valuable benefit.  This bill just enhanced the benefit.  Whether you are a participant saving for retirement or a sponsor offering the benefit, you should pay attention as the various changes are enacted and be sure to take advantage when they become effective.

New laws enacted by congress are often complex.  As a result, you should seek advice from an expert in the retirement plan space.

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