- SECURE 2.0 Act—Cheat Sheet
- Summary and effective dates of key provisions applicable to workplace plans
- 2023-01-17 10:47
WHAT HAPPENED
On December 29, 2022, President Biden signed into law the “Consolidated Appropriations Act, 2023,” which included a major package of retirement savings provisions known as “SECURE 2.0 Act”.
As expected, the final package contained many of the same provisions included in the U.S. House and Senate bills that were previously considered.
POTENTIAL IMPACT
The SECURE 2.0 Act is a meaningful step for the retirement security of all Americans to help improve individuals’ ability to save for retirement, expand access to retirement plans, and ease plan administration for employers.
HIGHLIGHTS
Highlights of the SECURE 2.0 Act include:
- Enables matching contributions for student loan payments
- Enables plans to include emergency savings accounts
- Encourages automatic enrollment and automatic contribution increases
- Increases catch-up contribution limit
- Permits older workers to save more and stay invested longer
- Simplifies disclosures
- Provides new and enhanced credits for small businesses sponsoring plans
See the following for a summary of key provisions effective each year.
OUR COMMITMENT
In our annual T. Rowe Price U.S. Retirement Market Outlook, we specifically discussed how legislators can help address three themes shaping the retirement industry and supported many of the proposed SECURE 2.0 Act provisions as advancing retirement security.
We will continue to closely monitor the impact of the SECURE 2.0 Act and work with institutions, employers, and financial professionals to help individuals achieve their best retirement outcomes.
We also recognize that more retirement legislation can and should be done, and we look forward to continuing to help influence legislators and policymakers in the future. In addition, we will be working with regulators as they propose rules to implement the SECURE 2.0 Act.
Key Provisions
| Provisions Effective by January 1, 2023 | ||
| Section | Description | Effective Date |
|---|---|---|
| Section 102 Modification of credit for small employer pension plan startup costs | Increases the startup credit from 50% to 100% for employers with up to 50 employees. Additional credit provided based on employer contribution. | Taxable years beginning after December 31, 2022 |
| Section 107 Increase in age for required beginning date for mandatory distributions | Increases the required minimum distribution (RMD) age to 73 starting on January 1, 2023, and to 75 starting on January 1, 2033. | January 1, 2023 and January 1, 2033 |
| Section 112 Military spouse retirement plan eligibility credit for small employers | Provides small employers a tax credit with respect to their defined contribution plans if they allow military spouses to participate with certain requirements. | Taxable years beginning after December 29, 2022 |
| Section 113 Small immediate financial incentives for contributing to a plan | Enables employers to offer de minimis financial incentives, not paid for with plan assets, such as low-dollar gift cards, to boost employee participation in workplace retirement plans. | Plan years beginning after December 29, 2022 |
| Section 128 Enhancement of 403(b) plans | Changes tax laws to allow 403(b) custodial accounts to participate in collective investment trusts. NOTE: The needed securities law provisions were not included. | Effective after December 29, 2022 |
| Section 201 Remove required minimum distribution barriers of life annuities | Eliminates certain barriers to the availability of life annuities in qualified plans and IRAs that arise under current law due to an actuarial test in the RMD regulations. | Calendar years ending after December 29, 2022 |
| Section 202 Qualifying longevity annuity contracts (QLAC) | Repeals the 25% limit and allows up to $200,000 (indexed) to be used from an account balance to purchase a QLAC. | Effective for contracts purchased or received in an exchange on or after December 29, 2022 |
| Section 301 Recovery of retirement plan overpayments | Allows retirement plan fiduciaries the latitude to decide not to recoup overpayments that were mistakenly made to participants, including retirees. Certain overpayments may also be treated as eligible rollover distributions. | Effective December 29, 2022 |
| Section 302 Reduction in excise tax on certain accumulations in qualified retirement plans | Reduces the penalty for failure to take RMDs from 50% to 25%, with a further reduction to 10% if the RMD failure is corrected in a timely manner. | Taxable years beginning after December 29, 2022 |
| Section 305 Expansion of Employee Plans Compliance Resolution System (EPCRS) | Expands EPCRS to (1) allow inadvertent errors to be self-corrected within a “reasonable time” and (2) apply to inadvertent IRA errors. | Effective December 29, 2022 Any required guidance shall be promulgated no later than two years after the date of enactment of this act |
| Section 306 Eliminate the “first day of the month” requirement for governmental Section 457(b) plans | Allows participants in governmental 457(b) plans to change their deferral rate at any time, i.e., it is no longer necessary to request a deferral change prior to the beginning of the month in which the deferral was made. | Taxable years beginning after December 29, 2022 |
| Section 311 Repayment of qualified birth or adoption distribution (QBAD) limited to three years | Amends the QBAD provision to restrict the recontribution period to three years for distributions made after enactment and to January 1, 2026, for distributions made prior to enactment. | Distributions made after December 29, 2022, and retroactively to effective date of the original SECURE Act for distributions prior to enactment |
| Section 312 Employer may rely on employee certifying that deemed hardship distribution conditions are met | Allows employees to self-certify that they have had an event that constitutes a hardship or unforeseeable emergency for purposes of taking a hardship or unforeseeable emergency withdrawal. | Plan years beginning after December 29, 2022 |
| Section 318 Performance benchmarks for asset allocation funds | Directs the U.S. Department of Labor (DOL) to update the fee and investment disclosure regulations within two years after the date of enactment so that investments that use a mix of asset classes, such as target date investments, can be benchmarked against a blend of broad-based securities market indices. | Effective December 29, 2022 |
| Section 320 Eliminating unnecessary plan requirements related to unenrolled participants | Eliminates requirement for employers to provide certain annual ERISA or code notices to unenrolled participants who have not elected to participate in a workplace retirement plan provided they receive disclosures initially and a subsequent annual reminder of the right to enroll. | Plan years beginning after December 31, 2022 |
| Section 331 Special rules for use of retirement funds in connection with qualified federally declared disasters | Provides permanent rules relating to the use of retirement funds in the case of a federally declared disaster. | Disasters occurring on or after January 26, 2021 |
| Section 601 SIMPLE and SEP Roth IRAs | Allows SIMPLE IRAs to accept Roth contributions. Also allows employers to offer employees the ability to treat employee and employer SEP contributions as Roth (in whole or in part). | Taxable years beginning after December 31, 2022 |
| Section 604 Optional treatment of employer matching or nonelective contributions as Roth contributions | Allows defined contribution plans to provide participants with the option of receiving matching and qualified nonelective contributions on a Roth basis. | Effective for contributions made after December 29, 2022 |
| Provisions Effective by January 1, 2024 | ||
| Section | Description | Effective Date |
|---|---|---|
| Section 110 Student loan matching | Permits an employer to make matching contributions under a 401(k) plan, 403(b) plan, governmental 457(b) plan, or SIMPLE IRA with respect to “qualified student loan payments.” | Plan years beginning after December 31, 2023 |
| Section 115 Penalty-free withdrawals for certain emergency expenses | Provides an exception to the early withdrawal penalty for distributions up to $1,000 annually used for emergency expenses. A taxpayer has the option to repay the distribution within three years. | Distributions made after December 31, 2023 |
| Section 117 Contribution limit for SIMPLE plans | Increases the annual deferral limit and the catch-up contribution limit at age 50 by 10% in SIMPLE IRAs, as compared with the limit that would otherwise apply in the first year this change is effective. Employees with 26 to 100 employees: Employers permitted to provide higher deferral limits, but only if the employer either provides a 4% matching contribution or a 3% employer contribution. Makes similar changes to contribution limits for SIMPLE 401(k) plans. | Taxable years beginning after December 31, 2023 |
| Section 120 Prohibited transaction exemption for certain automatic portability transactions | Permits a retirement plan service provider to provide employer plans with automatic portability services. Such services involve the automatic transfer of a participant’s default IRA (established in connection with a distribution from a former employer’s plan) into the participant’s new employer’s retirement plan, unless the participant affirmatively elects otherwise. | Effective for transactions occurring on or after December 29, 2023 (12 months after enactment) |
| Section 121 Starter 401(k) plans for employers with no retirement plan | Permits an employer that does not sponsor a retirement plan to offer a starter 401(k) plan (or safe harbor 403(b) plan) with simplified requirements and lower contribution limits. | Plan years beginning after December 31, 2023 |
| Section 127 Emergency savings accounts linked to individual account plans | Provides employers the option to offer to their non-highly compensated employees’ pension-linked emergency savings accounts. Contributions are treated as Roth and are prohibited once the account balance meets or exceeds $2,500 (indexed). Auto-enrollment and match are permitted, subject to conditions. | Plan years beginning after December 31, 2023 |
| Section 304 Updating dollar limit for mandatory distributions | Increases the amount that plans can require to be distributed without consent from $5,000 to $7,000. | Distributions made after December 31, 2023 |
| Section 314 Penalty-free withdrawals for victims of domestic abuse | Allows retirement plans to permit participants that self-certify that they experienced domestic abuse to withdraw up to the lesser of $10,000 indexed (or 50% of the vested balance) within one year of incident without penalty. | Distributions made after December 31, 2023 |
| Section 325 Roth plan distribution rules | Eliminates pre-death RMDs from Roth accounts in employer plans. | Taxable years beginning after December 31, 2023. (Note: Change does not apply to distributions required with respect to years beginning before January 1, 2024, but payable on or after such date.) |
| Section 602 Hardship withdrawal rules for 403(b) plans | Conforms the hardship rules for 403(b) plans to those for 401(k) plans | Plan years beginning after December 31, 2023 |
| Section 603 Elective deferrals generally limited to regular contribution limit | Provides that all catch-up contributions to qualified retirement plans are subject to Roth tax treatment. An exception is provided for employees with wages of $145,000 or less (indexed) in the prior year. | Taxable years beginning after December 31, 2023 |
| Provisions Effective by January 1, 2025 | ||
| Section | Description | Effective Date |
|---|---|---|
| Section 101 Expanding automatic enrollment in retirement plans | Requires auto‑enrollment and auto‑escalation for all 401(k) and 403(b) plans (with certain exceptions for collective bargaining plans, church plans, and governmental plans, as well as plans established on or before December 29, 2022). The initial automatic enrollment amount is at least 3% but not more than 10%. Each year thereafter, that amount is increased by 1% until it reaches at least 10%, but not more than 15%. | Plan years beginning after December 31, 2024 |
| Section 109 Higher catch-up limit to apply at ages 60, 61, 62, and 63 | Increases catch-up limits to the greater of $10,000 ($5,000 for SIMPLE plans) or 50% more than the regular catch-up amount in 2025 for individuals who have attained ages 60, 61, 62, and 63. The increased amounts are indexed for inflation after 2025. | Taxable years beginning after December 31, 2024 |
| Section 125 Improving coverage for part-time workers | Reduces to two years (from three years) the requirement to allow long-term, part-time workers to participate in employers’ 401(k) plans and extends these rules to ERISA-covered 403(b) plans. | Plan years beginning after December 31, 2024 |
| Section 303 Retirement savings lost and found | Requires DOL to create and administer a national online searchable lost and found database for Americans’ retirement plans; requires plan administrators to provide annual reporting of disposition of balances for vested terminated participants. | Directs the creation of the database no later than two years after the date of enactment of this act |
| Provisions Effective by January 1, 2026 | ||
| Section | Description | Effective Date |
|---|---|---|
| Section 338 Requirement to provide paper statements in certain cases | Amends ERISA to generally provide that, with respect to defined contribution plans, unless a participant elects otherwise, the plan is required to provide a paper benefit statement at least once annually. | Plan years beginning after December 31, 2025 |
| Provisions Effective by January 1, 2027 | ||
| Section | Description | Effective Date |
|---|---|---|
| Section 103 Saver’s Match | Changes the saver’s credit (applicable to tax obligations) to a federal “match” deposited into a taxpayer’s IRA or retirement plan that accepts such contributions; increases eligibility for the saver’s match. | Taxable years beginning after December 31, 2026 |
QUESTIONS
Please contact your T. Rowe Price representative with questions about the key provisions in this cheat sheet or any other provisions included in the SECURE 2.0 Act.
Founded in 1937 and headquartered in Baltimore, MD, T. Rowe Price delivers investment excellence and retirement services for institutions, intermediaries, and individual investors. Two‑thirds of our assets under management are in retirement, and one‑quarter of our assets are in target date funds. We have over 40 years’ experience as a recordkeeper, and we support over 7,600 retirement plans and over 2.2 million participants, as of December 31, 2022. We have veteran industry experts across the retirement spectrum, as well as dedicated retirement public policy experts who are closely engaged with legislators, regulators, and policy influencers.
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Note: Effective dates generally apply to taxable years or plan years, as applicable, beginning on or after the listed dates. Variations are noted in the effective date column.
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