It is the beginning of the year and the US government has again provided us with a gift in the form of a $1.7 trillion omnibus spending bill. Specifically, on December 23, 2022, President Biden signed the bill which funds the government through September 30, 2023. In addition to providing funding for the war in Ukraine, emergency disaster assistance, and the January 6 attack prosecutions, overhauling the electoral vote-counting law, and banning TikTok from federal devices, the bill contains many retirement plan and IRA changes, which are the focus here.
As you may recall, in January 2020, we wrote the Introduction to the Secure Act, which contained a list of the more significant changes made by the Secure Act to retirement plans and IRAs. Like the Secure Act 2.0, the original Secure Act was contained in a $1.4 trillion omnibus spending bill which was signed by President Trump on December 20, 2019. Notably, the Secure Act created the most significant changes to retirement plans and IRAs in over a decade. Now, we ask you to buckle up as we review the changes that have again been made to our retirement savings.
Here are a few of Secure Act 2.0’s more significant changes to retirement plans and IRAs:
- For individuals who attain age 72 after December 31, 2022, and age 73 before January 1, 2033, you do not have to take required minimum distributions from certain retirement plans and traditional IRAs until age 73.
- For individuals who attain age 74 after December 31, 2032, you do not have to take required minimum distributions from certain retirement plans and traditional IRAs until age 75.
- For defined contribution retirement plans where the plan allows additional “catch-up” contributions, participants age 50 and older can make “catch-up” contributions. In 2023, the dollar limit for catch-up contributions is $7,500. Starting in 2025, the catch-up limit is increased to the greater of $10,000 or 50% more than the regular catch-up amount in 2024 for individuals attaining the ages of 60, 61, 62, and 63. (Secure Act 2.0 also provides that if you earn more than $145,000 annually, the catch-up contributions must be treated as Roth contributions, not pre-tax contributions).
- Defined contribution plans that permit salary deferrals can automatically enroll employees at a predetermined contribution percentage unless the employee elects otherwise.
- Improved coverage for part-time workers in retirement plans.
- Beneficiaries of 529 college savings accounts can make direct rollovers from a 529 account to a Roth IRA without tax or penalty if certain requirements are met. Aggregate rollovers cannot exceed $35,000 over the beneficiary’s lifetime.
Please contact your FineMark advisor if you are interested in discussing how these changes specifically impact you or if you want to discuss any other aspect of your retirement planning.
Changes To The Secure Act 2.0 That Could Affect Your Retirement Plans
By Read Sawczyn , J.D.
Sr. Vice President & Private Wealth Advisor, Trust
Articles In This Issue:
2022 Fourth Quarter Review and Commentary