By Kyle Stuckey, CPA, PFS, CFP

New legislation that addresses several retirement and savings strategies recently passed Congress as part of the federal omnibus budget bills that made their way through the legislature toward the end of December 2022. The part of the legislation that addresses financial planning has been commonly termed the SECURE Act 2.0. It references the original SECURE Act (Setting Every Community Up for Retirement Enhancement Act) that was signed into law in late 2019.  

The original SECURE Act introduced the first significant changes to retirement account and estate planning rules in decades. A few of its most memorable provisions were adjusting the individual retirement account (IRA) required minimum distribution (RMD) age from 70.5 to 72, mandating that most inherited IRAs must be distributed within 10 years, and establishing multiemployer 401(k) defined contribution retirement plans. After much debate about additional changes in the months and years since the original bill became law, we now have a bill incorporating many of those updates.

One concern legislators had noted is the low retirement savings of among most Americans. According to the Federal Reserve's Survey of Consumer Finances, the median retirement account balance in 2019 was $65,000, with Americans of retirement age only averaging $134,000. Lawmakers are concerned that a significant portion of the populace may need financial assistance in their later years in the form of additional social programs and expenditures. The goal of both SECURE Acts is to try to enhance and improve the availability and flexibility of retirement savings tools to encourage improvement in retirement savings trends.

Key Provisions of SECURE Act 2.0

While each of the provisions of the SECURE Act 2.0 will require further attention and care to unpack the specific applications, some of the notable highlights included in the final bill are as follows:

• Another increase to the RMD age: from 72 (as adjusted in the original SECURE Act) to age 73, and further increased up to age 75 for those born after 1960.
• A decrease in the heavy 50% penalty for missed RMDs down to 25%, or 10% if corrected in a timely manner.  
• Several updates to Roth accounts, both Roth IRA and Roth 401(k) savings balances. Among those are the opportunity to receive employer matching contributions as Roth and an option to roll unused 529 IRAs into Roth IRAs.
• Creation of a new “Starter 401(k)” that is aimed at small businesses that currently do not offer a retirement plan.
• Increased availability of insurance and annuity contracts inside employer retirement plans, with the intent of helping employees plan to have sufficient retirement income.
• Ability to receive employer-matching contributions into a retirement plan if the employee is making student loan repayments.
• An increased retirement plan start-up credit for smaller employers.
• Availability of an emergency savings account linked to an employer retirement plan that could be accessed for emergencies without penalty.
• An increase to the "catch-up" contribution amounts that older workers are permitted to make into their retirement plans over and above the standard annual limitations.
• Added availability of multiemployer 403(b) defined contribution retirement plans.

There will be many opportunities forthcoming in the weeks and months ahead to dig into the specific details contained in this new legislation and to uncover the implications for our clients. The PICPA, as always, will be a strong resource for quality and timely education content on these matters. In fact, several online courses are available now to get you up to speed.  

Kyle Stuckey, CPA, PFS, CFP, is the founder of Verity Wealth Advisors in Mechanicsburg, Pa. He can be reached at KStuckey@VerityWA.com.

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