After months of debate, Congress finally passed some major changes to retirement laws at the end of 2022. The Secure Act 2.0 is a piece of legislation that makes a number of changes to retirement savings plans and tax rules that roll out over several years. Here are some of the key provisions of the Act:

  • The Required Minimum Distribution (RMD) age will be increasing to 73 for 2023, and will increase to 75 starting in 2033.
  • The penalty for missed Required Minimum Distributions (RMDs) is being reduced from 50% to 25%. If you miss an RMD but correct the mistake in a timely manner, the penalty will be further reduced to 10%.
  • Congress is also continuing the trend of “Rothification,” which means that more retirement plans will allow for Roth contributions (contributions that are made with after-tax dollars, rather than before-tax dollars). Starting in 2023, SEP and SIMPLE plans will be able to allow Roth contributions, and Employer matching contributions can also now be made on a Roth basis. Additionally, starting in 2024 all plan catch-up contributions for age 50-or-over for employees whose wages are above $145,000 will have to be Roth contributions (non-SIMPLE).
  • In 2025, individuals between the ages of 60 and 63 will be able to make larger catch-up contributions to their retirement plans. More specifically, participants who fall into this category will have their plan catch-up contribution limit increased to the greater of $10,000, or 150% of the regular catch-up contribution amount (indexed for inflation). For employees who make above $145,000 this additional catch-up contribution will have to be made to the Roth portion of the plan (non-SIMPLE).
  • The IRA catch-up contribution for individuals over the age of 50 will be indexed for inflation starting in 2024.
  • Starting in 2024, employers with SIMPLE plans will be able to make additional, non-elective contributions to the plans of up to the lesser of 10% of employee compensation, or $5,000.
  • The Secure Act 2.0 includes some new exceptions to the 10% early distribution penalty, which is applied when you take money out of your retirement accounts before you reach 59.5. The new exceptions apply to situations such as disaster relief, domestic abuse, terminal illness, and emergency need. Some of these exceptions are effective immediately, while others will not be implemented until later.
  • Effective 2024 Congress is allowing 529 plans to be rolled over to Roth IRAs that are in the name of the beneficiary, as long as the 529 plan has been open for over 15 years and the beneficiary has earned income for the year. Additionally, any contributions made to the 529 plan in the last 5 years are ineligible for roll-over and the annual limit for how much can be is rolled over is the IRA contribution limit for the year. This annual limit is reduced by any regular IRA or Roth contribution made for the year and the lifetime maximum to be rolled over is $35,000.
  • The original Secure Act included a provision that allowed individuals to receive penalty-free distributions from their retirement accounts for birth or adoption expenses. There was no time limit on repayment but now this has been modified to include a three-year time limit for repayment.
  • The government is introducing the Savers Match, which is intended to help lower income savers by providing a direct match to their retirement accounts. However, this won’t be effective until 2027.

There are other provisions in the Secure Act 2.0, but these are some of the most significant changes that will affect retirement savings and tax rules. As we’ve learned with previous new regulations, Congress might enact new laws, but we often have to wait for the IRS and other agencies to catch up before we can fully make use of them.

Stay tuned for more updates as the new rules shake out.


Information provided should not be relied upon for tax, legal, or accounting advice, as it is intended for informational purposes only. You should consult your own tax, legal, and accounting professionals before engaging in any transactions.