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Secure 2.0
Insights
#Secure2Ready
Duration: ~44minStrongpoint Partners, and leaders from across our family of brands, gathered to share tips, strategies, and product evolutions that we are utilizing to ensure that everyone we work with is #Secure2Ready.
New Plans
Duration: ~4min
Nick Jocelyn; Jocelyn Pension Consulting
Tools for New Plans; Tax Credits, Starter Plans, Incentives to Participate, Easing Top-heavy Plan Rules, and SIMPLE Plan Conversion to Safe Harbor
Admin Changes
Duration: ~10min
Todd Baker; Retirement Strategies Group
Supporting Customers Through Change; Monitoring Age Changes, Roth Expansion, Plan Administration Updates, and Retroactive Opportunities
Integrated System Insights
Duration: ~7min
Patrick Pasqualicchio; HowardSimon
Critical Operating Changes Enacted Through Secure 2.0
Secure Act 2.0
— simplified.
Here's a few ways to navigate the legislation:
Navigating Year to Year
To easily navigate the legislation effective within each year, use the quick links at the bottom of each provision; ie. Forward to 2024 or Back to 2023.Navigating to Specific Sections
To search specific sections of the act, click Command+F on your keyboard and manually type Section 000.Navigating to Full-text Legislation
To read the full text version of the legislation, use the button link at the bottom of each provision labeled More Details. This will take you straight to the source in a new browser tab.
Note: Secure Act 2.0 regulations are subject to change. We will continue to update as increased guidance is released, especially as relates to IRS changes to tax regulations and reporting requirements.
2023
Legislation
Defined Contribution (DC) Plans
Small Financial Incentives for Participation : Section 113
Effective after December 29, 2022
Optional
Employers can offer employees de minimis financial incentives (e.g., gift cards) to participate in a 401(k) or 403(b) plan. Incentive must not be paid from plan assets.
Small Employer Startup Credit : Section 102
Effective for tax years beginning after December 31, 2022
The small employer retirement plan startup credit is modified as follows:
Employers with 50 or fewer employees now get a credit for 100% of the costs to start and administer a pension plan (up from 50%), but the credit is still capped at $5,000 and available for the employer’s first 3 taxable years administering the plan.
Employers that start a DC plan get an additional credit that’s a percentage of their contributions on behalf of employees, capped at $1,000 per employee and phased out for employers with 51–100 employees.
The new expanded tax credit structure means there’s never been a more valuable time to sponsor a plan. We specialize in plan designs that maximize the financial benefit, both in savings and tax reduction/deferral, for plan sponsors and plan participants. Whether you’re just launching a new plan, or have started one in the past few years, we can ensure you see the maximum tax benefit available and help secure your financial future from hire through retire.Contact an expert to see what tax reduction opportunities may be available for you and your business.
Employer Contributions Directly Made as Roth Contributions : Section 604
Effective for contributions made after December 29, 2022
Optional
Plan may permit an employee to designate matching or nonelective contributions as designated Roth contributions.
Employee-certified Hardship Distributions : Section 312
Effective for plan years beginning after December 29, 2022
Optional
Plan administrators of 401(k) and 403(b) plans can rely on a participant’s self-certification of the following:
A hardship distribution is for an immediate and heavy financial need and does not exceed the amount required to satisfy the need
The participant has no alternative means reasonably available to satisfy the need
Similar rule applies to administrators of 457(b) plans allowing distributions for unforeseeable emergencies
Increase in RMD Starting Age : Section 107
Effective for distributions after December 31, 2022 for participants attaining age 72 after that date
Required
Increases required minimum distribution (RMD) age from 72 to 73 starting in 2023 for those who turn age 72 after 12/31/2022; and again to age 75 for those who turn age 74 after 12/31/2032.
Reduction in Excise Tax for RMD Failures : Section 302
Effective for tax years beginning after December 29, 2022
Required
The excise tax for failure to take RMDs is reduced to 25% (from 50%). The tax is further reduced to 10% if the failure is fixed during a specified correction window.
Partial Annuitization in DC Plans; Effect on RMDs : Section 204
Effective December 29, 2022
Optional
Participants receiving a portion of their individual account as an annuity can count annuity payments received during a year toward RMD due for that year.
More Qualifying Longevity Annuity Contract (QLAC) Flexibility : Section 202
Changes to premium limitations effective for contracts purchased after December 29, 2022
Other changes effective for contracts purchased after July 2, 2014
Optional
Treasury has 18 months to amend its QLAC regulations as follows:
Eliminate requirement that premiums not exceed 25% of a participant’s account balance
Increase the dollar limitation on premiums to $200,000 (from $125,000) and provide for indexing starting in 2024
Allow ex-spouses to receive spousal benefits pursuant to a qualified domestic relations order (QDRO) or similar divorce or separation instrument
An employee may rescind the purchase of the contract within a period not exceeding 90 days from the date of purchase
Life Annuities from Defined Contribution (DC) Plans : Section 201
Effective calendar years ending after December 29, 2022
Optional
Plans can offer annuities with the following features without violating IRC Section 401(a)(9):
Annual increases of less than 5%
Lump sum payments that shorten the payment period or result in a full or partial commutation or acceleration of future payments
Dividends and similar distributions
Return of premium payments upon death
Three-year Repayment Limit on Qualified Birth or Adoption Distribution : Section 311
Effective for distributions made after December 29, 2022
Optional
A participant who wishes to repay a QBOAD has 3 years to do so starting on the day after the distribution is received. However, for QBOADs made on or before Dec. 29, 2022, the repayment period ends on Dec. 31, 2025.
Penalty-free Withdrawals for Terminal Illness : Section 326
Effective for distributions made after December 29, 2022
Required
Plans can offer distributions with no early withdrawal penalty to participants certified by a physician as having a condition reasonably expected to result in death within 84 months after the date of certification.
QACA Annual Notice: Technical Amendments : Section 401
Effective 2020
Required
Amendment clarifies that an auto enrollment notice is required for QACAs.
Simplified Disclosures for Unenrolled DC Plan Participants : Section 320
Effective for plan years beginning after December 31, 2022
Required
Eliminates the requirement to provide notices to unenrolled participants that would otherwise be required by the tax code or ERISA. This provision would not apply to a participant who is eligible to accrue employer-funded benefits under the plan, even if the participant has not elected to contribute.
Tribal Government Domestic Relations Orders (DROs) Can be QDROs : Section 339
DROs received (or submitted for reconsideration) after December 31, 2022
Required
Plans can now recognize as a QDRO, a DRO issued by or under the laws of an Indian tribal government, a subdivision thereof, or an agency or instrumentality of either an Indian tribal government or a subdivision thereof.
Recovery of Overpayments : Section 301
Effective December 29, 2022 with some retroactive relief
Optional
Plan fiduciaries can decide not to recoup certain inadvertent benefit overpayments; such overpayments must be treated as eligible rollover distributions. Fiduciaries can also choose to forgo recovery of overpayments from sponsors if doing so poses no risk to other participants’ benefits.
Qualified Disaster Recovery Distributions : Section 331
Effective for disasters on or after January 26, 2021
Optional
Plans can offer the following relief to "affected"participants affected by federally declared disasters:
Distributions up to $22,000 per disaster, with no early withdrawal penalty and option to repay within 3 years
Repayment of unused hardship distributions taken to purchase principal residence in disaster area
Temporary increase in plan loan cap up to $100,000
180-day suspension of plan loan repayments and corresponding extension of the loan term
A qualified disaster recovery distribution would not be subject to the distribution restrictions that otherwise would apply
Retroactive First Year Elective Deferrals for Sole Proprietors : Section 317
Effective for tax years beginning after December 29, 2022
Optional
Allows sole proprietors and single member LLCs to make retroactive first-year elective deferrals up to the date of the Employees tax return filing date for the initial year.
Tax Credit for Military Spouses : Section 112
Effective for tax years beginning after December 29, 2022
Optional
Small employers sponsoring DC plans get a tax credit for making military spouses immediately eligible to participate and receive matching or nonelective contributions that they would otherwise have received at two years of service.
Employee Plans Compliance Resolution System (EPCRS) Expansion : Section 305
Effective December 29, 2022
Treasury must update EPCRS by December 29, 2024
Expands EPCRS to allow self-correction of inadvertent plan operational defects. This provision significantly expands the Self-Correction Program (SCP) under IRS’s EPCRS.
Defined Contribution Group (DCG) Audit Exception : Section 345
Effective December 29, 2022
This provision eliminates the trust-level audit requirement for groups of plans permitted to file a single Form 5500 under the SECURE Act. DOL and Treasury refer to these plans as “defined contribution groups” (DCGs) in proposed revisions to Form 5500 and related regulations released in September 2021. Only large plans (with 100 or more participants) in the DCG must undergo an audit.
Defined Benefit (DB) Plans
Eliminate Variable-rate Premium (VRP) Indexing : Section 349
Effective December 29, 2022
Required
For plan years after 2023, inflationary indexing of Pension Benefit Guaranty Corp. (PBGC) VRPs for single-employer plans will end and VRPs will be frozen at $52 per $1,000 in unfunded vested benefits.
420 Transfers : Section 606
Effective for transfers made after December 29, 2022
Optional
DB plans can transfer excess pension assets to retiree health accounts until Dec. 31, 2032 (previously, DB plans could make transfers only until Dec. 31, 2025). The minimum level of plan funding for certain de minimis transfers (i.e., not exceeding 1.75% of plan assets) has decreased to 110% (from 125%).
Increase in Required Minimum Distribution (RMD) Age : Section 107
Effective December 29, 2022
Treasury must update EPCRS by December 29, 2024
RMD age increases from 72 to:
73 for participants who turn 72 after December 31, 2022, and age 73 before January 1, 2033
75 for participants who turn 74 after December 31, 2032
Cash Balance Cap on Interest Crediting Rate for Accrual Rules Testing : Section 348
Effective for plan years beginning after December 29, 2022
Required
To demonstrate compliance with the anti-backloading rules in IRC Section 411(b), cash balance and other hybrid plans with variable interest-crediting rates can use a reasonable projection of the rate, not greater than 6%. Provision only affects the projected rate for compliance testing, not the plan’s actual interest-crediting rate.
Section 415 Limits for Rural Electric Cooperative Plans : Section 119
Limitation years ending after December 29, 2022
Required
The highest three-year average compensation limit no longer applies to participants in certain rural electric cooperative plans, except for participants who were HCEs in the earlier of:
The plan year the participant terminated
The plan year distributions commenced
Any of the five plan years preceding the plan year above
2024
Legislation
Defined Contribution (DC) Plans
Surviving Spouse Election to be Treated as an Employee : Section 327
Effective calendar years beginning after December 31, 2023
Required
Allows the surviving spouse who inherits an employee’s account in an employer-sponsored plan to elect to be treated as the employee going forward.The amended provision still doesn’t require RMDs until the employee would have had to start distributions, but goes further by treating the surviving spouse as the employee, rather than a designated beneficiary.
No Pre-death RMDs for Roth Accounts : Section 325
Effective for tax years beginning after December 31, 2023
Required
Roth accounts in DC plans are no longer subject to the pre-death RMD rules. However, plans must still pay pre-death RMDs from Roth accounts that relate to tax years before the effective date (e.g., 2023 RMD must be paid to a participant with April 1, 2024, required beginning date).
Top-heavy Exception for Otherwise Excludable Employees in Defined Contribution (DC) Plans : Section 310
Effective for plan years beginning January 01, 2024
Optional
Exempts otherwise excludable employees (i.e., employees who have not satisfied the statutory age and service eligibility requirements) from top heavy minimums, but only in defined contribution plans.
The most experienced plan design consultants work to fully understand both the intricacies of your business model and the goals you’ve laid out for your retirement plan (be it tax reduction, employee retention, maximize long-term savings, or some combination thereof) so we can provide options that get you the closest to maximizing performance against your goals. With new changes like redefinition of highly compensated employees and the requirements for testing, experienced consultants backed by experienced administrators are more valuable than ever.Talk to an expert to see what value you may be leaving on the table with an overly simplistic plan.
Long-term, Part-time Employees : Section 125
Effective for plan years beginning January 01, 2024
Required
Amends the law to clarify that:
The exclusion of pre-2021 service also applies to determine vesting for these employees
A safe harbor 401(k) plan will not fail to qualify for the exception to the top heavy rules merely because the LTPTs covered by the plan are not eligible for the employer’s safe harbor 401(k) contributions
Matching Student Loan Payments : Section 110
Effective for plan years beginning January 01, 2024
Optional
Allows a plan to provide a match on qualified student loan payments.
Pension-linked Emergency Savings Accounts : Section 127
Effective for plan years beginning after December 31, 2023
Optional
Employers can let non-highly compensated employees (NHCEs) contribute to an emergency savings account linked to their retirement plan.
Penalty-free Withdrawals for Emergency Expenses : Section 115
Effective for distributions made on or after January 01, 2024
Optional
Plans can offer distributions with no early withdrawal penalty for “unforeseeable or immediate financial needs relating to necessary or personal family emergency expenses”.
Domestic Abuse Distribution Penalty Exception : Section 314
Effective for distributions made after December 31, 2023
Optional
Plans that aren’t subject to IRC’s qualified joint-survivor and preretirement-survivor annuity requirements can offer distributions with no early withdrawal penalty to victims of domestic abuse.
Starter 401(k) Plans : Section 121
Effective for plan years beginning after December 31, 2023
Optional
Creates a new safe harbor 401(k) plan where the employer is not required to make any contributions in order to waive the ADP test. Intended as federal alternative to state mandates.
Replacement of SIMPLE with Safe Harbor 401(k) : Section 332
Effective for plan years beginning January 01, 2024
Optional
Allows an employer to terminate the plan at any time during the year provided that it establishes a replacement safe harbor plan that is in effect for the rest of the year.The total contributions for the year by an employee cannot exceed a combined limit based on a proration of the §408(p) contribution limit for the SIMPLE plan added to a proration of the 402(g) limit applicable to the safe harbor planThe safe harbor plan can be a “traditional” safe harbor 401(k) or a QACA, the statute also includes a starter 401(k) as an eligible replacement plan.
Roth-only Catch-up Contributions for High Earners : Section 603
Effective for tax years beginning after December 31, 2023
Required
Requires employees who earn more than $145,000 (indexed starting in 2025) in the prior calendar year to make catch-up contributions for the current year in the form of designated Roth contributions. Statutory language does not subject self-employed individuals to this rule.
Extended Deadline to Adopt Amendments Increasing Benefits : Section 316
Effective for plan years beginning after December 31, 2023
Permits an employer to amend a plan retroactive to the prior plan year to increase benefit accruals for that prior year. This would allow an employer, for example, to add a nonelective contribution formula to a 401(k) plan that presently provides only for elective deferrals and match and have that nonelective contribution be applicable for the prior plan year.
Increase Involuntary Cash-out Limit : Section 304
Effective for distributions after December 31, 2023
Optional
Increases the cash-out limit from $5,000 to $7,000.
EPCRS Correction of Automatic Contribution Failures : Section 350
Effective for plan years after December 31, 2023
Optional
Codifies the correction method for elective deferral failures under plans that have automatic contribution arrangements.
Retirement Savings Lost and Found : Section 303
DOL must establish database by December 29, 2024.
Plan administrators will have to start furnishing information for plan years beginning after December 31, 2023
Required
DOL, in consultation with Treasury, must establish an online searchable database of information about retirement benefits. Plan administrators will have to provide DOL with information about current and former participants (as required by DOL regulations) to enable the agency to construct and operate the database. Anyone who had been a retirement plan participant or beneficiary will be able to search the database to get the plan administrator’s contact information to make a claim for benefits.
Reform of Family Attribution Rule for Controlled Groups : Section 315
Effective for plan years beginning after December 31, 2023
Required
Contains an exception to the spousal attribution rule for spouses who own separate businesses if:
Neither spouse has an ownership interest in the other’s business,
Neither spouse is a director or employee, or involved in the management of, the other’s business,
There are no restrictions on disposition of a spouse’s ownership interest that run in favor of the other spouse or their minor children, and
No more than 50% of the gross income of each business is derived from passive income (royalties, rents, dividends, interest, and annuities).
The exception though has not been available under two situations:
Where the spouses live in community property states (because each is treated as having direct ownership in the other’s business due to the community property interest), and
Where the spouses have minor children (because the minor children are still attributed what their parents own, triggering a controlled group if each spouse has a controlling interest in their respective business).
SECURE 2.0 fixes these problems. New IRC §414(b)(2) provides that, when applying the attribution rules under IRC§1563: (1) community property laws are disregarded, and (2) if IRC §1563(e)(5) is satisfied, the stock of each spouse is not attributed to their minor children.
Defined Benefit (DB) Plans
Increase Involuntary Cash-out Limit to $7,000 : Section 304
Effective for distributions after December 31, 2023
Optional
The maximum amount that may be involuntarily cashed out will increase to $7,000 (from $5,000).
Extended Deadline to Adopt Amendments Increasing Benefits : Section 316
Effective for plan years beginning after December 31, 2023
The deadline for an employer to adopt a discretionary amendment increasing benefit accruals is extended until its tax filing deadline (including extensions) for the year in which the amendment takes effect.
Mortality Tables : Section 335
Applicable to valuation dates starting January 01, 2024
Mortality improvement scales underlying mortality tables for single-employer DB minimum funding under IRC Section 430 can’t assume future rates of improvement greater than 0.78% at any age.
2025
Legislation
Defined Contribution (DC) Plans
Long-term Part-time Worker Eligibility : Sec. 125
Effective for plan years beginning after December 31, 2024
Required
401(k) and 403(b) plans must allow part-time workers to participate after completing two consecutive years with at least 500 hours of service. For 401(k) plans, pre-2021 service is disregarded for eligibility and vesting purposes. For other plans, service for plan years before January 1, 2023, is disregarded for those purposes.
Auto-enrollment and Escalation for New Plans — with Some Exceptions : Section 101
Effective for plan years beginning after December 31, 2024
Required (for new plans)
New 401(k) and 403(b) plans must include an eligible automatic contribution arrangement (EACA) feature.
As regulation becomes more complex, a partner who can make the complex simple is more important than ever. With integrated retirement, HR and payroll solutions, we can monitor, track, and communicate any required changes or actions relative to new hires, newly eligible employees, etc. and ensure you remain compliant, while maximizing the benefits available to both plan sponsors and plan participants.Learn what’s possible with fully integrated systems, and how thousands of small businesses are reducing internal burden by partnering with us.
Higher Catch-up Contribution Limits : Section 109
Effective for tax years beginning after December 31, 2024
Required
Plans can allow participants ages 60–63 to make catch-up contributions up to the greater of the following two amounts:
$10,000
150% of the 2024 catch-up contribution limit for other participants
Blended Performance Benchmarks for Asset Allocation Funds in Defined Contribution Plans : Section 318
Department of Labor must issue regulations by December 29, 2024
Optional
DOL must issue regulations allowing (but not requiring) DC plan administrators to benchmark a designated investment alternative holding a mix of asset classes — such as a target-date or balanced fund — against a blend of securities market indices reasonably representative of the fund’s asset holdings. DOL also must report to Congress on the utilization and participants’ understanding of the agency’s regulatory benchmarking requirements.
Plan Amendments for SECURE 2.0 : Section 501
Must be adopted by the end of the first plan year beginning on or after January 01, 2025 (2027 for governmental and collectively bargained plans)
Plan amendments for SECURE 2.0 must be adopted by the end of the first plan year beginning on or after Jan. 1, 2025 (2027 for governmental and collectively bargained plans). The statute provides anti-cutback relief for these amendments if plans operate in accordance with applicable changes until amendments are adopted.
Defined Benefits (DB) Plans
Lump Sum Window Disclosure : Section 342
Effective within 1 year after issuance of DOL/IRS regulations, which must be delayed until at least December 29, 2023
Required
Plan administrators must provide extensive disclosures to participants and beneficiaries offered lump sums during a window period, not later than 90 days before the window opens. Plan sponsors must also submit information to DOL and PBGC 30 days before the window opens, as well as a post-offer report including the number of individuals who took the offer and other information the agencies may require.
Distributions to Retired Public Safety Officers for Health and Long-term Care Premiums : Section 328
Effective for distributions beginning December 29, 2025
Required
These distributions no longer have to be paid directly to the insurer.
Annual Funding Notice (AFN) Enhancements : Section 343
Effective for plan years beginning after December 31, 2023
First modified AFNs are due 120 days after the end of plan years beginning on or after January 1, 2024 (April 30, 2025, for calendar-year plans)
Required (for plans that must issue AFNs)
The disclosure of a plan’s funded level for the notice year and the prior two years will be based on year-end market value of assets and liabilities, rather than the funding target attainment percentage (FTAP).
2026
Legislation
Defined Contribution (DC) Plans
Paper Statements : Section 338
Effective for plan years beginning after December 31, 2025
Required
DC plans must deliver at least one paper benefit statement per year (one every three years for DB plans), unless a participant has affirmatively requested electronic delivery. In addition to summarizing the participant’s benefits, the paper statement must contain information on how participants can opt out of receiving the paper disclosure or request delivery of some or all disclosures on paper for no additional cost.This change wouldn’t apply to benefit statements furnished electronically under DOL’s 2002 e-delivery safe harbor. However, participants who first become eligible to participate (or beneficiaries who first become eligible for benefits) after Dec. 31, 2025, must receive a one-time paper notice about their ability to request paper copies of required disclosures before the plan e-delivers any benefit statement.
2027
Legislation
Defined Contribution (DC) Plans
Expanded Saver’s Credit Match : Section 103
Effective for tax years beginning after December 31, 2026
Optional
The saver’s credit for contributions to retirement plans and individual retirement accounts (IRAs) will no longer be refunded in cash. Credits greater than $100 will be deposited into taxpayer’s 401(k), 403(b) or IRA non-Roth account. Credit will equal 50% of contributions up to $2,000 per person, with income-based phaseout.
Disaster Relief : Section 331
Effective for disasters on or after January 26, 2021
Optional
Plans can offer the following relief to participants affected by federally declared disasters:
Distributions up to $22,000 per disaster, with no early withdrawal penalty and option to repay within 3 years
Repayment of unused hardship distributions taken to purchase principal residence in disaster area
Temporary increase in plan loan cap up to $100,000
180-day suspension of plan loan repayments and corresponding extension of the loan term
Secure Act 2.0 regulations are subject to change. We will continue to update as increased guidance is released, especially as relates to IRS changes to tax regulations and reporting requirements.© 2023 Strongpoint Partners All rights reserved. Privacy Policy