Introducing SECURE Act 2.0

The original SECURE Act was signed into law on December 20th, 2019. Its “sequel,” the SECURE Act 2.0, was similarly enacted at year-end on December 29th, 2022. Both pieces of legislation seek to reform how Americans prepare for retirement while juggling current spending needs. Its guiding goal is right there in the name: Setting Every Community Up for Retirement Enhancement (SECURE).

We will dedicate our next several articles to spotlighting key changes brought about by the legislation and breaking down what these changes mean for you and your retirement.

Keep in mind, implementation for each SECURE Act 2.0 provision varies from being effective immediately, to ramping up in future years. A few even apply retroactively. We’ve noted with each provision when it’s slated to take effect.

Provisions Impacting Individual Savers

First, key provisions include several updates to encourage individual savers:

• Higher Catch-Up Contributions (2024–2025): To accelerate retirement saving as you approach retirement age, SECURE Act 2.0 has increased annual “catch-up” contribution allowances for many retirement accounts (i.e., extra amounts allowed beyond the standard contribution limits); and, importantly, tied future increases to inflation. However, in many instances, the updates also require high-wage-earners ($145,000/year or higher) to direct their catch-up contributions to after-tax Roth accounts.
• Faster Plan Participation for Part-Time Employees (2024): If you’re a long-term, part-time employee, the SECURE Act of 2019 made it possible for you to participate in your employer’s retirement plan. With SECURE Act 2.0, you’ll be eligible to participate after 2 years instead of 3 years (after meeting other requirements).
• An Expanded Contribution Window for Sole Proprietors (2024): If you’re a sole proprietor, you’ll be able to establish a Solo 401(k) through the current year’s Federal income tax filing date, and still fund it with prior-year contributions.
• Finding Former Plans (2024): It can be hard for company plan sponsors to keep in touch with former employees—and vice-versa. SECURE Act 2.0 has tasked the Dept. of Labor with hosting a national “lost and found” database to help you search for plan administrator contact information for former employees’ plans, in case you’ve left any retirement savings behind.

As is the case with most legislation, there are more updates than we have space for in a single article, or series of articles. Our goal is to highlight the most relevant provisions to your savings and retirement. In upcoming articles we’ll touch on changes for employers (including small businesses), Roth retirement accounts, and required minimum distributions.