The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act, enacted in December 2022, introduced significant changes to the retirement savings landscape in the United States. Building on the foundation of the original SECURE Act of 2019, SECURE 2.0 aims to enhance retirement security for workers, encourage savings, and simplify administrative processes for plan sponsors. The recent release of final regulations provides much-needed clarity on implementing the Act’s provisions. Below, we explore key aspects of the final regulations and their implications for individuals and employers.

Expansion of Automatic Enrollment

One of the standout provisions of SECURE 2.0 is the mandate for automatic enrollment in new 401(k) and 403(b) plans. Under the final regulations, employers establishing new plans after December 31, 2024, must automatically enroll employees at a minimum contribution rate of 3%, increasing annually by 1% until it reaches at least 10% but not exceeding 15%. Employees may opt out or adjust their contributions.

Increase in Required Minimum Distribution (RMD) Age

SECURE 2.0 raises the RMD age from 72 to 73, effective January 1, 2023, and further increases it to 75 starting January 1, 2033. The final regulations clarify the transition rules for individuals who turn 72 in 2023, emphasizing that they can delay their first RMD until April 1 of the year following the year they turn 73. By allowing retirees to defer withdrawals, this provision provides more flexibility in managing retirement assets and may help reduce tax burdens for those who can afford to delay distributions.

Catch-Up Contributions

Recognizing the need for additional savings opportunities as individuals approach retirement, SECURE 2.0 enhances catch-up contribution limits. Starting in 2025, individuals aged 60 to 63 can make catch-up contributions of up to $10,000 (indexed for inflation) to their employer-sponsored plans. For SIMPLE plans, the limit increases to $5,000. The final regulations specify that these contributions must be made on an after-tax Roth basis for employees earning more than $145,000 annually.

This shift toward Roth contributions ensures that future withdrawals of these catch-up contributions are tax-free, benefiting participants in higher tax brackets during their working years. However, it also requires employers to adjust their payroll and plan systems to accommodate the Roth requirement.

Changes to Qualified Charitable Distributions (QCDs)

SECURE 2.0 expands the scope of QCDs, allowing retirees aged 70½ and older to make a one-time $50,000 gift to a charitable remainder trust or charitable gift annuity. The final regulations provide specific guidance on the types of charitable entities that qualify and the reporting requirements for these distributions.

By broadening QCD options, the Act encourages philanthropy among retirees while providing tax advantages. This provision is particularly beneficial for individuals with substantial IRA balances who wish to support charitable causes.

Looking Ahead

As the retirement savings landscape continues to evolve, SECURE 2.0 represents a significant step toward addressing long-standing challenges in retirement planning. The final regulations provide much-needed clarity but also highlight the complexity of implementing these changes. Policymakers, employers, and individuals alike must work together to ensure that the Act’s goals of enhanced savings, accessibility, and security are realized.

With many provisions taking effect in the coming years, staying informed and proactive will be essential for maximizing the benefits of SECURE 2.0.

For Informational Purposes only and not for legal or tax advice.

About the Author – Marie Feindt, JD 

Marie Feindt is the Planning Specialist – Estate Attorney at Members’ Wealth, a boutique wealth management firm that offers a comprehensive and holistic approach to serving individuals, families, business owners, and institutions. The firm’s goal is to preserve and grow its clients’ wealth to endure over time, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of estate planning experience, Marie and the Members’ Wealth team thrive on bringing clarity and confidence to clients’ unique situations. She believes everyone, young adults and older, need the essential documents to conserve and preserve and transfer assets accumulated during lifetime to the next generation.

Marie received her JD from Widener University School of Law, her bachelor’s degree from Penn State University, University Park and is currently enrolled in the Villanova University Charles Widger School of Law Graduate Tax Program.

Marie is an Adjunct Faculty at the Villanova University College of Professional Studies Paralegal Professional Certificate Program where she teaches Estates & Trusts and Civil Procedure & Litigation and Torts & Personal Injury Law.

Marie volunteers for a monthly legal clinic at The Salvation Army in Chester, PA facilitated by the Christian Legal Clinic of Philadelphia. She has served on the Women’s Commission of Delaware County and as a Board Member for the Delaware County Literacy Council.

Marie enjoys biking, reading, yoga and walking in her free time with her husband and three children.

To get in touch with the Members’ Wealth team today, I invite you to email info@memberswealthllc.com or call (267) 367-5453. 

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