Biden Signs Massive Budget Bill That Includes SECURE 2.0 Act For Retirement Savings

On December 23, 2022, President Biden signed the SECURE 2.0 Act of 2022, which will restructure most Americans’ 401(k) plans and change retirement contributions and withdrawals. 


Here’s what you can expect

Sec. 107 – RMD Age Increase: SECURE 2.0 changed the required minimum distribution law to indicate RMDs from qualified retirement accounts will not begin until an individual attains age 73 after December 31, 2022.  In addition, in the case of an individual who attains age 72 after December 31, 2032, the RMD age is 75. 

Sec. 302 – Lower RMD Penalty: Under SECURE 2.0., the penalty for failure to satisfy the annual RMD will be reduced from 50% to 25%.  The penalty can be further reduced if the taxpayer receives a distribution during the correction window.

Sec. 115 – Emergency Expense Distributions: Beginning 2024, you are allowed to take an early “emergency” distribution from your retirement account to cover unforeseeable financial needs. Rules and limitations apply.

Sec. 110 – Employer Fund Match for Student Loan Payments: Effective 2024, student loan repayments (subject to limitation) are deemed “contributions” to an employer-sponsored retirement plan.  Therefore, your employer can make a matching contribution to your retirement plan based on your student loan payment amount. 

Sec. 101 – Automatic Enrollment in Retirement Plans: Beginning 2025, automatic enrollment in a 401(k) or 403(b) plan will be required if your employer sponsors a plan. The minimum employee contribution rate will be 3% during the first year of plan participation.  In addition, the employee contribution rate will increase automatically by 1% every year until the contribution rate is between 10% and 15%.  Eligible participants may opt out of participation, if desired. 

Sec. 109 – Higher Catch-Up Contribution Limit:  Beginning 2025, for individuals between ages 60 and 63, the ‘catch-up’ contribution limit increases to the greater of $10,000 or 50 percent more than the regular catch-up amount in 2024 OR the greater of $5,000 or 50 percent more than the regular catch-up amount in 2025.

Sec. 103 – Saver’s Match: Beginning 2027, the SECURE 2.0 Act will replace the nonrefundable Saver’s Credit. You can expect a 50% match of IRA or retirement plan contributions up to $2,000 per person. Income limits and phase-outs will apply. 

Sec. 303 – Retirement Savings “Lost and Found”: SECURE 2.0 will enable the creation of a searchable database to help individuals find retirement benefits that they lost track of. The “lost and found” will be housed at the Department of Labor. 

Sec. 126 – Rollover Distributions from Long-term Qualified Tuition Program to Roth IRA:  Beginning 2024, A distribution (dollar limitations apply) from a Qualified Tuition Program account (like a 529 account) may be transferred tax-free to a Roth IRA owned by the beneficiary of the QTP as long as the QTP had been maintained for 15 years leading up to the date of transfer.


For more information visit Schwab’s website.