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VIEWPOINT: Retirement Planning has Changed Again with SECURE Act 2.0

By Mark Prian


In 2019, Congress passed and President Donald Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The intent of this law was to improve the way businesses provide retirement benefits to employees. In 2022, some long-awaited changes to the original act were introduced, and what is now known as SECURE 2.0 was passed and signed into law by President Joe Biden in December.

The original SECURE Act of 2019 was designed to expand access to tax-advantaged retirement-savings accounts, and made changes to existing laws to ensure that older Americans are less likely to outlive their retirement assets.

SECURE 2.0 builds on those objectives and makes some important adjustments to the 2019 legislation. With more than 100 provisions in the law, these new changes are bound to impact just about everyone who is saving for retirement. So, whether your employees are close to retiring or have many more years to save, here’s what we all need to know.

• The biggest change in SECURE 2.0 might be the adjustments to required minimum distributions (RMDs). Under the 2019 act, a plan participant had to begin withdrawing retirement savings at the age of 72. The 2022 law increased this to age 73, beginning on Jan. 1, 2023. By 2033, the starting age for RMDs will be 75. 

• Also starting this year, the penalties for failing to take the RMD are slashed from 50 percent of the amount not taken down to 25 percent. If you correct this mistake in a timely manner within an IRA, the penalty drops a bit further, down to 10 percent. 

• Upcoming changes in catch-up contributions might help you reach your retirement savings goals faster. However, the parameters are different for those ages 50-59 and 60-63:

- For employees ages 50-59, the catch-up contribution is $7,500;

- For employees ages 60-63, the amount increases to $10,000 effective Jan. 1, 2025.

The original SECURE Act sought to make it easier for small businesses to create retirement accounts for employees, which was difficult and expensive in the past. With nearly half of all U.S. workers employed by small businesses, Congress recognizes that this is an important sector to reach, and encouraging small businesses to offer retirement plans is critical. According to the U.S. Bureau of Labor Statistics, 67 percent of private-industry workers had access to an employer-provided retirement plan as of March 2020.

SECURE 2.0 expands automatic enrollment in retirement plans. The new legislation requires employers who introduce new plans to automatically enroll any eligible new employees. Small businesses with 10 or fewer employees are exempt, as are new businesses, defined in the bill as those which have been in business for three or less years.

If you think it might help to offer some incentives to get your employees to participate in a retirement plan, beginning in plan year 2023, SECURE 2.0 has options for you. The legislation permits employers to offer small financial incentives to help boost employee participation, like low-dollar-amount gift cards. 

If you have employees who are putting off participating in a retirement plan because they have student loans to pay back, starting in 2024 employers can “match” those employee student-loan payments as contributions to a retirement account. If student loans have been holding your employees back from saving for retirement, this provision may give them a real reason to start saving.

One interesting and potentially helpful provision in the new law relates to lost 401(k) plans. If concern about dormant accounts due to staff turnover has kept you from offering your employees a retirement plan, this provision could help. For past employees who may have changed jobs and subsequently lost track of their 401(k) accounts, the new law establishes a retirement savings “lost and found” database to help people track down their missing and forgotten accounts. The database is anticipated to be up and running in about two years.

The intent behind the original SECURE Act was to encourage working Americans to plan for retirement. SECURE 2.0 builds on that by enhancing incentives for small-business owners to motivate employees to participate. If you are interested in setting up a retirement plan for your small business, your financial institution is ready to help you get your employees on the road to saving for their retirement.                       

Mark Prian is VP and senior institutional wealth management consultant at NBT Wealth Management. He delivers financial, retirement, and institutional planning strategies to wealth-management clientele. With more than 25 years of financial-services industry experience, Prian is a certified financial planner (CFP), certified trust and financial advisor (CTFA), and holds a financial planning advanced certificate from the College of Saint Rose.