The SECURE Act passed in late 2019 was the first significant retirement-related legislation passed in over a decade. Just last week, the House approved a bill that has been coined the SECURE Act 2.0. If the bill advances and President Biden signs it into law, what would change, and how would it affect you?
About the SECURE Act 2.0
Just two weeks ago, the Securing a Strong Retirement Act of 2021 (SECURE Act 2.0) passed the house by a vote of 414 to 5. Here are the bill’s most noteworthy provisions:
Retirement Matching Based on Student Loan Payments
The SECURE Act 2.0 allows employers to base matching contributions off employees’ student loan payments. Often, recent grads must choose between saving for retirement and paying down student loans. This law would help them do both at the same time.
Lowering the Age for Increased Catch-Up Contributions
Taxpayers who are age 62, 63, or 64 could increase catch-up contributions from $6,500 to $10,000 beginning in 2024.
Creating a National Database for Retirement Savings
The bill would create a national database called the Retirement Savings Lost and Found that could help individuals locate funds held in retirement accounts that they’ve lost or forgotten about.
Increasing Required Minimum Distribution (RMD) Age
Individuals are currently required to begin taking distributions from their retirement accounts beginning at age 72. The SECURE Act 2.0 would gradually raise this age over the next decade to:
- Age 73 beginning in 2023(for individuals who reach age 72 after Dec. 31, 2022, and age 73 before Jan. 1, 2030).
- Age 74 beginning in 2030(for individuals who reach age 73 after Dec. 31, 2029, and age 74 before Jan. 1, 2033).
- Age 75 beginning in 2033(for individuals who reach age 74 after Dec. 31, 2032)
The SECURE Act 2.0 would make auto-enrollment mandatory — with a few exceptions — for new retirement plans. The auto-enrollment rate would begin at 3% (or more) of the employee’s salary and would escalate by 1% each year up to at least 10%. Employees will be able to opt out if they want to.
Allowing Roth Matching Contributions
Under current law, matching contributions made by the employer must be paid into a pretax retirement account.Under the new law, taxpayers could request that their matching contributions be made to their Roth accounts instead.
These are just a few of the changes proposed by the SECURE Act 2.0. We will keep an eye on the actions Congress takes with this legislation and keep you updated. Reach out to your Meaden and Moore advisors If you have questions.