SECURE Act: The Setting Every Community Up for Retirement Enhancement Act: 2019 vs. 2022

The SECURE Act, which was enacted in 2019, introduced a wide range of comprehensive enhancements to retirement savings plans, resulting in significant improvements for individuals preparing for their future financial security and stability.

The original SECURE Act expanded eligibility for long-term, part-time workers (who completed at least 500 hours of service for three consecutive years) to contribute to their employers' 401(k)
plan. Employer matching contributions are permitted but not required.

This does not apply to employees who participate in collectively bargained plans or to non-resident immigrants.

• Increased start-up tax credit for small businesses

• Offered a tax credit for companies that established or added an automatic

  contribution arrangement

• Increased Required Minimum Distribution age from 70.5 to 72

• Allowed for birth or adoption withdrawals up to $5000 without an early distribution penalty

• Included an annuity portability provision in 401(k) plans

• Expanded eligibility for long-term, part-time workers (those with at least 500 hours of service for three consecutive years) to contribute to their employers' 401(k) plan (effective January 1, 2024)

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SECURE 2.0 was signed into law in December 2022. The Act includes over 90 provisions that will facilitate and increase savings and add many helpful plan features.

• Expedite the process for part-time workers to become eligible for long-term benefits from 3 years to 2 years.

• Individuals earning $145,000+ must make catch-up contributions as Roth

• Employees ages 60-63: Increase catch-up contributions to $10,000/year

• Require Automatic Enrollment in all new plans

• Allow for matching and non-elective contributions as Roth

What to do now?

• Review your plan eligibility requirements to determine if your plan requires a modification:

• Does your plan eligibility criteria include an hours-of-service requirement?

• Are you measuring hours of service based on a calendar year or another standard such as anniversary date?

• Will your employer provide a matching contribution?

• Modify your plan administration process to track hours of service and identify eligible employees?

Beginning in 2024, certain catch-up contributions must be made as Roth contributions.

• For any participant that earned more than $145,000 in FICA taxable wages in the previous year with the same employer

• Applies to 401(k), 403(b) and 457 plans

• Plan Sponsors can still elect to not offer catch-up contributions

• Beginning in 2025, SECURE 2.0 Act allows employees between 60 – 63 years of age to increase the catch-up limit to $10,000

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This information is intended for information purposes only. Any reader understands that Apex Benefit Group is not providing legal advice, tax advice, or professional services in this article. This article serves to offer practical information regarding the subject matter and is not a comprehensive resource.

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