On the Horizon: Possible Retirement Plan Changes with SECURE Act 2.0
In late 2019, then President Trump signed the Setting Every Community Up for Retirement Enhancement Act Of 2019 (the SECURE Act), rolling out a number of significant changes to retirement plans. These changes included modifications to the required minimum distribution (RMD) rules for IRA beneficiaries, additional exceptions to early withdrawal penalties from qualified retirement plans, and a number of tax changes including a reinstatement of the kiddie tax, which was previously suspended under the Tax Cuts and Jobs Act (TCJA).
You can read more about these changes previously enacted by 2019’s SECURE Act here.
Currently, there is also bipartisan support in Congress to move forward with a second iteration of the SECURE Act – the SECURE Act 2.0 – that would legislate further changes benefitting retirement plan participants. Following is a brief overview of some potential changes on the horizon:
- Further RMD Changes: The first SECURE Act increased the minimum required age from 70 ½ to 72; the SECURE Act 2.0, if enacted, would further increase the age to 75 as well as lower the penalty for anyone not taking an RMD from the current 50 percent of a required balance down to 25 percent.
- Auto-enrollment in Retirement Plans: Potential changes include a requirement to auto-enroll all eligible participants in new retirement plans, at a minimum deferral of 3 percent and with an automatic annual increase of 1 percent (up to a 10% maximum). Current plans would be exempt from this change, as well as certain small businesses, government entities and churches, and participants in eligible plans would be permitted to opt-out.
- Changes to Catch-up Contributions: New changes would increase the current catch-up limit from $6,500 to $10,000 for individuals 60 and older.
- Matching Employer Contributions: For participants making student loan payments and unable to contribute more to their retirement plans, employers would be permitted to make matching contributions to qualified loan payments.
- QCD Changes: Currently, individuals over the age of 70 ½ who hold an IRA are eligible to make tax-free contributions directly from their IRA to qualified charities. If enacted, the SECURE Act 2.0 would increase the maximum amount of qualified charitable distributions (QCDs) from $100K to $130K as well as extend this opportunity outside of IRAs to certain other qualified retirement plans.
The SECURE Act 2.0 remains in draft at this juncture and thus, these changes are merely proposed. As Congress moves closer to finalizing legislation, we will keep you apprised of potential implications to you and/or your organization.
In the meantime, please don’t hesitate to reach out to a member of MFA’s Retirement Plan Advisory Team with any questions or concerns.
Material discussed in this communication is meant to provide general information and should not be acted on without obtaining professional advice tailored to you or your company’s individual and specific needs. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used by any person or entity, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. This information is for general guidance only and is not a substitute for professional advice.
The information contained herein should not be construed as personalized investment advice. Investment in securities involves the risk of loss, and past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this document will come to pass. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. There can be no assurances that your portfolio will match or outperform any particular benchmark.
Information presented was obtained from sources deemed qualified and reliable; however, MFA makes no representations as to accuracy, completeness, suitability, or validity of any information within this communication and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any forward-looking statements are believed to be reasonable; however, MFA gives no assurance that such expectations will prove to be correct.
Related posts
SECURE Act: Educating Employees About What It Means for Them
The SECURE Act includes many changes designed to help strengthen employees’ retirement security, but employees…
Read More
The SECURE Act Brings New Opportunities for Workplace Retirement Plans
By now, most employers know that the Setting Every Community Up for Retirement Enhancement Act…
Read More