There are other provisions that are important to note in the SECURE 2.0 Act, such as the following:
- Long-term, part-time employees are permitted to contribute who work at least 500 service hours in two consecutive years (rather than three years).
- Creation of “Starter 401(k)” plans and safe-harbor 403(b) plans for employers that do not sponsor a traditional plan.
- Increase in small business (≤ 50 employees) tax credits from 50% to 100% to cover retirement plan start-up costs.
- Addition of a Roth tax treatment provision to SIMPLE and SEP plans.
- Employers may offer the minimum financial incentives, such as low-dollar gift cards, to post participation in retirement plans (purchases cannot be made with retirement plan assets).
- A surviving spouse can elect to be treated as the employee of a qualified plan participant, which would seemingly provide asset protection under ERISA rules.
- Pooled Employer Plans (PEPs) are allowed to designate a previously named fiduciary to gain contributions of the plan through written collection procedures.
- The SECURE 2.0 Act of 2022 does not address Roth conversion rules nor “Backdoor” Roth conversions, so complex planning strategies are still available.
- Beginning in 2024, early emergency distributions of up to $1,000 from a retirement account will be permitted penalty-free to cover unforeseeable or immediate financial needs. If the distribution is not repaid by the stated deadline, you will not be allowed to take another emergency distribution for the next three years.
Next steps regarding the SECURE 2.0 Act.
When reviewing the Act as a whole, the provisions are plentiful; however, it’s crucial to understand the recent changes and how they may impact your retirement planning and wealth strategy. As always, the updated Act is available online and viewable through the Senate’s government website.
For peace of mind and to ensure you’re reaping the full benefits of the SECURE 2.0 Act, reach out to your adviser or contact Sanderson for a consultation.
© 2023 Sanderson Wealth Management LLC. This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting, or tax advice from their own counsel. All information discussed herein is current as of the date appearing in this material and is subject to change at any time without notice. Opinions expressed are those of the author, do not necessarily reflect the opinions of Sanderson Wealth Management, and are subject to change without notice. The information has been obtained from sources believed to be reliable, but its accuracy and interpretation are not guaranteed.