The second iteration of the Secure Act, which builds on the first one passed in 2019, has been in the works for years. In 2020, House Ways and Means Committee Chairman Richard Neal proposed legislation for a Secure Act 2.0 that would enhance and expand upon the provisions laid out in the first version. After some back and forth between the House and the Senate, the new bill passed at the end of 2022, and became a part of President Biden’s 2023 Omnibus Budget Bill.

As you look forward to the rest of this year and beyond to consider how to strategize your retirement planning, it’s important to review the new retirement laws that will impact how you save and withdraw your savings. Many of the provisions in the bill won’t be enacted for a year or two, but others go into effect immediately—keep reading to learn how the Secure Act 2.0 will impact your retirement goals.

What is the Secure Act 2.0 Bipartisan 401(k) Retirement Bill?

In 2019, Congress passed the The Setting Every Community Up for Retirement Act of 2019—or, more simply known as the SECURE Act 1.0. This legislation was intended to make it easier for people to save for retirement, and included a range of provisions, including ones that increased the age of required minimum distributions (RMDs) and did away with age limits for traditional IRA contributions.

The Secure Act 2.0 takes the bill further, adding a range of new provisions and expanding upon existing ones from the previous bill. Winning bipartisan support, it was passed by Congress and signed into law by President Biden in December 2022.

It’s important to understand the various provisions in the Secure Act 2.0, as they affect how you save for retirement, as well as how you withdraw from your retirement accounts. Some of the provisions have already gone into effect, as of January 1, 2023, while some won’t until next year, 2025, or later.

Biggest Retirement Changes Included in the Secure Act 2.0 Bill

Some of the changes in the new bill only affect new retirement plans, but several of the provisions are applicable to anyone who has a retirement plan, whether it’s a 401(k), 403(b), or IRA. We’ve broken down the biggest changes to note, and shared when they will go into effect so you can prepare accordingly.

1. RMD Changes

The Secure Act 2.0 builds on changes made in the earlier version of the Secure Act, which increased the age at which retirees need to take their required minimum distributions (RMDs). These changes are already in effect, as of January 1, 2023.

Raising the Starting Age for RMDs

Previously, the law stated that you had to take your required minimum distributions at age 72. That’s changing with the Secure Act 2.0, and the changes have already gone into effect, as of January 1, 2023. The new required minimum distribution age is 73, and this is planned to jump in 10 years to 75.

Additionally, the penalty, should you fail to take your RMDs, will be cut in half starting in 2023, from 50% of the undistributed amount to only 25%. Overall, these changes will allow you to continue to grow your wealth on a tax-deferred basis, and if you make a mistake, the penalty is more manageable than before.

RMDs and Roth 401(k)s

In 2024, the act will eliminate RMDs for some employer Roth plans. Previously, Roth IRAs had no RMDs attached to them, but Roth 401(k) accounts did.

Qualified Charitable Distributions (QCDs)

Qualified Charitable Distributions (QCDs) involve a transfer of funds from your IRA to a qualified charitable organization. The funds distributed through your QCD count towards your RMDs for the year, and excluded from your taxable income. The Secure Act 2.0 states that you can make a one-time QCD of up to $50,000 to a charitable remainder trust or charitable annuity. In addition, inflation indexing would apply to the distribution limit ($100,000) for direct gifts to qualified non-profits.

2. 401(k) & Retirement Account Changes

Many of the changes to 401(k) and 403(b) plans are meant to help those who have trouble saving for retirement get their accounts off the ground, or assist you in getting more money into your savings, especially given higher inflation numbers over the last year.

Automatic Enrollment in 401(k) Retirement Plans

In 2025, employers must automatically enroll eligible employees into new 401(k) or 403(b) retirement plans at a pre-tax contribution of at least 3% of the employee’s salary. The percentage would go up 1% annually, up to at least 10% but not to exceed 15%.

Employees may still choose to opt out, or select a different contribution amount than what is automatically applied. Existing plans will not auto-enroll employees; only new plans will.

Some businesses are exempt from the provision: those with fewer than 10 employees, those less than three years old, or church and government-based retirement plans.

Increased Catch-up Contribution Limit

The 401(k) and 403(b) plan catch-up contribution limits will stay the same for those age 50 ($6,500), but for those ages 62 to 64, the annual catch-up amount will increase to $10,000 (or $5,000 for SIMPLE IRA plans), effective December 31, 2024. Additionally, the new, higher limit will be indexed for inflation starting in 2025.

Employer Fund Match for Student Loan Payments

Employers can make matching payments to your retirement plan based on your student loan payments; this provision will become active in 2024. This provision is intended to help those who have trouble saving for retirement due to student loan debt; many younger workers often put off contributing to retirement plans in order to pay down student debt. In addition, employers that participate can use this offering as a way to entice or retain a more diverse pool of employees.

Roth Rollover Option for 529 Plans

You might have some funds sitting in a 529 plan, which you set up to pay for college tuition. Beginning in 2024, you have the option of rolling over up to $35,000 from a 529 plan into a Roth IRA, converting tuition savings into retirement savings without getting hit with taxes. General withdrawals from 529 plans for nonqualified expenses are usually subject to federal and state taxes, as well as a 10% penalty. While that’s still the case, those with unused funds—especially young people—can kick off or add to a retirement fund without suffering a hefty penalty.

There are a few stipulations to be aware of: the 529 plan must have been in place for at least 15 years, and the funds must transfer directly into a Roth IRA for the same person who was the beneficiary for the 529 account. Contributions made in the last five years to the 529 are not eligible to be rolled over, and the amount must be within the annual IRA contribution limits.

Changes to Employer 401(k) Match Options

Currently, employers are not permitted to make matching contributions to their employees’ 401(k), 403(b), and governmental 457(b) plans on a Roth basis; the contributions must be pre-tax basis only. A new provision allows an option for participants to receive matching contributions on a Roth basis.

In addition, the current law offers a nonrefundable credit for those who make contributions to IRAs, employer retirement plans such as 401(k)s, and ABLE accounts. The Secure Act 2.0 repeals that provision and replaces the credit paid in cash (as part of a tax refund) into a federal matching contribution to be deposited into an IRA or other retirement plan. The match is equal to 50% of contributions, up to $2,000 per person. This provision is effective after December 31, 2026.

Revised Contribution Limits

This year, retirement savings plans will get revised, inflation-adjusted contribution limits. Those over age 50 can put $7,500 into an IRA in 2023 versus $7,000 in 2022. For those under age 50, the limit is up to $6,500 from $6,000 last year. The maximum contribution amount to a workplace retirement plan (401(k), 403(b), or Thrift Savings Plan) is $30,000 for 2023, which is up $3,000 from 2022.

Expanded Worker Access to Emergency Savings

Starting in 2024, retirement plans can include emergency savings accounts. These allow employees to make post-tax Roth contributions to a savings account that lives within the retirement plan. Withdrawals from the emergency savings are penalty-free and will not require documentation to show they are for a qualifying expense. The savings account has a ceiling of $2,500; once that limit has been reached, no further contributions will be made and additional contributions will be sent to the employee’s Roth plan.

Employees can be automatically opted-in to the savings accounts by their employers, with no more than 3% of earnings allocated for the savings account. On the flip side, employers can choose not to participate. Employers do not make contributions to the savings plan—all contributions are made by the employee.

There are also changes to early distributions for existing accounts. Typically, those who take withdrawals from their retirement plans early get hit with a 10% penalty tax, but in 2024, the Secure Act 2.0 allows for early distributions for emergency expenses. You will be allowed to withdraw $1,000 per year, and you have the option to repay the distribution in three years. You cannot take a second distribution during the repayment period until the previous withdrawal amount has been repaid.

Retirement Savings “Lost and Found”

The Secure Act 2.0 will also fund the creation of a searchable database that will help people discover any retirement benefits they may have forgotten about over the years. The Department of Labor expects the database to be ready in 2025.

$1.7 Trillion Spending Bill: 2023 Omnibus Budget Bill

At the end of December 2022, President Biden signed the 2023 Omnibus Budget Bill into law, funding the government through September of this year. Included in this bill was the Secure Act 2.0 and all of its provisions. The bill won bipartisan support after months of back and forth between the House and Senate.

In addition to the Secure Act 2.0, the Omnibus Budget Bill includes funding for many other programs and initiatives, such as:

• Defense aid for Ukraine
• Emergency disaster funding to aid those affected by natural disasters such as floods, hurricanes, and wildfires
• Protections and accommodations for pregnant workers
• High Pell grant awards for college students

Frequently Asked Questions

Has Secure Act 2.0 passed?

Yes, the law won bipartisan support after many months of negotiations and was passed by Congress on December 23, 2022. On December 29—just six days later—President Biden signed it into law.

Which retirement accounts are affected by the Secure Act 2.0?

Secure 2.0 will alter some rules for all retirement accounts, including but not limited to 401(k)s, 403(b)s, IRAs, and Roth accounts. Some of the changes only apply to new accounts, not existing ones, and some won’t go into effect right away—the changes could be a couple years away.

Need help making sense of it all?

We're here to help you navigate your retirement journey.

Talk with a Retirable Advisor