Secure Act 2.0: How It May Impact Your 401(k) Savings - 401k Maneuver

Secure Act 2.0: How It May Impact Your 401(k) Savings

In response to the retirement crisis in America, the U.S. House of Representatives recently passed the Securing a Strong Retirement Act of 2022 by an overwhelming bipartisan vote of 414 to 5.

The bill, which passed March 29, is referred to as Secure Act 2.0 because it builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. It aims to significantly improve retirement savings plans for Americans.

The Senate working on its own version of the bill, the Retirement Security and Savings Act, is similar to the House bill. It’s expected that, after the Senate passes its version, both bills will be reconciled before being sent to President Biden for signature.

As of publication, the expected timeline for the Senate to mark up and pass their version of Secure 2.0 is sometime in May or June.

Keep reading to find out the main provisions in the House Secure Act 2.0 bill and how, if it passes, it may affect your retirement future.

Delay in Required Mandatory Minimum Distributions

secure act 2.0

The Secure Act of 2019 increased the age investors had to begin taking RMDs (required minimum distributions) from employer-sponsored plans and traditional IRAs from 70½ to 72.

The Secure Act 2.0 increases this even further:

  • For participants who reach age 72 after December 31, 2021, and age 73 before January 1, 2029, the age increases to 73.
  • For participants who reach age 73 after December 31, 2028, and age 74 before January 1, 2032, the age increases to 74.
  • For participants who reach age 74 after December 31, 2031, the age increases to 75.

The bill also has a provision that would greatly reduce the penalty for failure to take an RMD – from 50% to 25%. This excise tax reduction would be effective for tax years starting after December 31, 2021.

Higher Catch-Up Contributions

secure act 2.0

The proposed bill would keep existing 401(k) and 403(b) plan catch-up contribution limits for workers aged 50 to 61. However, it would increase the catch-up amount to $10,000 for those who are 62 – 64, starting in 2024. Under current rules, the 2022 limit on catch-up contributions for employees who have reached age 50 is $6,500, for a total contribution limit of $27,000.

Additional Catch-Up Contribution Changes

secure act 2.0

The Secure Act 2.0 will require all catch-up contributions to be made to Roth accounts, starting in 2023. This means all catch-up contributions would be made with post-tax dollars and can be withdrawn in retirement tax-free.

Employers Can Make Roth Matching Contributions

secure act 2.0

Starting in 2023, the Secure Act 2.0 would allow employees to elect that some or all of their company matching contributions be treated as Roth contributions (post-tax). Currently, employer matching contributions must be paid into pre-tax 401(k) accounts.

Mandatory Automatic Enrollment

secure act 2.0

The Secure 2.0 Act expands automatic enrollment in workplace retirement plans, requiring employers to automatically enroll eligible newly hired employees in 401(k) and 403(b) plans. Employees will be able to opt out, but automatic enrollment will be mandatory.

The auto-enrollment rate would be at least 3% of employees’ pay and not more than 10%, with an annual increase of 1% capped at 10%.

There are exceptions. Small businesses with 10 or fewer employees, companies in business less than 3 years, churches, and government plans are exempted from automatic enrollment requirements.

Part-Time Workers Get Easier Access to 401(k) Plans

secure act 2.0

In the Secure Act of 2019, long-term, part-time workers who worked at least 500 hours per year for at least 3 consecutive years (or those who have worked one full year with 1,000 hours clocked) are eligible to participate in their employers’ 401(k) plans.

The Secure Act 2.0 shortens the period from 3 years to 2 years, with the first group eligible on January 1, 2023.

Note : The above rules are the maximum service requirements that a plan can impose – employers can lessen service requirements.

Student Loan Matching Would Be Legal

secure act 2.0

For plan years beginning after December 31, 2021, the Secure Act 2.0 allows employers to make matching contributions based on an employee’s student loan payments, even if the employee is not making retirement plan contributions.

These are just a few of the provisions in the House bill that may impact your retirement planning and saving in the next few months. We will keep you posted as the Senate finalizes its version.

We regularly post videos with financial information and updates. Check us out on YouTube.

Watch Videos

5 2 votes
Article Rating

401(k) Maneuver™ is offered by Royal Fund Management, LLC, which is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Royal Fund Management, LLC, is not affiliated with or endorsed by NASDAQ.

All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's investment portfolio. There are no assurances that a client’s portfolio will match or outperform any particular benchmark. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. Projections are based on assumptions that may not come to pass.

Images and photographs are included for the sole purpose of visually enhancing the website. None of them are photographs of current or former clients. They should not be construed as an endorsement or testimonial from any of the persons in the photograph.

All third-party trademarks, including logos and icons, referenced in this website and our content, are the property of their respective owners. Unless otherwise indicated, the use of third-party trademarks herein does not imply or indicate any relationship, sponsorship, or endorsement between 401(k) Maneuver and the owners of those trademarks. Any reference inside this website or content to third-party trademarks is to identify the corresponding third-party goods and/or services.

Would love your thoughts, please comment.x

Select a Date from the Calendar below


Select a Date from the Calendar below


Have questions? Need help?

Book Your Complimentary

15-Minute 401(k) Strategy Session


Looking for tips that might maximize your retirement
savings and help you be a better steward of your money?

Subscribe to our 401(k) Blog

The go-to-source for your retirement investing and saving tips

5 401(k) Accounts Mistakes that May Negatively Affect Retirement Income

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.

The 5 Top Costly 401(k) Rollover Pitfalls

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.

Make the Best Decision for Retirement:
Understanding the Different Types of
Financial Advisor Licenses

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.

How Popular Advice On Target Date Funds May Be
Working To Undermine Your 401(k) Retirement Savings

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.

3 Things That May Supercharge Your Future
401K Performance...Even In a Down Economy

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.