What Will “Secure Act 2.0” Look Like?

What Will “Secure Act 2.0” Look Like?

Lisa Jones

Both the house and the senate have introduced retirement bills.  Eventually these two bills will be combined into one piece of legislation. The bills have some provisions in common.  We will go over some of the common provisions the bills share.
 Both bills would allow match contributions to be made based on student loan payments.

Both bills would increase the age for required minimum distributions (RMD) from age 72, as increased by the 2019 SECURE Act.  One bill would increase the RMD age in phases to 73 in 2022, age 74 beginning in 2029 and age 75 in 2032. The other bill skips the phase in and increase the RMD age to 75 in 2032.

Both would allow larger 401(k) catch-up contributions.  Currently, in a 401(k) plan, an individual who is age 50 or older may make additional deferrals of up to $6,500.  These are referred to as catch-up contributions.  Catch-up contributions are increased based on cost of living adjustments.    One bill would increase 401(k) catch-up contributions for participants who are age 62-64 to $10,000.  The other bill would allow the increased $10,000 catch-up at age 60 and would not phase it out at age 65.

Both would allow indexing of the IRA Catch-up limit.  Currently the IRA catch-up limit is a flat $1,000 and does not increase for cost of living.

Both bills would increase the start-up credit for small employers.  One would increase the credit from the current 50% to 100% of start-up costs for employers with up to 50 employees.  The other would increase the credit from 50% to 75% for employers with up to 25 employees.

Both would allow 403(b)s to invest in collective investment trusts.

Both would give an income tax credit to small employers that employ military spouses and allow the spouses to participant in a defined contribution plan.

Both would allow the employer to offer small incentives to employees who defer into a 401(k) plan.

The 2019 SECURE Act legislation contained a provision that required part time workers with at least 500 hours per year for 3 consecutive years to be allowed into a 401(k) plan.  Both bills would reduce the 3 consecutive years requirement to 2 consecutive years.

Both bills would create an easily searchable lost and found for retirement benefits.

More to come on other on provisions in the bills.

About the Author

Lisa joined Sentinel Benefits & Financial Group in 2006 as an ERISA attorney. Her new role as a Retirement Plan Advisor/ERISA Consultant involves using her technical knowledge to help retirement plan sponsors minimize their fiduciary risk through better plan investments and improved retirement plan recordkeeping/TPA services.  

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