Secure 2.0’s Potential Impact on Retirement Savings Thumbnail

Secure 2.0’s Potential Impact on Retirement Savings

The Setting Every Community Up for Retirement Enhancement, or SECURE Act, passed in 2019, had a significant impact on an individual’s personal tax, estate planning and retirement savings plans. As Congress looks to further improve the U.S. retirement system, additional changes may be coming by the end of this year.

The House of Representatives recently passed the Securing a Strong Retirement Act (H.R. 2954), also known as “Secure 2.0”. Some of the notable provisions of this bill are:
  • Employers would be required to automatically enroll employees in their 401(k) plan at a rate of at least 3%. Enrolled workers' contribution rates would then be automatically increased by 1% each year until their contribution rate reaches 10% annually. Existing plans, businesses with 10 or fewer employees and those in business for less than three years would be excluded from this requirement.
  • For individuals who are age 62, 63 or 64 beginning in 2024, the allowed “catch-up” contributions for 401(k) plans would be increased to $10,000, up from $6,500 under current law. Also, starting in 2023, all “catch-up” contributions would be treated as post-tax, or Roth, contributions.
  • Required Minimum Distributions (RMDs) would not start until age 73 in 2023, age 74 in 2030 and age 75 in 2033.
  • Student loan payments could be treated the same as elective retirement deferrals, and employers could provide a matching contribution to the employee’s 401(k) for each payment made.
  • Part-time workers, gig employees, freelancers, caregivers, and independent contractors could have a chance to participate in a 401(k). Companies that offer a 401(k) plan would be required to allow employees who work at least 500 hours a year for two years to contribute to a retirement account.
The Senate is also slowly working on two of its own versions of “Secure 2.0”: the Retirement Security and Savings Act (S. 1770) and the Improving Access to Retirement Savings Act (S. 1703). Each Senate bill has its own unique provisions, however many overlap with, or are similar to, those in the bill recently passed by the House. While it remains to be seen which provisions from each bill will make it through to any final legislation, the overall improvements to retirement savings could be significant.

Related professionals

Related practices