The SECURE Act 2.0 was included as part of the Consolidated Appropriation Act of 2023 and was primarily aimed at helping boost retirement savings.
Those saving for retirement and retirees can potentially benefit from this new legislation, as well as small business owners.
We have summarized some of the key points below.
Tax provision | Summarized details |
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The change in required minimum distribution (RMD) age from IRAs and qualified employer sponsored retirement plans (QRP) such as 401(k), 403(b), and governmental 457(b). |
The RMD age increased to age 73 in 2023 and will increase to age 75 in 2033. |
The reduction in excise tax on certain accumulations in QRPs and IRAs. |
The excise tax for every dollar of your RMD under-distributed is reduced from 50% to 25%. May be reduced to 10%, if you correct the shortfall during a two-year correction window. |
Includes a one-time election for an IRA qualified charitable distribution (“QCD”) to split-interest entity and increases the QCD limit. |
For 2024, individuals who have attained age 70 1/2 are able to make a one-time $53,000 QCD paid directly from the IRA to certain split-interest entities that qualify. The $53,000, indexed for inflation, is part of the QCD annual limit. The QCD annual limit, indexed for inflation, is $105,000 for 2024. |
Clarifies that the repayment of a qualified birth or adoption distribution is now limited to three years. |
Requires qualified birth or adoption distributions to be recontributed within three years of the distribution in order to qualify as a rollover contribution. Effective for distributions made after 2022. For prior distributions, the repayment period ends December 31, 2025. |
Includes new exceptions to the 10% additional tax for early or pre-59 ½ distributions. Each item has its own rules and limits and should be discussed with a tax advisor prior to any distribution. |
Additional distribution exceptions include:
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Permits qualified rollovers from 529 plans to a Roth IRA. |
529 plan designated beneficiaries may be eligible to have a direct rollover contribution made on their behalf from their 529 plan to a Roth IRA, if certain conditions are met (state laws may vary):
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Allows 401(k), 403(b), governmental 457(b) and SIMPLE IRAs to “match” student loan payments |
In order for a 401(k), 403(b), governmental 457(b), or SIMPLE IRA to “match” a student loan payment, the matching contributions must be:
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Additional increase in catch-up contributions in 401(k), 403(b), and governmental 457(b) and SIMPLE retirement plans for 60–63-year-olds beginning in 2025 |
Starting in 2025, if you are aged between 60-63 you can contribute the greater of either $10,000 or 50% more than the regular catch-up contributions to 401(k), 403(b), and governmental 457(b)plans. For SIMPLE plans the catch-up contribution for the same age group will be the greater of $5,000 or 50% of the catch-up contribution limit. |
Increased startup tax credit for small employers |
Increases the 3-year small business startup credit from 50% to 100% of administrative costs up to an annual cap of $5,000.
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The effective dates of the tax provisions mentioned above have not changed as a result of IRS guidance (Notice 2023-62) released August 2023.
We hope this information will help you with your retirement planning goals. Please consult with your tax, legal and financial advisors to discuss how these new rules impact your specific situation and what potential actions, if any, you should take.
Disclosures
This report has been created for informational purposes only and is subject to change. Information has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed.
The implementation and maintenance of certain strategies and techniques outlined in the table may require the advice of consultants or professional advisors other than Wells Fargo or its affiliates.
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