SECURE 2.0 updates for 2024

The SECURE 2.0 act was signed into law by President Biden in late December 2022, and it brought sweeping changes to many retirement plans. Financial professionals had to act fast to accommodate changes that went into effect on January 1, 2023.1

Some examples included a required minimum distribution (RMD) age increase to age 73 for participants in employer-sponsored retirement plans, allowing them an additional year to defer receiving RMDs. Expanded employer matching options were also made available in 2023, as well as exceptions for terminally ill participants to not pay the additional 10% penalty for early distributions.2

Not all SECURE 2.0 rules went into effect right away, though. The following are some important changes to expect in 2024 and beyond, especially as it relates to employer-sponsored plans. Remember to include them as part of your conversations with clients as you assess their entire retirement strategy.

2024 updates: SECURE 2.0

The following provisions go into effect January 1, 2024.

Indexing IRA catch-up limits (Section 108)

Catch-up contributions for those age 50 and over weren’t indexed in the past. Beginning in 2024, they will be.2

Elimination of RMDs (Section 325)

RMD on a Roth 401(k) were previously required prior to the death of the owner. Roth 401(k) accounts in employer retirement plans will no longer be subject to RMD requirements beginning in 2024.2

Student loan debt “matches” (Section 110)

Millions of Americans struggle with student debt. Make sure your clients are aware of potential provisions made available by their employer beginning in 2024. Employers may choose to "match" employee student loan payments with matching funds to a retirement account.2

College savings (Section 126)

Assets in 529 plan accounts open for more than 15 years can be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000.2

Emergency expense withdrawals (Section 115)

Participants in employer-sponsored plans may withdraw up to $1,000 per year to help cover expenses for a permissible personal or family emergency, effective January 1, 2024. What’s more, they won’t have to pay the 10% early distribution penalty. It’s important to tell clients that these distributions need to be repaid to the plan within three years, and they can’t request additional emergency funds during that time unless the initial withdrawal has been repaid.2 

Increased limits for mandatory cashouts (Section 304)

Currently, if your client is a former employee of an organization where they had a retirement account — and that account doesn’t exceed $5,000 — the employer can distribute and roll over the account into an IRA without your client’s consent. Beginning in 2024, the distribution limit will increase to $7,000.2

Surviving spouse can be treated as an employee (Section 327)

For the purposes of an RMD, a surviving spouse can elect the same treatment as the deceased spouse who was an employee.2

Beyond 2024: SECURE 2.0 changes on the horizon

Required automatic enrollments (Section 101)

Effective in 2025, 401(k) or 403(b) employer-sponsored plans will be required to automatically enroll participants once they become eligible. This means employees will be responsible to opt-out if they so choose. The initial automatic enrollment is a minimum of 3%, and it cannot exceed 10% without the employee’s consent. The amount increases by 1% each year until it reaches at least 10%, but not more than 15%. Current 401(k) and 403(b) plans are grandfathered in, and there are exceptions for small businesses with 10 or fewer employees, new businesses less than three years old, church plans and governmental plans.2

New age tier for catch-up limits (Section 109)

Catch-up contributions for those ages 60–63 increase to $10,000 or 50% more than the regular catch-up amount, whichever is greater, beginning in 2025.2

Expanded eligibility for part-time employees (Section 125)

Part-time employees haven’t always had the same opportunities as full-time employees, especially when it comes to retirement benefits. Employers will need to allow eligible long-term, part-time employees to participate in 401(k) or 403(b) plans beginning in 2025. Part-time employees who qualify must complete either one year of service (with a 1,000-hour minimum rule) or two consecutive years of service (for employees who complete at least 500 hours of service).2

There are many other provisions included in SECURE 2.0 that aren’t covered in this overview. Please contact your wholesaler if you would like to talk through other implications as this legislation gets implemented. Also, take a look at our helpful resources below that may offer additional topics to serve as conversation starters.


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