SECURE ACT 2.0 Summary

In late 2022 the legislation commonly referred to as SECURE Act 2.0 was signed into law. There are numerous provisions in this bill affecting the retirement security of Americans.

ALLOWS IRA ANNUITIZATION PAYMENTS TO BE AGGREGATED FOR RMD PURPOSES

The payments that come from an IRA annuitization may be used to satisfy the RMD obligations for the IRA owner’s other IRAs.

This provision is effective in 2023.

REDUCES THE PENALTY FOR MISSED RMDS

The new law reduces that penalty tax to 25% from 50% for missed RMDs, and if timely corrective action is taken by the IRA owner the tax penalty can be reduced to 10%. This provision is effective in 2023.

EXCEPTION TO 10% PENALTY ON EARLY DISTRIBUTIONS FOR INDIVIDUALS WITH A TERMINAL ILLNESS

The bill creates a new exception for terminal illness and is effective for 2023.

INCREASED CONTRIBUTIONS AMOUNTS TO PLANS FOR OLDER WORKERS

Starting in 2025, individuals who are ages 60 to 63 will be eligible to make larger catch-up contributions to their plans.

NO LIFETIME RMDS FROM ROTH PLAN ACCOUNTS

Starting in 2024, plan participants who have Roth plan accounts will no longer be subject to RMDs. This change will align the lifetime distribution rules of Roth qualified retirement plan accounts with the rules of Roth IRAs, which have never had a lifetime

RMD requirement.

MORE ROTH OPTIONS FOR SAVERS

In 2023 SEP and SIMPLE plans can allow Roth contributions, while other qualified retirement plans can allow employer matching contributions to be made on a Roth basis.