The SECURE 2.0 Act of 2022 (SECURE 2.0)Â was signed into law by President Biden on Dec. 29, 2022, as part of a $1.7 trillion omnibus spending bill.
This massive piece of legislation builds on the foundation that was laid by the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act to further improve upon the success of the private employer-based retirement system by making it easier for businesses to offer retirement plans and for individuals to save for retirement.
The full text of SECURE 2.0, including provisions that affect pension and cash balance plans, may be found on pages 2,046-2,404 of the omnibus Consolidated Appropriations Act of 2023.
December 29, 2022 will serve as the date of enactment (DOE), where several provisions became effective immediately while others become effective in 2023 or later years.
For Retirement plan sponsors, the question is not whether SECURE 2.0 impacts them, it’s which of the 92 provisions apply to them and when do they take effect. Key provisions that are either retroactive, or that have effective dates on the DOE or began at the start 2023 include:
- Section 102. Modification of credit for small employer pension plan startup costs; effective for tax years beginning after Dec. 31, 2022.
- Section 111. Application of credit for small employer pension plan startup costs to employers which join an existing plan; effective retroactively for tax years beginning after Dec. 31, 2019.
- Section 128. Permit 403(b) custodial accounts to participate in group trusts with other tax-preferred savings plans and IRAs; effective after DOE.
- Section 302. Reduction in excise tax on certain accumulations (i.e., failure to take RMDs) in qualified retirement plans; effective for tax years beginning after DOE.
- Section 312. Employer may rely on employee certifying that deemed hardship distribution conditions are met; effective for plan years beginning after DOE.
- Section 317. Retroactive first year elective deferrals for sole proprietors; effective for plan years beginning after DOE.
- Section 320. Elimination of unnecessary plan notification requirements related to unenrolled participants; effective for plan years beginning after Dec. 31, 2022.
- Section 326. Exception to penalty on early distributions from qualified plans for individuals with a terminal illness; effective for distributions made after DOE.
- Section 331. Special rules for use of retirement funds in connection with qualified federally declared disasters; effective for disasters occurring on or after Jan. 26, 2021.
- Section 333. Elimination of additional tax on corrective distributions of excess contributions; effective for any determination of taxes, interest or penalties which is made on or after DOE, without regard to whether the act (or failure to act) upon which the determination is based occurred before the DOE.
- Section 345. Clarifies that plans filing under a Group of Plans need only to submit an audit opinion if they have 100 participants or more; effective on the DOE.
- Section 348. Clarifies the application of the Code and ERISA’s rules, prohibiting the backloading of benefit accruals, as they relate to hybrid plans that credit variable interest; effective for plan years beginning after DOE.
- Section 604. Allows DC plans to provide participants with the option of receiving matching contributions on a Roth basis; effective on DOE.
The Schneider Downs Retirement Solutions practice will continue to monitor SECURE 2.0 for associated clarifications and guidance that has yet to be released, and will develop summaries of key provisions in the coming weeks, so please subscribe for updates.
This article is part of a series highlighting the impact of the SECURE 2.0 on retirement plan sponsors, participants and retirees. You can view our full catalog of SECURE 2.0 articles here or download our comprehensive SECURE 2.0 eBook here.
About Schneider Downs Retirement Solutions
Schneider Downs Retirement Solutions has experience in all facets of qualified and non-qualified plan delivery, which allows us to be flexible to the needs and direction of our clients. Our specialized team of advisers and consultants provide objective advice and expertise to help plan sponsors govern their retirement plans appropriately, mitigate risk, improve participant outcomes and support efficient and compliant plan operations.
Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services. Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice. Registration with the SEC does not imply any level of skill or training.
