By Kevin Doll, CFP® 

Happy New Year and welcome to another new set of tax rules! The SECURE Act 2.0 was signed into law on December 23, 2020 as part of an omnibus budget bill for 2023.  So, what does it mean for you?

Another Change to Required Minimum Distributions (RMDs)

  • Delayed from age 70.5 to age 72 under the original SECURE Act, RMDs do not need to begin until age 73 starting in 2023.
  • Age raised to 75 starting in January, 2033.
  • A surviving spouse who inherits a retirement account can be treated as the deceased for RMD purposes so if the survivor is younger, they may be able to delay RMDs.
  • Penalties for missed RMDs are reduced from 50% to 25% (10% if corrected in a timely manner, generally speaking by the end of the next year).

Increased Retirement Plan Catch-Up Contributions

  • In 2023, people 50 and older can make catch-up contributions of $7,500 in addition to their $22,500 maximum deferral.
  • The catch-up will be increased to the greater of $10,000 or 150% of the regular catch-up amount ($11,250 in 2023) for people aged 60-63 starting in 2025. After 2025, the amount will be indexed for inflation.
  • For those who earned > $145k in the previous year, catch-up contributions must be made on a Roth basis beginning in 2024.

New Employer Retirement Plan Matching Options

  • Employers can add a Roth match to their plan giving employees the option to choose a Roth or pre-tax match. Currently, all matching is done on a pre-tax basis.
  • Participants will be taxed on the amount of matching done on a Roth basis
  • Effective in 2024, employers can choose to match contributions into your retirement account based on the amount of your student loan payments.

Roth 401(k), 403(b), SEP and SIMPLE Rules

  • RMDs for the Roth portion of 401(k) and 403(b) accounts will be eliminated beginning in 2024.
  • Roth SEP and SIMPLE IRAs will now be available.

401(k) Emergency Fund and Other Early Withdrawal Exceptions (Penalty Free – NOT Tax Free)

  • Employers can automatically enroll non-highly compensated employees (<150k in 2023) in an emergency savings account linked to their 401(k).
    • Employees could save up to $2,500 in a Roth account that would be free of taxes and the 10% penalty if withdrawn before age 59.5.
    • Must be held in cash or interest bearing investment
    • Employer must match as if the funds were in the 401(k)
  • Certain employees including firefighters and public safety officers will have some relief from the early retirement penalty.
  • Those who are terminally ill, with an expanded definition from 2 to within 7 years, can make limited penalty free withdrawals.
  • Beginning in 2024, you can withdraw up to $1,000 per year penalty free for a personal or family emergency. If not repaid, you would need to wait 3 years before taking another $1,000 penalty free distribution.
  • There are additional penalty exceptions including:
    • Those impacted by a federally declared emergency ($22k maximum, can be spread over 3 years, can be repaid).
    • Domestic abuse victims (lesser of 50% of the balance ort $10k, can be repaid).
    • Payment of long term care premiums (Up to $2,500 per year).

Automatic Enrollment in 401(k) & 403(b) Retirement Accounts

  • Beginning in 2025, newly established plans must automatically enroll eligible employees and defer 3-10% of their income. Note: Participants can later opt-out if desired.
  • The savings rated will be increased by 1% per year until they reach 10-15%.

529 Plan Rollover to Roth IRA

  • You can roll up to $35,000 from a 529 Plan into a Roth IRA.
  • The transfer can only be made to the Roth IRA of the beneficiary, not the owner.
  • The 529 Plan must be in existence for 15 years.
  • The transfer in any given year is limited to no more than the annual IRA contribution limit for that year (reduced by any actual IRA contribution made).
  • You can’t transfer contributions (or earnings) made in the last 5 years.

Small Employer Retirement Plan Credit

  • Credit for the initial costs to establish a plan of up to $5,000 for 3 years.
  • There is an additional credit, available for 5 years, if the employer matches employee contributions.

Solo 401(k) Dates

  • Previously, a solo 401(k) Plan had to be established by 12/31 of the year the contributions were being made for.
  • New rules permit the Plan to be established up to the filing deadline.

Qualified Charitable Distributions (QCDs) & IRA Rollover to Charitable Gift Annuity, Remainder Trust, or Annuity Trust

  • The QCD limits will increase with cost of living adjustments beginning in 2024
  • Up to $50k can be distributed tax free to a charitable gift annuity or trust
  • The distribution counts towards any RMDs
  • The CRUT or CRAT can only benefit the owner or spouse


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