SECURE 2.0: Changes affecting defined contribution (DC) plans

 
The SECURE 2.0 Act of 2022 (Div. T of Pub. L. No. 117-328) is intended to build on changes made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 (Div. O of Pub. L. No. 116-94). 

SECURE 2.0 provisions affecting DC plans include:

  • Eligibility and participation
    • Long-term part-time worker eligibility (Sec. 125)
    • Auto-enrollment and escalation for new plans, with some exceptions (Sec. 101)
    • Small financial incentives for participation (Sec. 113)
  • Contributions and benefits
    • Matching student loan payments (Sec. 110)
    • Higher catch-up contribution limit (Sec. 109)
    • Roth-only catch-up contributions for high earners (Sec. 603)
    • Option for Roth employer match and nonelective contributions (Sec. 604)
    • Pension-linked emergency savings accounts (PLESAs) (Sec. 127)
    • Expanded saver’s credit match (Sec. 103)
  • Distributions
    • Increase in age for required minimum distributions (RMDs) (Sec. 107)
    • No predeath RMDs for Roth accounts (Sec. 325)
    • Increase involuntary cash-out limit (Sec. 304)
    • Disaster relief (Sec. 331)
    • Reliance on employee certification for hardship distributions (Sec. 312)
    • Penalty-free withdrawals for emergency expenses (Sec. 115)
    • Penalty-free withdrawals in the event of domestic abuse (Sec. 314)
    • Penalty-free withdrawals for terminal illness (Sec. 326)
    • Qualified long-term care distributions (Sec. 334)
    • Three-year repayment limit on qualified birth or adoption distribution (QBOAD) (Sec. 311)
  • Lifetime income
    • Removal of RMD barriers for life annuities (Sec. 201)
    • More qualifying longevity annuity contract (QLAC) flexibility (Sec. 202)
    • Elimination of RMD penalty on partial annuities (Sec. 204)

     

  • 403(b) plans
    • 403(b) MEPs (Sec. 106)
    • Investment in collective investment trusts (CITs) (Sec. 128) 
    • Hardship withdrawal conforming changes (Sec. 602)
    • Long-term part-time worker eligibility (Sec. 125)
  • Pooled employer plans (PEPs)
    • 403(b) MEPs (Sec. 106)
    • Designation of named fiduciary for contributions (Sec. 105)
    • Application of startup credit for MEPs (Sec. 111)
    • DOL report on PEPs (Sec. 344)
  • Governmental plans
    • Elimination of “first day of the month” requirement for governmental 457(b) plans (Sec. 306)
    • Extension of qualified public safety employee distributions to private-sector firefighters (Sec. 308)
    • Extension of qualified public safety employee distributions to corrections officers (Sec. 330) 
    • Distributions to retired public safety officers for health and long-term care premiums (Sec. 328)
  • Simplified employee pensions (SEPs) and SIMPLE plans
    • Higher SIMPLE catch-up contribution limits (Sec. 109)
    • Additional nonelective contributions for SIMPLE plans (Sec. 116)
    • Increased SIMPLE deferral and catch-up contribution limits (Sec. 117)
    • Replacement of SIMPLE IRAs with safe harbor 401(k) plans during plan year (Sec. 332)
    • Roth for SEPs and SIMPLEs (Sec. 601)
  • Miscellaneous
    • Auto-portability prohibited transaction exemption (PTE) and requirements (Sec. 120)
    • Starter 401(k) plans (Sec. 121)
    • Separate top-heavy testing for excludable and nonexcludable employees (Sec. 310)
    • Extended deadline to adopt amendments increasing benefits (Sec. 316)
    • Spousal beneficiary election to be treated as employee (Sec. 327)

Contributors: