Congress pens letter to Treasury, IRS on SECURE 2.0 corrections 

To clarify the congressional intent for certain provisions of the SECURE 2.0 Act of 2022 (Div. T of Pub. L. No. 117-328), House Ways and Means and Senate Finance committee leaders have sent a letter to the Treasury Department and IRS. The letter notes that the committees are planning to introduce technical corrections legislation to address drafting errors in the statute. In the meantime, the committees want to ensure the following four provisions operate as intended:

• Catch-up contributions. Starting in 2024, SECURE 2.0 requires catch-up contributions by certain high-earning employees to be made on a Roth basis. (Other employees must be able to choose Roth or pretax treatment of catch-ups.) However, as drafted, the provision arguably can be read as disallowing all catch-up contributions (Roth and pretax). The committees’ letter confirms that legislators did not intend that result. IRS representatives have said informally that the agency will enforce catch-up contribution rules as Congress intended, disregarding the drafting glitch.
  
  
• Required minimum distributions. SECURE 2.0 increases the age that triggers required minimum distributions (RMDs) from 72 to 73 for participants who turn 72 after 2022 and 73 before 2033, and then again to 75 for individuals who turn 74 after 2032. As drafted, the provision is ambiguous for individuals born in 1959: These individuals will turn both 73 before 2033 (i.e., in 2032) and 74 after 2032 (i.e., in 2033). The letter says that the RMD triggering age for these individuals should be 73.
  
  
• Roth contributions to SEP and SIMPLE IRA plans. Starting this year, SECURE 2.0 allows employees with simplified employee pension (SEP) plans or individual retirement accounts (IRAs) through a savings incentive match plan for employees of small employers (SIMPLE IRA plan) to make Roth contributions. The letter clarifies that Roth contributions to these arrangements don’t count against an employee’s contribution limit to a separate Roth IRA.
  
  
• Small employer start-up credit. SECURE 2.0 creates a new tax credit for small employers that start a defined contribution plan. The credit is based on an employer’s contributions to employees’ accounts. The letter clarifies that this credit is in addition to the separate three-year credit for the costs to start and administer a new plan. (The act also increases the three-year credit for employers with 50 or fewer employees.)

•  Letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel (House Ways and Means and Senate Finance committees, May 23, 2023)
• Div. T of Pub. L. No. 117-328, the SECURE 2.0 Act of 2022 (Congress, Dec. 29, 2022)

• DC plans need guidance on SECURE 2.0’s higher catch-up limit (May 1, 2023)
• Implementing SECURE 2.0’s Roth provisions may tax DC sponsors (April 11, 2023)
• User’s guide to SECURE 2.0 (March 7, 2023)
• Taking a look at SECURE 2.0’s defined benefit plan provisions (Feb. 21, 2023)
• SECURE 2.0 brings more changes to required minimum distribution rules (Feb. 7, 2023)