Secure 2.0 Act Provides Welcome Relief To Retirement Savers

The Secure 2.0 Act of 2022 is aimed at getting Americans to save more for retirement. While some provisions of the Act have already gone into effect, many aspects will not be available until 2025 or later.

The bipartisan-supported Act has 92 retirement-savings provisions, some of which provide substantial changes and opportunities to maximize retirement contributions. The IRS recently issued Notice 2024-2, which addresses implementation issues and extends the deadline for plans to adopt many of the changes.

Let’s discuss some of the more notable changes you should be aware of.

Required Minimum Distribution Changes

The date an individual must take a required minimum distribution (RMD) continues to be a moving target.  Prior law had set the age to begin RMDs at 72. The Secure 2.0 Act increases the age to 73 for individuals who turn 72 after December 31, 2022. Starting in 2033, the age to begin RMDs moves to 75.

There is good news for those who fail to take their RMD in a timely manner. The draconian 50% penalty decreases to 25% of the amount not taken and can further be reduced to 10% if the account owner makes a corrective distribution in a timely manner.

Higher Catch-Up Contributions

Under current law, employees closer to retirement (age 50+) are eligible to defer an additional catch-up contribution annually to a workplace plan.

For 2024, the additional catch-up contribution is $7,500 for a 401(k), 403(b), or governmental 457(b) plan and $3,500 for a SIMPLE IRA plan.

Starting in 2025, the Secure 2.0 Act increases these limits for employees ages 60 through 63 to the greater of $10,000 or 150% of the standard catchup amount in 2025.

Effective in 2026, employees earning $145,000 in the prior calendar year will be required to make all catch-up contributions to a workplace plan to an after-tax Roth account. Individuals earning $145,000 or less, adjusted for inflation, will be exempt from the Roth requirement.

Matching Roth Contributions

Historically, when an employer provides a matching retirement plan contribution, it does so on a pre-tax basis, and those funds grow tax deferred.

The Secure 2.0 Act allows employers to provide employees in 401(k), 403(b), and governmental 457(b) plans with the option of having those matching contributions made to Roth accounts, with the earnings growing tax-free.

Employees choosing the Roth match option will have additional taxable income to report. The taxable Roth match will not be reported as wages on the W2; rather, it will be treated similarly to a taxable Roth conversion with the taxable income reported on Form 1099-R.


SIMPLE and SEP IRAs are retirement plans typically used by small businesses as they do not require the administration of a 401(k) plan, making them a cost-effective approach.

Historically, these plans have only been available on a pre-tax basis. The Secure 2.0 Act changes that, allowing both the employee deferral and employer match to be made as after-tax Roth contributions. The employee deferral will be included in taxable wages on the W2 and the employer match will be taxable income to the employee and will be reported on Form 1099-R, similar to the reporting of a Roth conversion.

While the Act called for this provision to be effective after 2022, the IRS is still issuing guidance and has extended the deadline for incorporating these changes until 2027. Employer adoption of the Roth SIMPLE and SEP IRA plans are likely a few years out as employers await further IRS guidance to fully understand the changes.

529 Plan Rollover to Roth IRA

529 plans are a great way to save for education costs, providing tax-free growth as long as the funds are used for qualified expenses.  But what happens to the funds in those accounts if they aren’t fully utilized by the beneficiary for education costs?

The Secure 2.0 Act allows tax and penalty-free rollovers to Roth IRAs. Beneficiaries of 529 college savings accounts will be permitted to rollover up to $35,000 over the course of their lifetime. These rollovers are subject to the annual Roth IRA contribution limits, and the 529 account must have been open for more than 15 years.

Additionally, any contributions made during the past five years and the earnings on those contributions are not eligible to be rolled over. A conversion made prior to April 15th can be treated as a Roth contribution for the prior year, thus those eligible could make rollovers during 2024 for both 2023 and 2024 if they act prior to April 15th. This is a great opportunity for those who have funds remaining in 529 plans that will no longer be incurring educational expenses.

Person typing on computer learning about the Secure 2.0 Act chnages.

Contact Graves Light Lenhart For Secure 2.0 Act Questions & Retirement Planning In Harrisonburg

The Secure 2.0 Act provides many new opportunities to help individuals plan for retirement. Please contact us if you have any questions on how the changes may impact your retirement planning.