Retirement Act (“SECURE 2.0” or “Act”) of 2022 via HR 2954. The Senate is expected to vote on the bill later this spring, and in doing so, there may be changes in the Senate version; however, it is anticipated that the legislation will become law in some form. Below are some key highlights from the provisions of the House bill:
- Expanding automatic enrollment. For plan years beginning after December 31, 2022, SECURE 2.0 would mandate automatic enrollment in 401(k) and 403(b) plans at the time of participant eligibility. The contribution rate would be at least three percent and not more than ten percent, with an auto-escalation provision of one percent annually, capped at ten percent. Eligible participants would also be able to opt-out;
- Increasing the age for required minimum distributions. The SECURE Act increased this to age 72, and SECURE 2.0 would raise the age to 73 starting on January 1, 2023, to age 74 on January 1, 2030, and to age 75 on January 1, 2033;
- Improving coverage for part-time workers in 401(k) plans. SECURE 2.0 proposes to reduce the years of service requirements for long-term, part-time workers to participate for plan years beginning after December 31, 2022. Specifically, the bill would reduce the current requirement to permit certain employee participation following three consecutive years during which the employee attains 500 hours of service to two-consecutive years during which the employee attains 500 hours of service. Employers would retain the right to impose lesser service requirements;
- Increasing catch-up contributions for people aged 50 and over. For taxable years beginning after December 31, 2023, the catch-up contribution amount for certain retirement plans would increase to $10,000 (currently $6,500 for most plans) for eligible participants who have attained ages 62-64 by the end of the applicable tax year;
- Treating student loan payments as elective deferrals for purposes of matching contributions. For plan years beginning after December 31, 2021, employers may amend their plans to make matching contributions to employees based on an employee’s qualified student loan payments; and
- Establishing a Retirement Savings Lost & Found Database. SECURE 2.0 creates a national online searchable lost and found database for Americans’ retirement plans at the Department of Labor. The database will enable retirement savers, who might have lost track of their pension or 401(k) plan, to search for the contact information of their plan administrator. The Act directs the creation of the database no later than two years after the date of enactment.
More information on SECURE 2.0 can be found here.
Next Steps for Employers
It is currently unknown which provisions of SECURE 2.0 will be reflected in the Senate version, but employers should monitor the progress of this legislation to get insight into potential plan changes for 2023 and beyond.
HR Works will continue to monitor this topic and provide updated information as needed.