New Incentives, Changes to Retirement Planning Included in SECURE 2.0 Act

The spending bill signed by President Joe Biden on December 29, 2022, includes provisions affecting people with retirement accounts.

The SECURE 2.0 Act was included in the omnibus Consolidated Appropriations Act of 2023.

Similar to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, these changes are known as SECURE 2.0.

An overview of changes related to personal retirement planning, as well as employer and business provisions, follows.

Personal Retirement Planning Provisions

Impacts to personal retirement provisions in the SECURE 2.0 Act, include changes to qualified charitable distributions, Simplified Employee Pensions (SEP), required minimum distributions (RMD), and catch-up contributions.

The below outlines changes to provisions over time through 2025.


The following changes take effect right away.

SEP and SIMPLE Plans

SEP and Savings Incentive Match Plan for Employees (SIMPLE) plans can now accept direct Roth contributions.


The RMD age increased to 73. It will eventually increase to 75 starting in 2033.

RMD Penalty

The penalty for late RMDs was reduced to 25% from 50%.

This can be further reduced to 10% if timely corrective actions are taken.

Note that this could result in more penalty collections as the 50% penalty was often waived; only 90% of the penalty can now be avoided under the statute.


The next wave of SECURE changes follows.

Catch-Up Contributions

The $1,000 catch-up contributions for individuals over age 50 will be indexed for inflation.

Roth IRA Rollovers

Up to $35,000 of 529 account balances can be rolled over to the beneficiary’s Roth IRAs if the 529 plan has been open for 15 years.

Qualified Charitable Distributions

The amount of qualified charitable distributions from IRAs, currently $100,000, will be indexed for inflation.

A one-time election to contribute up to $50,000 in distributions from an IRA to a charitable remainder trust or charitable gift annuity may be allowed in qualifying situations.


Catch-Up Contributions

Catch-up contributions for workplace retirement plans will increase for employees who are ages 60–63. These amounts will be indexed for inflation starting in 2026.

Additional hardship exceptions to the 10% early distribution penalty are also now incorporated, including one to pay up to $2,500 per year to purchase long-term care insurance.

Employer and Business-Related Provisions

Below are a few employer and business-related provisions included in the SECURE 2.0 Act, including changes to employer contributions and treatment of Roth IRA accounts that will roll out starting in 2023.


Roth Contributions

Employer contributions can be made as Roth contributions rather than only on a pre-tax basis.

A participant whose employer chooses this will report the Roth contribution amount as taxable income in the year of contribution.

SEP Costs

The tax credit for Small Employer Pension Plan Start-up Costs increases to 100% of costs for employers of up to 50 people.

The credit can also be used to reimburse employers for a portion of the employer contributions to certain employees.


Roth 401(k) Accounts and Treatment

Roth 401(k) accounts will no longer be subject to required minimum distributions.

This aligns Roth 401(k) treatment with that of Roth IRA treatment.

Starter 401(k) plans may be offered to employees where a workplace plan hasn’t been previously offered.

These plans allow only for employee contributions, and there’s a cap on contributions equal to the IRA contribution limit amounts each year.

Student Loan Repayments

An employee’s student loan repayment amounts may be treated as a contribution to the workplace retirement account for purposes of calculating the employer matching contribution.

This is optional for employers.



Auto-enrollment of employees will be required for workplace plans established after December 31, 2024.

An initial contribution rate of 3% and an annual increase of 1% per year up to a max of 10% will also be automatic unless the employee opts out.

Some employers may be able to opt out of this rule.

Changes Left Out of Final Bill

Many other changes were discussed, but not included, in the final legislation including:

  • Permission for qualified charitable distributions to be made from workplace retirement plans and not just IRAs
  • Closing of the backdoor Roth contribution loophole
  • Additional changes and guidance to the new 10-year rule for inherited IRA required distributions
  • Exemption from the RMD requirement if the balance in an IRA or plan is under $100,000.

We’re Here to Help

To learn more about how SECURE 2.0 will affect you or your company, contact your Moss Adams professional.

You can also find additional insights at our Private Clients Practice.

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