SECURE 2.0 Act and other tax law changes

In Dec. 2022, Congress passed the SECURE 2.0 Act as part of the larger $1.7 trillion omnibus spending bill. Building upon the original SECURE Act from 2019, this bipartisan legislation aims to further strengthen retirement security for millions of Americans. With more than 90 provisions, the SECURE 2.0 Act introduces significant changes and improvements to the retirement landscape. Here are some of the major points:

Increased catch-up contributions

One of the key provisions allows for greater catch-up contributions to retirement accounts such as 401(k)s and IRAs for older workers. Starting in 2025, individuals ages 60-63 can make catch-up contributions of up to $10,000 annually to workplace retirement plans, including 401(k)s. This is a substantial increase from the current $7,500 limit for those 50 and older. In addition, the catch-up contribution limits for IRAs will be indexed to inflation starting in 2024, allowing savers to set aside more as costs rise over time.

Boosting small business retirement plans

The legislation includes several provisions to incentivize small businesses to offer retirement plans and make it easier for employees to participate. It creates new tax credits for small employers that join an existing 401(k) or 403(b) plan, as well as for those that automatically enroll workers into their company’s plan. There are also increased tax credits for establishing a retirement plan of up to $5,000 per year for up to three years.

Part-time worker access

Long-term, part-time workers will gain access to their employer’s 401(k) plan under the new rules. Those who work at least 500 hours per year for two consecutive years must be allowed to participate in their workplace retirement plan. This provision aims to extend retirement plan coverage to millions of part-time workers previously excluded.

Emergency savings accounts

In recognition of the need for short-term emergency savings, the SECURE 2.0 Act allows employers to automatically enroll workers into emergency savings accounts linked to their retirement plans. Employees can allocate a portion of each paycheck to build up a rainy day fund, with contributions capped between $2,500.

Student loan assistance

To help workers burdened with student debt save for retirement, the Act permits employers to make matching contributions to retirement plans based on an employee’s qualified student loan payments. This allows employees to receive the benefit of an employer match while paying down educational debt.

Increased required minimum distribution (RMD) age

The age at which individuals must begin taking required minimum distributions from tax-deferred retirement accounts increased, yet again. The SECURE 2.0 Act gradually raises the RMD age from 72 to 73 in 2023, and 75 in 2033. This allows retirement assets more time to potentially grow tax-deferred.

Roth plan catch-up contributions

Beginning in 2024, the legislation requires catch-up contributions for those meeting certain income limits to be made to Roth accounts such as Roth 401(k)s instead of pre-tax accounts. This provision sunsets after 2031 unless extended by Congress. The income threshold is $145,000.

Surviving spouse protections

The Act provides greater protection for retirement assets when a spouse dies. It allows the remaining balance in the deceased spouse’s 401(k) or other retirement account to be rolled over to the surviving spouse’s retirement account and remain tax-deferred.

Automatic enrollment and escalation

New 401(k) and 403(b) plans will be required to automatically enroll participants upon becoming eligible, starting with an initial deferral of at least 3% of salary. Plans can also allow workers to elect to have contributions automatically escalated each year until reaching at least 10% deferral, helping boost savings rates.

Roth catch-up contributions

The legislation allows non-Roth plan participants to have catch-up contributions made to Roth accounts starting in 2024. For those meeting certain income limits, all catchup contributions must go into a Roth account.

Assistance for military spouses


The SECURE 2.0 Act provides greater flexibility for military spouses when it comes to penalties for retirement plan withdrawals. It allows an exception to the 10% early withdrawal penalty if the distribution is less than $1,000 annually and related to the relocation of a military spouse.

Retirement plan starter 401(k)s


The Act creates new tax incentives for employers to offer “starter” 401(k) plans with more affordable administrative requirements. These new plans aim to drive higher participation among smaller businesses.

Certain withdrawal penalties eliminated


Under current law, participants face a 10% penalty for withdrawing retirement funds before age 59½. The SECURE 2.0 Act provides important exceptions in cases such as domestic abuse, terminally ill individuals, and certain emergencies, including wildfires and pandemics.

Enhanced Saver’s Credit


To boost retirement savings for lower- and middle-income workers, the Act expands the existing Saver’s Credit by increasing the income limits to qualify. It also applies the credit for investments in ABLE accounts for those with disabilities.

These major provisions represent a comprehensive effort to address persistent challenges, including increasing access to retirement plans, incentivizing higher savings rates, and providing greater flexibility for all workers in preparing for a secure financial future. With more than 90 key provisions, the SECURE 2.0 Act is one of the most impactful pieces of retirement legislation in decades.

Of course, implementation of these sweeping changes will take time. Some provisions are effective immediately, while others phase in over the coming years. The retirement industry, employers, and individual savers will need to adapt to the new rules and requirements. Financial advisors can provide important guidance to ensure individuals understand how to maximize the new opportunities and benefits included in this landmark legislation.