In December 2022, the U.S. Congress passed the $1.7 trillion Consolidated Appropriations Act, effectively averting a government shutdown.

The 4,000-plus page bill includes the Secure Act 2.0, an updated version of the original Secure Act passed in 2019 designed to strengthen retirement planning prospects for millions of Americans.

It contains dozens of provisions with varying effective dates, targeted demographics, outcomes, and more.

Among its most popular changes according to Donald Lyons, a wealth strategist with Bryn Mawr Trust:

• Required Minimum Distributions (RMDs): RMDs are the amount of money that must be withdrawn from an employer-sponsored retirement plan, traditional IRA, SEP, or SIMPLE IRA by owners and qualified retirement plan participants of retirement age.

Beginning in 2023, the RMD age was increased to 73 years old from 72, meaning any individual who turns 72 this year will now have an additional year to start taking distributions. This age will increase further to 75 years old by 2033. 

• Increased Catch Up: For individuals with Roth and Traditional IRAs, this year’s contribution limit is $6,500. Those over the age of 50 are allowed to contribute an additional $1,000 in the form of a catch-up, which will now be indexed for inflation on an annual basis. 

For other retirement plans, such as 401(k)s, the special catch-up provision will be available for anyone between the ages of 60 and 63, where they will be allowed to make a catch-up of $11,250 or 150% of the catch-up of $7,500 adjusted for inflation. 

• Qualified Charitable Distributions (QCD): QCDs allow individuals over the age of 70 to donate up to $100,000 total to one or more charities directly from a taxable IRA instead of taking their RMD. 

This amount will now be indexed for inflation. Furthermore, individuals are now allowed to make a one-time gift of up to $50,000 directly to a charitable remainder unitrust (CRUT), charitable remainder annuity trust (CRAT), or charitable gift annuity (CGA). 

• Automatic Enrollment: New employer retirement plans, such as 401(k)s and 403(b)s will be required to automatically enroll eligible employees starting at 3% with automatic annual increases of 1% up to a max of 10%. 
• 529 Plans: Starting in 2024, a lifetime maximum of $35,000 will be eligible for rollover into a Roth IRA for the beneficiary with a few limitations. The 529 plan must have been open for at least 15 years, the rollover is limited to the contribution limit for that year, and contributions and earnings within the past five years are ineligible for rollovers.
• Student Loan Debt: Beginning in 2024, student loan payments will be considered a retirement plan contribution, making them eligible for an employer match into a 401(k) or 403(b).

Lyons also notes that while the Secure Act 2.0 brings some planning opportunities, the best course of action would be to consult with your tax and financial advisors to find the best plan to suit your needs.

You can read the Secure 2.0 Act of 2022 in its entirety by clicking here.