SECURE Act 2.0 Offers Expanded Saving Opportunities

Expanding retirement saving opportunities for American workers has been an ongoing priority for Congress over the past several years. The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, made significant and important changes designed to increase saving opportunities. While certainly helpful, it was difficult for many Atlanta workers to take advantage because of the COVID-19 pandemic. To re-ignite retirement savings, a new bill known as the SECURE Act 2.0 (Act), was recently approved by the House Ways and Means Committee and sent to the full House for consideration. Much like the first version, there are several changes proposed including an expanded savers credit, increased RMD age, accelerated part-time employee participation rules, and more.  Although it may still undergo modifications, there are several important provisions that will impact both Atlanta plan sponsors and participants. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.

• Enhanced Automatic Enrollment – The Act includes a requirement that 403(b) and 401(k) plans implement an automatic enrollment process for all participants into the plan when they meet service and eligibility requirements. Of course, there must be an opt-out option if an employee elects not to participate. In addition, the auto-enrollment amount must be at least 3% and increase each year by 1% until the maximum of 10% is reached. It is important to note this change would apply only to new plans and there are exemptions for businesses with less than 10 employees, church, and governmental retirement plans.
• Part-Time Employee Participation – An important change made in the original SECURE Act was the requirement that certain part-time employees be permitted to participate in a company’s retirement plan. The Act calls for a reduction in the eligibility waiting period to 2 years. This means a part-time employee would need to have worked at least 500 hours per year, over 2 years, and been with the same employer for 2 consecutive years to qualify.
• Expanded Savers Credit – To encourage lower-income workers to participate in retirement savings, there is a provision that increases the value of the Retirement Savings Contribution Credit (Savers’ Credit) for eligible contributions. The maximum would increase from $1,000 to $1,500 per person, raise the maximum income eligibility, and index the value of the credit for inflation.
• Student Loan Matching – For workers with student loans, the Act includes a provision that allows employers to treat qualified student loan payments as elective deferrals. This means the employer would need to make matching contributions in 401(k), 403(b) or SIMPLE IRA plans. The Act defines qualified student loan debt as any debt incurred by an employee for the purpose of paying qualified higher education expenses.
• Required Minimum Distributions (RMDs) – The Act changes the age at which RMDs will need to be taken from the current age of 72 to 75 years old. Additionally, any participant with an aggregate account value of less than $100,000 would not be required to take an RMD at all.
• Increased Catch-Up Contributions – To accelerate retirement saving opportunities, the Act proposes implementing higher catch-up contribution limits for employees at ages 62-64. The current limit of $6,500 would be increased to $10,000 in most cases. This change provides an additional opportunity for these workers to accelerate retirement-saving efforts.

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The SECURE Act 2.0 outlines several provisions to expand and enhance available retirement saving opportunities. While it is possible there may be changes made during the Congressional approval process, it does provide insight into modifications currently under consideration. If you have questions about the information outlined above or need assistance with a plan audit issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.