NEW 2023 – Secure Act 2.0 important changes you need to know.

The SECURE 2.0 Act aims to achieve three objectives: Encourage individuals to increase their retirement savings, enhance retirement regulations, and reduce the expenses that employers incur while establishing retirement plans.

A number of provisions have already been implemented since January 1, 2023, while some will come into effect in 2024, 2025, or beyond.

The first Secure Act was passed in 2019 and it made some changes to your retirement account, but the new Secure Act 2.0 recently signed into law brings even more changes to the way you need to plan for your retirement.

The first step to getting ahead in your retirement planning is having a good grasp of the landscape in which you are operating.

That said, below is a walkthrough of some major changes in the Secure Act 2.0 you need to be aware of:

14 states offer mandatory 401(k) plans to employees.

This is not going into effect for a couple of years, until 2025. So the way it works right now is – if you go to work for a company and they offer a 401(k) plan, you have to be enrolled. You have to say “I want to enroll in this plan” and you have to make that happen.

Well, that changed with the new SECURE Act 2.0. In 2025 eligible employees will be automatically enrolled in 401(k) or 403(b) plans.

However, if the employee decides not to participate, they would have to unenroll.

And reminders are sent to these non-participating employees at least every 3 years to reconsider their decision.

This change will have a lot more people participating.

Up to $90,000 in Tax Credits for business owners setting up Safe Harbor eQRP 401k

This provision is a tremendous opportunity for business owners setting up the Safe Harbor eQRP 401k.

Enabling them to not only claim tax credits for their startup expenses but also potentially receive credits for their contributions toward employee benefits.

This effectively makes the plan set up free for the first couple of years, saving employers tons of administrative hassle.

It can also help businesses attract and retain top talent in a tight labor market.

Employer match AND Profit Sharing PAID for by IRS up to $1,000 per employee, per year

The IRS is also encouraging employers to offer retirement plans by offering to pay for both employer match and profit-sharing incentives up to $1,000 per employee per year.

This is a win-win situation for both employers and employees – as it helps employees save for retirement while also reducing the tax burden for the employer.

100% of 401(k) contributions can now be Roth (employer contributions too!)

Another exciting change brought about by the Secure Act 2.0 is the ability to contribute 100% of 401(k) contributions to Roth accounts, including employer contributions. Previously, only employee contributions were eligible for Roth contributions, while employer contributions were made to traditional pre-tax accounts. Roth contributions are made after tax, which means that the withdrawals are tax-free in retirement, making it an attractive option for employees.

NO MORE Required Minimum Distributions on Roth 401(k)s – previously only Roth IRAs were exempt from RMDs.

This is one of the most significant changes brought about by the Secure Act 2.0 – the elimination of Required Minimum Distributions (RMDs) on Roth 401(k) accounts.

Formerly, only Roth IRAs were exempt from RMDs, while Roth 401(k) and other retirement accounts were subject to RMDs.

This change allows you to keep your funds in your Roth 401(k) accounts as long as you want, without being forced to withdraw funds that you don’t need at the stipulated age and pay taxes on them.

The new eQRP system also allows for over $700,000 of annual contributions per family, which can be deducted from taxes

This is a substantial increase from the previous limits.

With this, high-earning individuals don’t have to worry about their contributions being capped by low contribution limits.

An upgrade of the traditional 401(k) and IRA accounts.

This New eQRP system allows a family to make total contributions of over $700,000 yearly.

Find out more about the New eQRP system.

One point of contact, no more 800-number with crazy hold times.

Lastly, the Secure Act 2.0 has made it easier for employers and employees to access retirement plan information by providing an account executive as a single point of contact.

This eliminates the need for employees to navigate complicated phone systems or wait on hold for long periods just to get across.

Now is the time to plan for a secure future with the new retirement rules.

“The changes to retirement planning introduced by the Secure Act 2.0 highlight the importance of working with a financial advisor to achieve your financial goals.” 

– Kaleb Paddock, Founder of Ten

The SECURE 2.0 Act has introduced significant changes to retirement savings and plan distributions.

These changes can be intricate, and it is advisable to seek guidance from a financial professional to understand how they will affect your retirement plan so you can plan accordingly.

It is crucial to evaluate your current retirement strategy and assess where you stand in terms of retirement savings.

A financial advisor can assist you in reviewing your current plan and help you identify which changes will be most advantageous for you.

Learn how we can help you set up the safe harbor eQRP 401(k)