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On 29 December 2022, President Biden signed the Consolidated Appropriations Act of 2023 (HR 2617) into law, which included provisions affecting retirement savings plans intended to build upon the 2019 SECURE Act. These provisions are collectively called the Secure 2.0 Act of 2022 (the “Secure 2.0 Act”). 

This legislation builds on the original Secure Act and years of discussion aimed at strengthening the retirement system and an expansion of the rules for qualified charitable donations (QCDs). While the Secure 2.0 Act contains dozens of provisions, the highlights are different depending on where you are in your life cycle. 

Important highlights for People in or Near Retirement:

• The age to start taking the required minimum distribution (RMD) increases to age 73 in 2023 and to 75 in 2033.
• The penalty for failing to take an RMD will decrease to 25% of the RMD amount, from 50% currently and 10% if corrected in a timely manner for IRAs.
• Starting in 2024, RMDs will no longer be required from Roth accounts in employer retirement plans.
• Catch-up contributions will increase in 2025 for 401(k), 403(b), governmental plans, and IRA account holders.
• Defined contribution retirement plans will be able to add an emergency savings account associated with a Roth account.
• IRA account holders 70 ½ and older may still elect to make qualified charitable distributions (QCD) to charitable organizations, like the IEEE Foundation, of up to $100,000 per year. The amount counts toward the RMD and beginning in 2024 this amount will be indexed for inflation.
• Beginning in 2023, the use of the QCD has been expanded to include a one-time gift of up to $50,000, adjusted annually for inflation, to a charitable remainder unitrust, a charitable remainder annuity trust, or a charitable gift annuity. 

Important highlights for People Years Away from Retirement: 

• The legislation requires businesses adopting new 401(k) and 403(b) plans to automatically enroll eligible employees, starting at a contribution rate of at least 3%, starting in 2025. It also permits retirement plan service providers to offer plan sponsors automatic portability services, transferring an employee’s low-balance retirement accounts to a new plan when they change jobs. 
• Defined contribution retirement plans would be able to add an emergency savings account that is a designated Roth account eligible to accept participant contributions for non-highly compensated employees starting in 2024. Contributions would be limited to $2,500 annually (or lower, as set by the employer), and the first four withdrawals in a year would be tax and penalty-free. Depending on plan rules, contributions may be eligible for an employer match. In addition to giving participants penalty-free access to funds, an emergency savings fund could encourage plan participants to save for short-term and unexpected expenses.
• Starting in 2024, employers can “match” employee student loan payments with matching payments to a retirement account, giving workers an extra incentive to save while paying off educational loans.
• After 15 years, 529 plan assets can be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000. Rollovers cannot exceed the aggregate before the 5-year period ending on the date of the distribution. The rollover is treated as a contribution towards the annual Roth IRA contribution limit.

The Secure 2.0 Act includes close to 100 additional provisions aimed at enhancing Americans’ ability to save for retirement and rewarding those who utilize qualified charitable donations. This legislation can drastically impact you and the organizations you are philanthropically supporting. 

It is important to understand how this legislation affects your financial situation. Be sure to consult your financial advisor or tax professional to understand exactly how these changes apply to you.

As a valued member of the IEEE family and supporter of the mission of the IEEE Foundation, there may be an opportunity to further your impact by utilizing the updates to the QCDs. If you would like to learn more about the impact a gift would have on the Foundation, we would be honored to have a conversation with you and your family. Additionally, to help guide you in your decision, you can refer to the IRA Charitable Rollover page on our site.. 

Interested in learning more about including IEEE in your estate plans, we invite you to complete our planned giving interest form.

The information in this article is for educational purposes only and is not intended as legal, tax, or investment advice. Before you take action, consult your tax and legal advisors to determine the best options for you.