President Biden signed the Consolidated Appropriations Act of 2023, which includes the SECURE 2.0 Act of 2022.
Here are some of the highlights:
- Increases the age for required minimum distributions. Beginning January 1, 2023, the age is raised to 73, and to 75 on January 1, 2033
- Expands employer tax credits for establishing retirement plans. The credit for small employer pension plan startup costs is modified to increase administrative costs eligible for the credit to 100% for employers with up to 50 employees. Employer contributions can also be considered for an additional tax credit up to a $1,000 per-employee cap.
- Consideration of student loan payment when determining an employer’s 401(k) contribution. This permits employers to contribute to an employee’s 401(k) account if they make qualified student loan payments, even if they do not make retirement plan contributions. It will be applicable for plan years after December 31, 2023.
- Increases catch-up contribution limits for people 60 to 63 years of age. While employees who have attained age 50 are permitted to make catch-up contributions, an additional catch-up contribution will increase the limits to $10,000 for those ages 60 through 63. The added contributions, indexed to inflation, would be effective after December 31, 2024.
- Automatic enrollment of employees into company retirement plans. Automatic contributions begin at 3% and increase by one percentage point up to 10%, unless a participant opts out. There are exceptions for new businesses under three years and small businesses with less than ten employees. This will be applicable for plan years beginning after December 31, 2024.
- Expands access to retirement plans for long-term, part-time workers. Part-time employees who provide two years with at least 500 hours of service annually are eligible to participate in a retirement plan.
- Expands access to the Saver’s credit, a tax contribution for lower and middle-income employees. This increases the income thresholds eligible for the credit and increases the percentage of contributions eligible for a tax credit to 50%. This change is expected for taxable years after December 31, 2026.
The bill also includes $12.3 billion for the IRS, the same as in the fiscal year 2022. This continues the $2.8 billion of funding for taxpayer services designed to improve IRS customer service by increasing personnel.