After President Biden signed the omnibus spending package into law, there are new retirement rules coming down the pipeline that could make it easier to build up retirement savings – and less costly to withdraw them.

Among other items, the Secure 2.0 Act will do the following:

• Requiring automatic 401(k) enrollment: Employers would be required to automatically enroll employees in their 401(k) plan at a rate of at least 3% but not more than 10%. Businesses with 10 or fewer workers and new companies in business for less than three years are among those that would be excluded from the mandate.
   
• Increasing the age when RMDs would need to start: The current bill would increase the age to start your required minimum distributions from age 72 to age 73 in 2023 and then to age 75 in 2033. Additionally, the penalty for failing to take RMDs would be reduced to 25%, and 10% in some cases from the current 50%.
   
• Creating bigger “catch-up” contributions for older retirement savers: Under current law, you can put an extra $6,500 annually in your 401(k) once you reach age 50. Secure 2.0 would increase the limit to $10,000, or 50% more than the regular catch-up amount, starting in 2025 for savers ages 60 to 63. Catch-up amounts also would be indexed for inflation. Additionally, all catch-up contributions will be subject to Roth treatment – meaning contributions are made with after-tax funds – except for workers who earn $145,000 or less.
   
• Broadening employer 401(k) match options: Secure 2.0 would make it easier for employers to make contributions to 401(k) plans on behalf of employees paying student loans instead of saving for retirement.
   
• Improving worker access to emergency savings: One provision would let employees withdraw up to $1,000 from their retirement account for emergency expenses without having to pay the typical 10% tax penalty for early withdrawal if they are under age 59½. Companies also could let workers set up an emergency savings account through automatic payroll deductions, with a cap of $2,500.
   
• Increasing part-time workers’ access to retirement accounts: The original Secure Act made it so part-time workers who book between 500 and 999 hours for three consecutive years could be eligible for their company’s 401(k). Secure 2.0 reduces that to two years. Companies have already been required to grant eligibility to employees who work at least 1,000 hours in a year.
   
• Boosting how much can be put in a qualified longevity annuity contract: Currently, the maximum that can go into a QLAC is either $135,000 or 25% of the value of your retirement accounts, whichever is less. Secure 2.0 eliminates the 25% cap and increases the maximum amount allowed in a QLAC to $200,000.
   
• Creating a federal matching contribution for lower-income retirement savers: An existing tax credit for low- and moderate-income individuals who contribute to retirement accounts would become a limited government-funded matching contribution.
   
• Changing the required minimum distribution rules for Roth 401(k)s: Currently, while Roth IRAs come with no RMDs during the original account owner’s life, that’s not the case for Roth 401(k)s. Starting in 2024, the pre-death distribution requirement would be eliminated.
   
• Broadening uses for unused college savings money: A provision would allow for tax- and penalty-free rollovers to Roth IRAs from 529 college savings accounts that are at least 15 years old, within limits.
   
• Helping military spouses get access to retirement plans: Secure 2.0 creates tax credits for small businesses that let military spouses enroll right away in their plan and qualify for immediate vesting of any employer matches.

Information contained herein is not tax advice and should not be considered as such. Each individual’s tax situation is unique and different. For advice related to your specific tax situation, please contact your personal tax professional. Not FDIC insured. Not bank guaranteed. May lose value.