SECURE Act 2.0: Key Changes for 2024 and 2025 – Duncan Financial Group
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SECURE Act 2.0: Key Changes for 2024 and 2025

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SECURE Act 2.0: Key Changes for 2024 and 2025

To most, the SECURE Act 2.0 appeared to predominantly outline optional changes that go into effect over the span of 10 years. However, there are a few mandatory changes taking effect in 2024 that plan sponsors will need to comply with. These provisions require sponsors to work with their advisors, recordkeepers, and providers to develop a strategy for incorporating them into their plan design, as well as dealing with the cost implications that come with it.

On August 25th, the IRS announced that it is granting a two-year delay on the effective date of SECURE 2.0’s requirement that catch-up contributions must be Roth for individuals earning more than $145,000 (indexed). In other words, catch up contributions can continue to be made pre-tax through 2025 no matter one’s income. Previously, beginning in 2024, those making $145,000 annually would be required to make catch-up contributions through the Roth source. For more insights on this breaking news, click here for more details.

Other mandatory changes to look out for in 2024 are regarding required minimum distributions (RMDs). One new provision allows a surviving spouse to be treated as their deceased partner for the purpose of RMDs. This is crucial for a widow who is younger than the deceased. It means they can delay withdrawals to when they, themselves, are at the minimum age of RMD, rather than having to take RMDs out earlier, when their deceased spouse would’ve been the minimum age. Additionally, the SECURE Act 2.0 named Roth accounts in employer retirement plans exempt from RMD requirements starting in 2024. Previously, Roth 401(k) account holders who wanted to bypass RMDs would need to roll over their funds into a Roth IRA. Now, they can avoid dealing with a transfer of assets and the Roth IRA five-year rule by keeping their 401(k), RMD requirement free.

As we approach 2024, sponsors should also understand the optional changes going into effect and decide whether or not they can use them to optimize their plan designs. Examples of these include:

    •Employee student loan payments matched with employer contributions to a retirement account;
    •Introduction of the ability to transfer certain benefits between accounts (automatic portability); and
    •Allowance of self-certifying emergency savings withdrawals up to $1,000 per year.

These provisions offer opportunities for plan committees to evaluate their current plan design and determine what changes can be made to support employee needs and help attract talent.

As each year brings more changes into effect, we at Duncan Financial Group look forward to working with our plan sponsors to help navigate these updates and how to best proceed with the goals and objectives of their retirement plan. Schedule a meeting with one of our professionals to learn more.