Secure Act 2.0 — Here’s What You Need to Know

By Dr. James M. Dahle, WCI Founder

President Biden signed into law an omnibus bill called the Secure Act 2.0 just before Christmas. Like most bills during the last few years, the $1.7 trillion spending package was passed mostly along party lines as Speaker Nancy Pelosi's last act before Republicans take control of the House of Representatives in 2023. Yes, $1.7 trillion is a lot of money, and the bill included all kinds of things like:

• $45 billion in aid for Ukraine
• $40 billion to respond to natural disasters
• $773 billion for domestic programs
• $858 billion for defense
• Overhaul of the 1887 Electoral Count Act (a response to the events of January 6)
• Protection for senators and former Speakers provided
• TikTok has been banned on government devices
• COVID-related Medicaid expansion goes away April 1 instead of in July
• Telehealth expansion extended through 2024
• Maine lobster industry reprieve (fishermen can still use the equipment that is killing whales)
• Makeup regulatory revamp
• Military academy graduates can no longer get a waiver to play professional sports without two years of service first
• National Labor Relations Board gets additional funding
• Secure Act 2.0

In this article, we're only going to be talking about the last of those items, including significant changes to conservation easement deductions to prevent abuse.

 

What Is Secure Act 2.0?

If you'll recall, the original Secure Act was passed at the end of 2019. It raised the Retired Minimum Distributions (RMD) age to 72, limited Stretch IRAs to just 10 years, allowed you to pay off $10,000 of your student loans with a 529 plan, and mostly encouraged employers to provide better 401(k)s. Secure Act 2.0 provides additional changes, almost all of which are great for savers, investors, employees, and employers. Let's go over them. If you want more detail, check out this 19-page summary from the chairman of the Senate Finance Committee. I'm going to follow his format but in a lot fewer than 19 pages.

There are so many changes here that this post is thousands of words long. To make your job easier, I have put a big blue delta (Δ) next to the changes that I think every white coat investor should be aware of. There are 90 sections in this act, and I think you need to know about 32 of them. Sorry that it's so long and there are so many changes. I don't make the rules; I just tell you about them and help you interpret them. If you find a mistake I've made, please kindly point it out in the comments section or by email, and I'll get it fixed.

More information here:

Inflation Reduction Act — How Will It Affect White Coat Investors?

 

Title I: Retirement Savings

The first 28 sections of the Secure Act 2.0 are all about expanding coverage and increasing retirement savings. They involve all kinds of retirement plan rule changes.

 

ΔSection 101: Expanding 401(k)/403(b) Automatic Enrollment

All new 401(k)s must automatically enroll participants to contribute at least 3% and not more than 10% and automatically increase contributions 1% per year to 10%-15%. Participants can still opt out. Starts in 2025.

 

Sections 102 and 111: Increased Credit for Small Businesses Starting a 401(k)

The old credit was for 50% of startup costs. Now, it is 100% of startup costs for businesses with up to 50 employees (phases out from 50-100 employees). The credit is for amounts contributed for employees up to $1,000 per employee and phases down over the first four years of the newly instituted plan. It is also available for new employers joining a Multiple Employer Plan (MEP) for the first three years of the MEP. Starts in 2023.

 

ΔSections 103 and 104: Changed Saver's Credit to Saver's Match

The Saver's Credit, for low earners contributing to retirement accounts, is no longer a deduction but a federally funded match into the account. It can be as much as a 50% match on the first $2,000 contributed (so, $1,000 total) and phases out between $20,500-$35,500 ($41,000-$71,000 MFJ). This is one more reason for residents—at least married residents—to contribute to their Roth IRAs. The match has to be repaid to the Treasury if you pull the money out before retirement. Starts in 2027.

 

Section 105: Pooled Plan Fiduciary

A pooled retirement plan may name a fiduciary that is not the employer starting in 2023.

 

Section 106: Addition of Multiple Employer Plans for 403(b)s

The original Secure Act allowed small businesses to band together to pool expenses for 401(k)s in “multiple employer plans.” Now, 403(b)s can do it too, starting in 2023.

 

ΔSection 107: RMD Age Goes Up

Starting in 2023, you will have to start taking RMDs from your traditional IRAs, traditional 401(k)/403(b)s, and Roth 401(k)/403(b)s at age 73. Starting in 2033, the age will increase to 75.

 

ΔSection 108: IRA Catch-Up Contributions Indexed to Inflation

Instead of just being a flat $1,000 extra, the additional amount those 50+ can contribute to an IRA each year will be indexed to inflation. Starts in 2024.

 

ΔSection 109: Higher Catch-Up Contributions in Your Early 60s

For those who are 60-63 years old, 401(k) catch-up contributions will not just be the $6,500 that those 50+ can make. It will be the greater of $10,000 or 50% more than the current catch-up contribution. Right now, that's $10,000 ($6,500 * 150% = $9,750), but since this is indexed to inflation, it could eventually be more. This also applies to SIMPLE IRAs (where the catch-up right now is only $3,000, not $6,500). Starts in 2025.

 

ΔSection 110: Allows Employers to Match Student Loan Payments into 401(k)s 

No longer do you have to miss out on the employer match if you choose to pay off your student loans instead of making 401(k) contributions. This also applies to 403(b)s, SIMPLE IRAs, and even governmental 457(b)s. However, this is up to the employer; it's not a requirement. Employers are just allowed to provide these matches. There will be a new nondiscrimination test just for those employees receiving these matching payments to ensure the benefits do not all go to owners/highly compensated employees. Starts in 2024.

 

ΔSection 112: Small Employers Get Tax Credit for Making Military Spouses Immediately Eligible for DC Plans

To get this new credit of up to $500 ($200 a piece, plus up to $300 matching contributions) per military spouse employee, an employer must make military spouses eligible to use the 401(k) within two months of hire, make them eligible for any match they would have qualified for after two years, and make them immediately vested in the match. The credit applies for up to three years but does not apply to highly compensated employees. Starts in 2023.

 

Section 113: Employers Can Now Bribe Employees to Save for Retirement

You can now give employees a $10 McDonald's gift card (or similar) to bribe them to start saving for their own retirement in the 401(k) plan. This apparently wasn't allowed before. Starts in 2023.

 

Section 114: ESOP Plan Benefit Extended to S Corps

A tax deferral benefit previously available to non-publicly traded C Corps that started Employee Stock Option Programs is now extended to S Corps, for up to 10% of their stock. Starts in 2028.

 

ΔSection 115: Emergency 401(k) and IRA Withdrawals Now Allowed Without Penalty

Unforeseeable or immediate financial needs relating to personal or family emergency expenses of up to $1,000 may now be withdrawn from a retirement plan without paying the 10% penalty (but still paying tax on tax-deferred money) up to once a year. You may also repay the $1,000 back into the plan (and presumably get a tax deduction for doing so) for three years. If you do repay it, you can do it again next year. If you do not repay it, you have to wait three years before taking another one. This one isn't going to do much for readers of this blog, but it should encourage low earners to save more for retirement without worrying about needing that money to replace the washing machine. Starts in 2024.

 

ΔSection 116: Allow Employers to Put More into SIMPLE IRAs

Raises the possible match in a SIMPLE IRA from 2% of compensation (or 3% of compensation if a match) to 10% of compensation or $5,000 indexed to inflation, whichever is less. Starts in 2024.

 

ΔSection 117: SIMPLE IRA and 401(k) Contribution Limit Increases

SIMPLE IRA/SIMPLE 401(k) contribution limits go up by 10% (including catch-up contributions). If the employer has 26+ employees, the employer must provide a non-matching contribution of at least 3% of compensation or a matching contribution of 4% of compensation in order for the plan to qualify for that increase. Starts in 2024.

 

ΔSection 118: Employers Can Provide a SEP for Nannies

Domestic employees can now be provided a SEP IRA by their employers. Starts in 2023.

 

Section 119: Rural Electric Employees Can Get Higher Employer Contributions

Non-highly compensated employees of a rural electric company now have a 415(c) contribution limit that is only limited by the 415(c) limit of $245,000, not by their compensation. So even if they only made $90,000, a worker could still potentially get $66,000 into their 401(k). Interesting loophole there. Starts in 2022.

 

Section 120: Low Dollar 401(k) Portability Changes

Retirement plan providers can automatically move a tiny old 401(k) into an employee's new 401(k) without their consent. Starts on December 24, 2023.

 

ΔSection 121: Introduction of Starter 401(k) Plans

A starter 401(k) (or safe-harbor 403(b)) can be started by an employer that does not currently offer a retirement plan, has a contribution limit equal to the IRA contribution limits ($6,500 in 2023 with $1,000 catch-up limits), and default-enrolls employees with a 3%-15% of compensation elective contribution. Starts in 2024. Not sure why an employer would choose a starter 401(k) over a real one, but perhaps it would be less hassle or less costly. This does not seem to replace the IRA contribution limit; it is just equal to it. Starts in 2024.

 

Section 122: Treasury Will Help States Find Savings Bond Owners

The Treasury will now share information with states about those who own matured savings bonds in their state so the state can help locate the owners. Starts in 2022.

 

Section 123: Slight Changes to ESOP Rules

Some securities that were not previously considered publicly traded for ESOP rule purposes now will be. Starts in 2028.

 

ΔSection 124: ABLE Disability Age Increased

The old rule was that the person had to be disabled before age 26 to have an ABLE account established for them. Now it is 46. Starts in 2026.

 

ΔSection 125: Part-Time Employees Now Eligible for 401(k) After 2 Years

Employees become eligible to use a 401(k)/403(b) after no more than one year of full-time work (1,000+ hours) or two years of part-time work (500+ hours per year). It was three years for part-timers. Starts in 2025.

 

ΔSection 126: 529 to Roth IRA Rollovers Now Allowed

Once the 529 has been established for 15 years, 529 beneficiaries can roll up to $35,000 from their 529s into their Roth IRAs. This is not an addition to their annual contribution but a replacement for it. Basically, if you oversave for college, newly graduated students can use their $6,000ish per year for something besides Roth IRA contributions and still get their Roth IRA funded. This won't work for Backdoor Roth IRA contributions. This won't change what I do with leftover 529 money for most of my kids (that will go to the grandkids), but it will for leftover 529 money I have saved for nieces and nephews. Starts in 2024.

 

ΔSection 127: Pension-Linked Emergency Savings Accounts

Employers can establish new tax-free accounts for their non-highly compensated employees called pension-linked emergency savings accounts. Employers can automatically opt employees in with up to 3% of their compensation. The first $2,500 put into this account by the employee sits there as an emergency fund. Once it hits $2,500, additional contributions go into the employee's Roth 401(k). Employers can match the contributions 1:1 up to $2,500. The first four withdrawals from the account each year are penalty-free. At separation, the money can be taken as cash (penalty-free), rolled into a Roth IRA, or moved into the Roth 401(k). Starts in 2024.

 

Section 128: 403(b)s Can Now Use Collective Investment Trusts

Collective Investment Trusts (CITs) are currently used in 401(a)s, but 403(b)s are limited to annuities and mutual funds. Now, 403(b)s can also use CITs. Starts in 2022.

 

Title II: Annuities and Retirement Income

Title II is much smaller than Title I, but it includes four sections that make changes with annuities. I worry that a lot of the changes in these sections will cause complex, expensive annuities to be sold more frequently than they were before. This is a huge boon to annuity salespeople, as it now provides them with a whole new pool of money that can be used to purchase their products that are designed to be sold, not bought. I worry also that it will open up employers who allow bad annuities into their retirement plans to more employee lawsuits for inappropriate 401(k) investments (due to their fiduciary duty).

 

ΔSection 201: Makes It Easier to Put Annuities into Retirement Plans

Eliminates an actuarial test that commonly keeps certain types of more complex annuities (return of premium, period certain, annual increases) out of retirement plans. I'm not so sure this one is a good thing for retirement savers, but it starts in 2022.

 

Section 202: Makes It Easier to Put QLACs into Retirement Plans

Qualified Longevity Annuity Contracts (QLACs) are deferred income annuities that were hard to put into retirement plans because of RMD rules. These rules have now been relaxed so up to $200,000 can go into a QLAC. QLACs with spousal survival rights can also now be put into retirement plans. Again, I'm not sure this is a good thing given how annuities are typically sold. Starts in 2022.

 

Section 203: Insurance Dedicated ETFs

Variable annuities could now use ETFs like they currently use traditional mutual funds. Starts at the end of 2029.

 

Section 204: Slight Change to RMD Rules for Individual Retirement Annuities

Now “extra” income from the annuity can be used to reduce how much of an RMD you must take from the non-annuity portion of a retirement account. Starts in 2022.

 

Title III: Retirement Plan Rule Changes

There are 50 sections in this title. Some don't matter much, but others may have a significant effect on your financial life.

 

Section 301: Provides Flexibility and Protections When Retirement Plan Overpayment Errors Occur

Plan administrators no longer have to recoup mistaken payments, and those who received them get additional protections, including protecting rollovers of those overpayments. Starts in 2022.

 

ΔSection 302: RMD Penalty Cut in Half

The RMD penalty (50% of what should have been withdrawn but wasn't) is one of the most onerous in the tax code. It was just reduced to 25%, starting in 2023.

 

Section 303: Creates a Retirement Account Lost and Found

Creates a national searchable lost and found online database for forgotten retirement accounts. Starts at the end of 2024.

 

Section 304: Increases Dollar Limit for Small 401(k) to IRA Distribution

Employers can just cash out three-figure 401(k)s and can roll 401(k)s between $1,000-$5,000 to an IRA when their employees separate. Above $5,000, the employee must consent to taking the money out of the 401(k). Now, the limit is $7,000 instead of $5,000. Starts in 2024.

 

Section 305: Allows for Easier Retirement Plan Error Correction

It is now easier to correct many retirement plan contribution and distribution errors without involving the IRS by amending tax returns. This is known as the Employee Plans Compliance Resolution System. Starts in 2022.

 

Section 306: Eliminates “First Day of Month” 457 Rule

457s (and only 457s) had a dumb rule that required you to change your contribution rate before the first day of the month, even if the money for the contribution wasn't available until later in the month. That rule is now gone. Starts in 2023.

 

ΔSection 307: QCD Improvements

The best way for older retirees to give to charity just got better. Qualified Charitable Distribution (QCD) annual limits ($100,000) are now indexed to inflation. Plus, you can make a one-time $50,000 charitable distribution, via a charitable trust or charitable annuity (split interest gifts). Starts in 2023.

 

Section 308: Age 50 Rule Now Applies to Private Firefighters

Did you know that firefighters get a special loophole to the Age 55 rule (no penalty for 401(k) withdrawals after separation from service)? It's the Age 50 rule for them. However, that used to just apply to publicly employed firefighters. Now it applies to all of them. Starts in 2023.

 

Section 309: Tax-Free Disability Payments for Retired First Responders

Disability payments for retired first responders become tax-free. Starts in 2027.

 

Section 310: Change in Retirement Plan Nondiscrimination Testing for Employees Under 21

Nondiscrimination tests become more lenient for employers to encourage them to allow those under 21 to use their retirement plans. Starts in 2024.

 

Section 311: Shortens the Time Period to Repay a Birth/Adoption IRA Distribution

The original Secure Act allowed for an indefinite time period, even though you can only refile your taxes to get it for three years. This clarifies that you must repay the distribution within three years. Starts in 2022 (but can be used retroactively for three years).

 

Section 312: Employees Can Self-Certify Hardship for Retirement Plan Withdrawal Purposes

This is really just an administrative clarification. Starts in 2023.

 

Section 313: Establishes Statute of Limitations for Bad Contributions/Withdrawals

The old statute of limitations (three years in the case of bad withdrawals; six years for bad contributions) started when the taxpayer filed the form (Form 5329) stating they had done something bad. Now it starts three years/six years from the date of the original return, even if the taxpayer didn't realize they should have filed the excise tax form with the return. Starts in 2022.

 

ΔSection 314: Domestic Abuse Penalty-Free Withdrawal

This adds yet another exception to the Age 59 1/2 rule: domestic abuse. The limit is $10,000 or 50% of the balance, whichever is less. Also applies to 401(k) withdrawals. The money can also be repaid (with a refund of taxes paid) for a period of three years. Starts in 2024.

 

Section 315: Equalizes Aggregation Rules for Those in Community Property States

Retirement plans in businesses owned by spouses (and sometimes parents and children) must be aggregated for purposes of nondiscrimination testing. However, in a community property state, these businesses were penalized in a way that didn't apply to separate property states. This fixes that issue. There was also an issue where parents and minor children owned aggregated businesses that has also been addressed. Starts in 2024.

 

Section 316: Beneficial Plan Amendments Now Allowed Until Tax Return Due Date

Employers can now add provisions to their retirement plans that benefit employees until the tax return due date rather than the end of the calendar year. Starts in 2024.

 

ΔSection 317: Solo 401(k)s Started After the Calendar Year Can Now Get Employee Contributions

I used to recommend that you use a SEP IRA if you don't get your solo 401(k) established by the end of the year. Now, you can just establish your 401(k) before your tax return date and still make employee contributions to it. No reason now to use the SEP IRA and mess up your Backdoor Roth IRA pro-rata calculation. Starts in 2023 (for 2023 contributions, not 2022 contributions.)

 

Section 318: Lifecycle Funds Can Be Compared to Lifecycle Benchmarks

There was a dumb rule that you had to compare Lifecycle funds to a broad market index, even though the funds included bonds and other assets. Disclosure statements will now allow a more appropriate comparison. Starts in 2025.

 

Section 319: Government Agencies to Review Reporting and Disclosure Requirements

The Treasury, Department of Labor, and Pension Guarantee Benefit Corporation will review reporting and disclosure requirements and report to Congress within three years. Oversight and review are good things.

 

Section 320: Eliminating Junk Mail for Unenrolled Employees

Employers will no longer be required to send a bunch of 401(k) paperwork to employees who haven't even enrolled in the 401(k). Starts in 2023.

 

Section 321: DOL to Review Some Paperwork

The Department of Labor is supposed to review the current interpretive bulletin about pension risk transfers and report to Congress within one year.

 

Section 322: Clarification of Penalty for Prohibited IRA Transaction

If you do a prohibited IRA transaction (like buying an investment not allowed in an IRA), the entire IRA is treated by the IRS as though you withdrew the entire balance even if the transaction was only a tiny fraction of the IRA. This clarifies that only that particular IRA is treated as distributed. So, if you're going to do something in a gray area, roll the money you're going to do it with into its own IRA. Starts in 2023.

 

Section 323: SEPP Rule Clarification

The Substantially Equal Periodic Payments (SEPP) exception to the 10% early withdrawal penalty will now be applied even if a rollover or annuity exchange occurs or if the IRA is invested into any annuity that meets the RMD rules. The rollover changes start in 2024, and the annuity changes start in 2023.

 

ΔSection 324: Rollover Paperwork Standardization

The Treasury is to provide simplified and standardized rollover forms by 2025.

 

ΔSection 325: No More Roth 401(k) RMDs

Roth 401(k)s (but not Roth IRAs) have Required Minimum Distributions (RMD). Starting in 2024, they won't.

 

ΔSection 326: Terminal Illness Exception to 10% Early Withdrawal Penalty

Another new exception to the 10% Early Withdrawal Penalty (Age 59 1/2 rule) will be terminal illness starting in 2022.

 

Section 327: Surviving Spouse Can Elect to Be Treated as Employee for RMDs

The surviving spouse can now elect to be treated as the employee with respect to RMDs. This could reduce the RMD amount. Starts in 2024.

 

Section 328: Administrative Change to a Public Safety Officer Loophole

Cops can pay up to $3,000 of health insurance premiums from their retirement account without it being taxable income. It no longer has to be paid directly.

 

Section 329: Another Public Safety Officer Loophole Change

Like firefighters, cops can start taking money out of retirement plans penalty-free at age 50. Now, they can start after 25 years of service, even if they're not 50 yet.

 

Section 330: Corrections Officers Loophole

Corrections officers will now also be treated as public safety officers with respect to this Age 50/25 years of service rule.

 

ΔSection 331: Disaster Retirement Plan Withdrawal Rule Changes

You can withdraw up to $22,000 from retirement plans penalty-free in the event of a federal disaster. Taxes on that withdrawal can be spread over three years. The money can also be repaid into a retirement account. You can also repay any money you withdrew for a home purchase. Employers can allow a larger amount to be borrowed for a longer period of time from their retirement accounts in a disaster, too. This change is retroactive to January 26, 2021. I'm not sure what disaster happened that day.

 

Section 332: Employers Allowed to Replace SIMPLE IRA with a 401(k) During the Year

They used to have to wait until the end of the year to swap out a SIMPLE IRA. Under new rules, you can do it mid-year as long as the 401(k) has mandatory employer contributions. Starts for the 2024 plan year.

 

Section 333: Corrective Distributions of Excess IRA Contributions No Longer Subject to Penalty

Another exception to the 10% early withdrawal penalty will now be corrective distributions of excess contributions and the earnings on those. Starts in 2022.

 

ΔSection 334: Long Term Care Premium Exception to 10% Early Withdrawal Penalty

You can use up to $2,500 per year to pay long-term care premiums without paying the 10% early withdrawal penalty. Starts in 2026.

 

Section 335: Correction of Pension Plan Mortality Tables

Only actuaries are going to care about this one. It caps a figure they use in plan design to 0.78%. I think the change will slightly improve pension payments for participants. Starts in 2022.

 

Section 336: Paperwork Requirement for GAO

The General Accountability Office is supposed to report to Congress within 18 months on the effectiveness of the 402(f) distribution notice given to plan participants who take distributions.

 

ΔSection 337: Special Needs Trusts Can Have a Charity as the Remainder Beneficiary

Special needs trusts have special RMD rules (the ones that apply to the disabled person who is the beneficiary) but can now list a charity as the remainder beneficiary. Starts in 2023.

 

Section 338: Paper Benefit Statement Must Be Provided

Unless the participant opts out, an employer plan must send them their annual (every three years for defined benefit plans) benefit statement in paper form. Starts in 2026.

 

Section 339: Tribal Courts Now Recognized for QDROs

Qualified Domestic Relations Orders (QDROs) split up IRAs in a divorce. Tribal courts have been added to the list of approved courts for these. Starts in 2023.

 

Section 340: DOL Paperwork Requirement

The Department of Labor must review its fiduciary disclosure requirements within three years.

 

Section 341: Paperwork Simplification for Employer Plans

Employers can soon combine required notices into one form. Starts in 2025.

 

Section 342: Financial Options Risk Mitigation Act

Pension plan administrators will be required to provide more information to participants deciding between taking a pension or a lump sum—such as how the lump sum was calculated. Final rule to be issued in a future year.

 

Section 343: Defined Benefit Plan Annual Funding Notices

Pension plans are going to have to tell their participants how underfunded they are. Starts in 2024.

 

Section 344: DOL Paperwork Requirement

The Department of Labor will have to do a report on pooled employer plans by 2028 and every five years afterward.

 

Section 345: Group of Plans Form 5500 Clarification

If a plan files its Form 5500 as a “Group of Plans,” it still only needs an audit if there are more than 100 employees. Starts in 2022.

 

Section 346: Worker Ownership, Readiness, and Owner (WORK) Act

Sets aside funds to be used to promote employee ownership programs from 2025-2029. The devil will be in the details.

 

Section 347: Secretary of Labor Paperwork Requirement

The Secretary of Labor will have to submit a report on the effect of inflation on retirement savings within 90 days.

 

ΔSection 348: Hybrid Cash Balance Plan Adjustment

A technical adjustment to certain types of cash balance plans to prohibit the backloading of benefit accruals. It will allow plan sponsors to provide larger pay credits to older, longer-service employees. Worth talking to your plan provider about if you have a hybrid cash balance plan. Starts in 2023.

 

Section 349: Termination of Variable Rate Premium Indexing

A technical change to the method for determining unfunded vested benefit amounts. Starts in 2022.

 

Section 350: Grace Period and Safe Harbor for Employer Screwups

This allows employers to fix honest mistakes without being penalized as long as the employee is made whole and it is done within 9 1/2 months of the mistake.

More information here:

My Favorite Physicians That Became Politicians: The History of Docs in Congress

 

Titles IV and V

Includes some technical, clerical, and administrative amendments to the original Secure Act and Secure 2.0.

 

Title VI: Revenue Provisions

I'm really not sure why some important rule changes are in Title I, others are in Title III, and yet others are in Title VI. But we're not done yet.

 

ΔSection 601: Roth SIMPLE and SEP IRAs

Now you can make Roth contributions to SIMPLE and SEP IRAs. Starts in 2023.

 

Section 602: 401(k)/403(b) Hardship Withdrawal Rule Standardization

403(b) hardship withdrawals used to have to come from employee contributions only. No longer. Starts in 2024.

 

ΔSection 603: Rothification of Catch-Up Contributions for High Earners

No longer will catch-up contributions for high earners ($145,000+, indexed to inflation) be allowed to be tax-deferred, They will have to be Roth contributions. This appears to be driven by a need to increase revenue to the government. Starts in 2024.

 

ΔSection 604: Match Can Now Be Roth, Too

Employers can now allow the match dollars to go into the Roth subaccount of a 401(k), 403(b), or 457(b). This includes matches of payments on student loans. They will be taxable to the employee and immediately vested. Starts in 2022.

 

ΔSection 605: Limitation on Charitable Conservation Easement Deductions

Can't say we didn't see this one coming. Abusive practices with conservation easements have caused the IRS and, now, Congress to crack down on them. There is now a limit on the deduction of 2.5X of each partner's relevant basis—unless it has been held for at least three years, the partnership is all owned by the same family, or there is a historic structure present on the property. This will eliminate much of the “benefit” of doing these since your tax deduction will now rarely be any larger than the amount you put into the deal. Starts in 2022.

 

Section 606: Extends Employer Flexibility for Retiree Health Benefits

Employers are allowed to use up to 1.75% of a pension plan that is at least 110% funded for retiree health and life insurance benefits. This flexibility has now been extended to 2032.

More information here:

The Student Loan Holiday Has Been Extended Again (and Maybe Forever)?

 

Title VII

Tax court judges somehow got their own section. I think doctors need better lobbyists.

 

Section 701: Tax Court Judges Get TSP Match

Tax court judges weren't getting the TSP match before. Now, they will. They also get parity with every other federal judge with respect to another benefit program for their surviving spouses and dependent children. Starts in 2022.

 

Section 702: Tax Court Special Trial Judges Get a Retirement Plan

Special trial judges of the tax court will now be treated like other federal judges. Why they didn't get the same retirement plan before is beyond me. Starts in 2022.

 

Well, almost 5,000 words later here we are at the end of the Secure Act 2.0. There is a TON in there that changes the rules we have been playing by for years. At a minimum, make sure you've gone back and read all of the sections with the blue deltas (Δ) next to them for the most relevant information. I'm really bummed that about half of this website is now out of date. We'll try to update it as we go along.

What do you think of the Secure Act 2.0? What surprised you the most? What changes are you most (or least) excited about? Comment below!