President Biden recently signed the SECURE 2.0 legislation into effect. This bill contains sweeping changes for both the employer’s and the employee’s 401K plans.
- Automatic Enrollment: You are now required to offer Automatic Enrollment of at least 3% as part of the plans starting 2025. Plans that are established going forward in 2023 will also have to switch to the automatic enrollment plan feature
- Emergency Savings: Defined contribution retirement plans will be able to add an emergency savings account saving up to $2,500 per-employee on a Roth basis 💵
- Matching Roth Contributions: You can now offer matching contribution to Roth accounts, which was previously unheard of. This is a huge game-changer!!
- Student loan debt. Starting in 2024, employers will be able to “match” employee student loan payments with matching payments to a retirement account, giving workers an extra incentive to save while paying off educational loans.
- Required Minimum Distribution: Age is now getting a bump from 72 to 73 starting January 1, 2023. Penalty for not taking a RMD will reduce from a whopping 50% to 25% 🌱 Additionally, Roth accounts are not subject to the RMD requirements starting 2024.
- Catch-up Contributions: Starting 2025, individuals ages 60 through 63 years old will be able to make catch-up contributions up to $10,000 annually to a workplace plan, and that amount will be indexed to inflation (currently at $7,500 in 2023). For anyone making $145,000, all catch-up contribution will need to be made to a Roth account.
- 529 Plans. 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. The rollover is treated as a contribution towards the annual Roth IRA contribution limit.
There is so much more to this bill.
Stay tuned to see how Feather incorporates all these to offer a low-cost, easy-setup and most technically advance 401(K)!
Reach out to us to see how we can help you in your retirement journey 🚀