SECURE 2.0 Act of 2022—Congress' Final Gift of 2022 to Retirement Plan Sponsors

Alerts / January 4, 2023
Key Takeaways/Provisions
  • SECURE 2.0 Act of 2022 was signed into law on December 29, 2022.
  • Key changes include:
    • The required minimum distribution age was changed from 72 to 73 starting in 2023, and to 75 starting in 2033.
    • The catch-up contribution limit has been increased for those who have attained age 60, 61, 62 and 63.
    • Plan sponsors may link plan emergency savings accounts to individual account plans.
    • Plan sponsors may treat qualified student loan payments as elective deferrals for purposes of matching contributions.
    • Emergency withdrawals are permitted for unforeseeable or immediate financial needs relating to personal or family emergency expenses, with limits.
    • New 401(k) and 403(b) plans must include automatic enrollment and automatic escalation (existing plans are grandfathered).
    • Participation requirements for long-term part-time workers have been expanded.
    • Automatic rollover limits are increased.
    • Employee Plans Compliance Resolution System correction guidelines are revised to provide additional self-correction options.
  • There are many additional changes that require attention or consideration; the changes have various effective dates in 2023, 2024 and 2025.
  • Plan sponsors should consult with an attorney or trusted advisor to analyze how this sweeping legislation impacts their retirement plans.

For the second time in approximately three years, Congress passed broad legislation with sweeping impacts on retirement savings programs. The SECURE 2.0 Act of 2022 (SECURE 2.0) was included as part of the Consolidated Appropriations Act, 2023, which was passed by Congress on Dec. 23, 2022 and signed into law by the president on Dec. 29, 2022.

SECURE 2.0, which reflects Congress’ reconciliation of three separate bills—the House’s Securing a Strong Retirement Act and the Senate’s Enhancing American Retirement Now (EARN) Act and Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (RISE and SHINE) Act—is largely aimed at increasing access to retirement plans and retirement savings, streamlining administration and reporting requirements, and preserving retirement income. It builds on the SECURE Act of 2019 and marks Congress’ most recent step toward making retirement savings and security more accessible for U.S. households. Many of the changes do not take effect until 2024 or 2025, but some provisions will impact plans in 2023.

This alert summarizes some of the more impactful provisions of SECURE 2.0.

Title I—Expanding Coverage and Increasing Retirement Savings
  • Section 101—Automatic Enrollment Required. New 401(k) and 403(b) plans must now include an automatic enrollment feature. The automatic enrollment must be at least 3%, but not more than 10%, and then escalate yearly by 1% up to a maximum of somewhere between 10% and 15%. As with current eligible automatic contribution arrangements, participants may unwind contributions by taking permissible withdrawals within the first 90 days of their automatic enrollment. Some plans are exempt, including existing plans, governmental plans, church plans, small employers with 10 or fewer employees, SIMPLE plans, and new employers that have been in existence for less than three years. This section is effective for plan years beginning after Dec. 31, 2024.
  • Section 102—Increased Business Startup Credit. SECURE 2.0 increases the small business startup credit for employers with up to 50 employees from 50% to 100% and creates a new credit for plans other than defined benefit plans that is based on the amount of money contributed to participant accounts. This section is effective for taxable years beginning after Dec. 31, 2022.
  • Sections 103 and 104—Changes to the Saver’s Credit. The Saver’s Credit is changed from a credit that is paid in cash as part of a tax refund to a federal matching contribution that must be deposited into the saver’s retirement account. The match is 50% of retirement contributions, up to $2,000 per individual, subject to phasing out at certain income levels. The law also directs the Treasury Department to develop a strategy to educate the public about the match. These sections are effective for taxable years beginning after Dec. 31, 2026.
  • Section 105—Pooled Employer Plans (PEPs) Allowed to Designate a Fiduciary for Contribution Collection. PEPs may designate any named fiduciary (other than a plan employer) to collect contributions to the plan. That fiduciary must create written collection procedures. This provision is effective for plan years beginning after Dec. 31, 2022.
  • Section 106—Multiple Employer 403(b) Plans Allowed. 403(b) plans may participate in Multiple Employer Plans and Pooled Employer Plans and will get relief from the “one bad apple” rule so that one employer’s violations do not affect the tax treatment of employees of compliant employers. This provision is effective for plan years beginning after Dec. 31, 2022.
  • Section 107—Increases in Age for Required Beginning Date for Minimum Required Distributions. The age for minimum required distributions is increased to 73 effective Jan. 1, 2023, and to 75 effective Jan. 1, 2033.
  • Section 109—Changes to Catch-Up Limits. SECURE 2.0 increases the limit for catch-up contributions under a retirement plan for individuals ages 60 to 63 to whichever is greater: $10,000 or 150% of the regular catch-up amount for 2024. Those amounts will be adjusted annually based on the cost of living. This section is effective for taxable years beginning after Dec. 31, 2024.
  • Section 110—Student Loan Payments Treated as Contributions for Matching. An employer may make retirement plan matching contributions to a participant’s retirement account when that participant makes a “qualified student loan payment.” This applies to 401(k) plans, 403(b) plans, SIMPLE IRAs and governmental 457(b) plans. Employers may elect to apply nondiscrimination testing related to elective contributions separately to employees who receive these matching contributions. This section is effective for plan years beginning after Dec. 31, 2023.
  • Section 113—De Minimis Financial Incentives Allowed. Employers may offer de minimis financial incentives, such as low-dollar gift cards, to encourage employee participation in retirement plans. The financial incentives cannot be paid for with plan assets. This section is effective for plan years beginning after the date of SECURE 2.0’s enactment.
  • Section 115—Emergency Withdrawals Allowed. Individuals may withdraw up to $1,000 per year from their retirement plan accounts for certain emergencies without paying the 10% early withdrawal tax. Individuals have the option to put the money back into their accounts within three years. Individuals may not take another emergency withdrawal during that three-year period unless the money is first paid back. This section is effective for distributions made after Dec. 31, 2023.
  • Sections 116 and 117—Changes to SIMPLE Plan Contribution Rules. SECURE 2.0 allows employers to make additional nonelective contributions under a SIMPLE plan, beyond the standard 2% of compensation or 3% of employee deferrals, up to the lesser of 10% of compensation or $5,000 (indexed). Also, contribution limits for SIMPLE IRA plans and SIMPLE 401(k) plans are increased. Both changes are effective for taxable years beginning after Dec. 31, 2023.
  • Section 120—Automatic Portability Rules. Retirement plan service providers may transfer amounts in an employee’s default IRA, which was set up in connection with a distribution from a former employer’s plan, into the new employer’s plan, unless the participant elects otherwise. This section is effective for transactions occurring on or after 12 months following SECURE 2.0’s enactment.
  • Section 121—Starter 401(k) and Safe Harbor 403(b) Plans Created. Employers that do not sponsor a retirement plan may offer a starter 401(k) plan or safe harbor 403(b) plan, which generally requires a default enrollment with a 3% to 15% of compensation deferral rate. Annual deferral limits match IRA limits. This section is effective for plan years beginning after Dec. 31, 2023.
  • Section 125—Expanded Coverage for Part-Time Workers. SECURE 2.0 builds on the SECURE Act requirement that employer-sponsored plans allow long-term part-time workers to participate. Rather than needing to complete three years of service with at least 500 hours worked, employees need only complete two years of such service. This also applies to 403(b) plans that are subject to ERISA. This section is effective for plan years beginning after Dec. 31, 2024.
  • Section 127—Retirement Plan Emergency Savings Accounts Allowed. Employers may offer non-highly compensated employees emergency savings accounts in a retirement plan. Employers may automatically enroll those employees at no more than 3% of salary. The contributions attributable to employees must be capped at no more than $2,500. Contributions are made like Roth contributions and are treated as elective deferrals for purposes of matching contributions, with a matching contribution cap equal to the maximum account balance. When an employee leaves employment, he or she may take the account as cash or roll it over into a Roth defined contribution plan or IRA. This section is effective for plan years beginning after Dec. 31, 2023.
  • Section 128—403(b) Plan Investments. Effective for plan years beginning after Dec. 31, 2022, 403(b) plans will be permitted to invest in collective investment trusts.
Title II—Preservation of Income
  • Sections 201-204—Changes to Several Retirement Income Vehicles. SECURE 2.0 changes the rules surrounding several retirement income options to reduce the outdated or unintended impact of current law. This includes eliminating some barriers to life annuities, qualifying longevity annuity contracts and certain exchange-traded funds. SECURE 2.0 also provides for a potential reduction in minimum required distributions for retirement accounts that hold both an annuity and other savings vehicle by allowing the account owner to aggregate distributions from all portions of the account for the purpose of determining minimum required distributions. The effective dates of these changes vary.
Title III—Simplification and Clarification of Retirement Plan Rules
  • Section 301—New Flexibility for Retirement Plan Overpayments. Plan fiduciaries may choose not to recoup overpayments to plan participants. If the fiduciaries do seek to recoup the overpayments, limits are imposed to protect participants. This section is effective as of the date of SECURE 2.0’s enactment.
  • Section 302—Reduced Penalty for Failure to Take a Minimum Required Distribution. The penalty for failing to take a minimum required distribution is reduced from 50% to 25%. If correction is made within two years (subject to some limitations), the tax is further reduced to 10%. This section is effective for taxable years beginning after the date of SECURE 2.0’s enactment.
  • Section 303—Retirement “Lost and Found” Created. No later than two years after SECURE 2.0’s enactment, the Department of Labor will have a “lost and found” database that will allow individuals with money in a retirement plan to search for the contact information of plan administrators. The goal is to reduce the amount of retirement benefits that go unclaimed each year due to company changes (like mergers) or difficulty in locating employees.
  • Section 304—Updated Limit for Mandatory Distributions. The upper limit for employer-initiated transfer of former employees’ retirement accounts into an IRA is increased from $5,000 to $7,000. This change is effective for distributions after Dec. 31, 2023.
  • Section 305—Updated Employee Plans Compliance Resolution System (EPCRS). SECURE 2.0 expands the types of errors that can be self-corrected through EPCRS, effective on the date of enactment.
  • Section 310—Separate Top-Heavy Test for Excludable Employees Allowed. Under SECURE 2.0, employers may perform the required top-heavy test separately on non-excludable and excludable employees. Congress hopes that this will encourage smaller employers to permit employees under age 21 to begin saving for retirement by assuaging concerns about the amount of nonelective contributions that the employer would need to make if they failed top-heavy testing. This is effective for plan years beginning after Dec. 31, 2023.
  • Section 311—Limited Repayment Period for Qualified Birth or Adoption Distributions. Effective for distributions made after the date of enactment, the repayment period for retirement plan distributions taken for qualified birth or adoption expenses is reduced to three years to align with statute of limitations rules applicable to refunds related to individual tax returns.
  • Section 312—Employees Permitted to Self-Certify Hardship in Some Circumstances. Plan administrators may rely on employee self-certification of some hardships for purposes of taking a corresponding withdrawal. This change is effective for plan years beginning after the date of SECURE 2.0’s enactment.
  • Section 314—Distributions Allowed for Domestic Abuse Victims. Retirement plans may allow an individual to self-certify that they experienced domestic abuse so that they may withdraw money from their account. The maximum withdrawal amount is the lesser of $10,000 or 50% of the participant’s account. The participant may then repay the money within three years, and if they do, income taxes will be refunded on that repaid money. This is effective for distributions made after Dec. 31, 2023.
  • Section 315—Updated Family Attribution Rule for Aggregation. The aggregation rules that determine the degree of common ownership in a business are updated for two situations: first, to fix an issue that resulted in unfair treatment of spouses with separate business in community property states versus spouses who reside in separate property states; and second, where a minor child owns stock, to update the attribution to the child’s parent. These changes are effective for plan years beginning after Dec. 31, 2023.
  • Section 316—Increased Time Period to Adopt Beneficial Amendments. SECURE 2.0 allows a plan to adopt discretionary amendments that increase participants’ benefits by the due date of the employer’s tax return, rather than by the end of the plan year in which the amendment is effective. This change is effective for plan years beginning after Dec. 31, 2023.
  • Section 320—Reduced Notice Requirements for Unenrolled Employees. Employers are no longer required to provide certain notices to employees who are eligible to enroll in a retirement plan but elected not to participate. The employer must still provide an annual reminder of eligibility and any documents requested by the participant. This change is effective for plan years beginning after Dec. 31, 2022.
  • Section 324—Treasury Department to Simplify the Rollover Process. Congress directed the treasury secretary to develop sample forms for direct rollovers with the hope that such standardized forms might simplify the rollover process for participants. Such forms are to be completed no later than Jan. 1, 2025.
  • Section 325—Pre-Death Minimum Distribution Requirement Removed for Roth Accounts. Pre-death minimum distributions are no longer required for Roth accounts in employer plans. This updates the law to make the minimum distribution rule for Roth accounts in employer plans match the rule for Roth IRAs. This change is effective for taxable years beginning after Dec. 31, 2023.
  • Section 326—Exception to Early Distribution Penalty for Distributions to Participants with a Terminal Illness. Individuals with a terminal illness may receive distributions from their retirement accounts without incurring the 10% penalty that normally applies to early distributions. An illness is considered terminal if a physician certifies that the illness is reasonably likely to result in death within 84 months. This is effective for distributions made after the date of SECURE 2.0’s enactment.
  • Section 327—Surviving Spouses May Elect to Be Treated as Employees. Effective for 2024 and later, surviving spouses may elect to be treated as the deceased employee for purposes of minimum required distributions.
  • Section 331—New Rules Created to Allow Use of Retirement Funds, Related to Federally Declared Disasters. Affected individuals may receive up to $22,000 in distributions. Those distributions are not subject to the 10% early withdrawal tax and may be repaid. Additionally, the amount is taxed over three years. Employers may permit larger loans and a longer payback time for affected individuals, as well. These changes are effective for disasters occurring on or after Jan. 26, 2021.
  • Section 332—Employers Allowed to Replace SIMPLE IRA Plan with Certain 401(k) Plans. Effective for plan years beginning after Dec. 31, 2023, employers may replace a SIMPLE IRA plan with a SIMPLE 401(k) plan or other 401(k) plan that requires mandatory employer contributions during a plan year.
  • Section 334—Distributions Allowed to Pay for Long-Term Care Contracts. Retirement plans may permit distributions up to $2,500 to pay for high-quality long-term care insurance premiums. These distributions are exempt from the 10% early withdrawal tax. This is effective three years after the date of SECURE 2.0’s enactment.
  • Section 339—Tribal Governments Allowed to Issue Qualified Domestic Relations Order (QDROs). Effective for orders received after Dec. 31, 2022, including orders submitted for reconsideration, Tribal courts are authorized to issue QDROs.
  • Section 350—Safe Harbor Confirmed for the Correction of Certain Elective Deferral Failures. SECURE 2.0 allows employers a nine-and-a-half-month grace period after the end of the plan year in which certain automatic enrollment/automatic escalation mistakes were made to fix those mistakes. The time to correct the error is reduced if the employee notifies the employer of the error. Additionally, the employer must notify an impacted employee of a mistake within 45 days of correction. This safe harbor is effective for errors after Dec. 31, 2023.
Title VI—Revenue Provisions
  • Section 601—Roth Contributions Allowed for SIMPLE IRAs and Simplified Employee Pension Plans (SEPs). Effective for taxable years beginning after Dec. 31, 2022, SIMPLE IRAs and SEPs may offer employees the ability to treat contributions as Roth contributions.
  • Section 602—403(b) Plan Hardship Rules. SECURE 2.0 conforms the 403(b) plan hardship rules with the analogous 401(k) rules, effective for plan years beginning after Dec. 31, 2023.
  • Section 603—Roth Treatment Required for Certain Catch-Up Contributions. Catch-up contributions to 401(a) plans, 403(b) plans and governmental Section 457(b) plans must be made on a Roth basis. Employees with compensation of $145,000 or less are exempt from this requirement. This change is effective for taxable years beginning after Dec. 31, 2023.
  • Section 604—Employer Contributions Allowed on a Roth Basis. Effective for contributions made after SECURE 2.0’s enactment, employer matching or nonelective contributions may be made on a Roth basis.
Plan Amendments

Plans have until the last day of the plan year beginning on or after Jan. 1, 2025 (or Jan. 1, 2027, for governmental plans) to adopt amendments made pursuant to SECURE 2.0, as long as the plan operates in compliance with the requirements of SECURE 2.0 or the amendment as of SECURE 2.0’s or the amendment’s effective date.

Additionally, plan amendment deadlines under the 2019 SECURE Act, the CARES Act and the Taxpayer Certainty and Disaster Relief Act of 2020 are updated to the SECURE 2.0 dates.


SECURE 2.0 is one of the broadest pieces of retirement plan legislation in decades. It impacts virtually all types of retirement plans and reflects Congress’ desire to increase retirement coverage and access, protect retirement plan assets, and simplify retirement plan operation and administration. SECURE 2.0 will have lasting impacts on retirement plans. Employers sponsoring retirement plans need to be ready to implement the various changes on the various compliance dates.

If you have any questions about SECURE 2.0 or its requirements, please contact any member of BakerHostetler’s Employee Benefits and Executive Compensation team.

Authorship credit: Seth J. Hanft and Christopher R. Switzer

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