SECURE Act 2.0 Legislation Overview
- The retirement industry experts widely expect it to pass by the end of the year (2022).
- Take away the option for auto-enrollment (for 401k and 403b retirement plans).
- Increases the tax credits for starting a company retirement plan from between 75-100%
- Currently 50%
- New credits for employer contributions
- Historically been tax deductible. Moving forward will get a dollar-for-dollar tax credit.
- Increases mandatory RMD age from 72 to 75.
Stats for Americans in retirement: These are the primary reasons for current legislation
- 25% of U.S. adults have no retirement savings.
- The median for individuals nearing retirement (ages 55-64) is less than $1,000/month in available income.
- 40% of working Americans are confident their retirement planning is on track (overconfident?).
Legislation mandates have been introduced in most states and are currently active in 16 states.
Of those active:
- Employee eligibility starts at age 18
- All post-tax, Roth IRAs
- Free administrative cost
Program details:
- Contribution Limits
- 401(k): $22,500 ($30,000 if older than 50)
- IRA: $6,000 ($7,000 if older than 50)
- Deadlines/Compliance
- Many state-run programs require employer compliance by a given deadline.
- Deadlines may be staggered or based on number of qualified employees.
- Fees/Penalties
- Employers may receive fines for failure to provide a retirement savings option to eligible employees.
- Administrative Duties
- Employers are often required to bear the burden of paperwork and processing to ensure program compliance.
