SECURE 2.0 became law on December 29, 2022. It has something for all retirement plans, and its provisions should be reviewed by all retirement plan sponsors. It aims to increase retirement savings and expand retirement coverage by providing for earlier plan enrollment, increased contributions, increased incentives for implementing plans and greater flexibility when taking plan distributions.

The original SECURE Act (sometimes referred to as "SECURE 1.0") became law in 2019. The deadline for implementing amendments to retirement plans for SECURE 1.0 was generally extended until December 31, 2025 because of anticipated passage of additional changes in "SECURE 2.0". SECURE 2.0 was signed into law on December 29, 2022, and the deadline for related amendments to retirement plans will also be December 31, 2025 (or December 31, 2027 for certain governmental and collectively bargained plans), unless extended by the IRS. Although the period for amendments has been delayed, plans must operate in compliance with the mandatory provisions of SECURE 1.0 and 2.0 once those provisions become effective.

SECURE 2.0 is some 350 pages long, which makes it difficult to read and implement, but we have summarized its key provisions. Future advisories will focus on specific issues and planning guidance. As a side note, our esteemed colleague, Jeff Belfiglio, who wrote portions of this advisory, has now officially retired. He will be missed, but many of us have ship-shape retirement plans due to his insights and efforts, and we invite you to join us in collectively thanking Jeff for his exemplary work throughout his career.


SECURE 2.0 has a number of mandatory provisions, as summarized below.

Additional Increase in Required Beginning Date. Effective January 1, 2023, the required beginning date for commencing required minimum distributions ("RMDs") from qualified plans (e.g., defined benefit plans, money purchase, 401(a), 401(k)), 403(b) and 457(b) plans will increase from: (1) age 72 to age 73 for individuals reaching 72 after December 31, 2022 and age 73 before January 1, 2033; and (2) age 73 to age 75 for individuals attaining age 74 after December 31, 2032, as summarized in the following chart:

Birth Year Age at which RMDs begin
1950 or earlier 72 (70.5 for those who turned 70.5 prior to 1/1/2020)
1951-1959 73
1960 or later 75

There is a related change to the excise tax payable if RMDs are not taken timely. Under current law, the excise tax is 50% of the amount by which the RMD exceeds the actual amount distributed. Effective for tax years after SECURE 2.0 is enacted, the excise tax for RMD failures will be reduced from 50% to 25%. If the failure is corrected in a timely manner, the penalty is reduced from 25% to 10%. Existing provisions allowing the plan administrator or participant to apply for waiver of the excise tax remain in effect.

In addition, effective for 2023 onwards, the RMD rules are modified to eliminate certain barriers to life annuities (such as period certain guarantees and small guaranteed annual increases). This change will allow a broader range of annuity products to meet the RMD rules, but plans are not required to offer such products.

Rothification of Catch-Up Contributions. Effective for tax years beginning after December 31, 2023, catch-up contributions made to 401(k), 403(b) and governmental 457(b) plans by employees whose wages in the prior year exceed $145,000 (and as adjusted in future years) must be made as Roth contributions. This is a change from the current rules, which allow participants to choose whether catch-up contributions will be made on a pre-tax or Roth basis.

Increase to Certain Catch-Up Contributions. Effective for tax years beginning after December 31, 2024, the maximum catch-up contribution for 401(k), 403(b) and governmental 457(b) plans (capped at $7,500 for 2023) will increase to the greater of $10,000 or 150% of the 2024 "regular" age 50 catch-up contribution amount for employees who are age 60, 61, 62, or 63 in the applicable tax year. Like standard catch-up contributions, these dollar limitations will be subject to inflation adjustments.

Improving Coverage for Part-Time Workers. For plan years beginning on or after January 1, 2025, an employee generally cannot be prevented from participating in a 401(k) plan, or 403(b) plan subject to ERISA, after the earlier of the following has been satisfied:

  1. the later of: (i) attaining age 21; or (ii) completing one year of service (this rule has been in place for a long time); or

  2. two consecutive 12-month periods during each of which the employee has at least 500 hours of service.

Collectively bargained employees are not impacted by this provision.

Defined Benefit Plan Annual Funding Notices. Effective for plan years beginning after December 31, 2023, the content of the Annual Funding Notice for defined benefit plans must comply with new content requirements aimed at making the information clearer.

Mandatory Participation in "Retirement Savings Lost and Found". Within two years of SECURE 2.0's enactment, the Department of Labor ("DOL") must establish an online searchable database to allow participants and beneficiaries to search for and locate plan contact information. Plan sponsors will be required to provide information to the DOL to be included in the database. Participants can use the database to update their information.

Periodic Provision of Paper Benefit Statements. Effective for plan years beginning after December 31, 2025, defined contribution plans must provide one paper benefit statement annually to participants, and defined benefit plans must provide the paper benefit statement once every three years, unless a participant chooses to receive statements electronically or if the DOL's e-delivery rules are followed.


SECURE 2.0 includes many features that plans may adopt on an optional basis, when they become effective. Some are likely to be incorporated in many plans, like the increase in the cash-out limit. Others should be reviewed more closely to determine whether they are workable and improve the value of the plan. Except as otherwise noted, these options are available for qualified plans, 403(b) plans, and governmental 457(b) plans.

Match on Student Loan Repayments. Due to concern that many employees do not participate in 401(k) plans because they first have to repay student loans, the law allows qualified student loan repayments (up to the dollar limit) to be treated as elective deferrals for purposes of matching contributions. The student loan must have been for higher education expenses. The match must be available to all employees who are eligible to make elective deferral contributions, and the rate of match and vesting must be same for both elective deferral contributions and student loan payments. For actual deferral percentage nondiscrimination testing purposes, the plan may test separately those employees who receive matching contributions on student loan payments. The IRS is directed to issue regulations to flesh out the logistics for this option. This feature will be available for plan years beginning after December 31, 2023.

Option to Take Employer Contributions as Roth. Previously, employer matching contributions could not be made as Roth contributions. However, effective immediately, plans may allow fully vested participants to designate employer matching and non-elective contributions as Roth contributions. Presumably like elective deferrals, the designation must be effective before the contribution is made. This could be an alternative to converting employer contribution accounts to Roth after they have accrued, but will take some time to implement.

No Roth RMDs Before Death. Plans are now not required to make required minimum distributions of Roth accounts before the participant's death. This conforms to the treatment of Roth IRAs. This rule takes effect for distributions required in years after December 31, 2023; a required distribution for 2023 is still required even if it could be paid as late as April 1, 2024.

Emergency Withdrawals up to $1,000. Employees who live paycheck to paycheck may decline participation in a defined contribution plan for fear of being unable to access savings in even a small emergency. Beginning in 2024, plans may allow self-certified withdrawals for "unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses" up to $1,000. Only one such withdrawal is allowed per year, and only if any previous withdrawal is repaid to the plan within three years.

Emergency Savings Account up to $2,500. Similarly, plans may establish a separate Emergency Savings Account for non-highly compensated participants, funded with Roth contributions, which will still be eligible for match and can be subject to auto-enrollment. The account is held in cash or a money-market type fund. It will not be subject to the usual plan restrictions on withdrawal, there is no 10% penalty tax, and can be tapped as often as once a month. Such accounts may be adopted effective for plan years beginning after December 31, 2023.

Hardship Withdrawals Expanded. The existing defined hardship events are expanded to include financial needs due to domestic abuse that occurred within the prior year (up to $10,000). Permanent rules for federally declared disasters, based on previous disaster relief such as the CARES Act, will now allow up to $22,000 to be distributed and to be repaid to the plan or taken as a loan up to $100,000. For all hardships, in plan years after enactment, SECURE 2.0 permits participants to self-certify they have experienced a safe harbor hardship event, the employee has no alternative means reasonably available to satisfy such financial need, and the distribution is not in excess of the amount needed. Similar self-certification will apply to unforeseeable emergency withdrawals from a 457(b) plan.

Exception to Penalty on Early Distributions for Individuals with a Terminal Illness. Distributions prior to age 59½ are generally subject to a 10% penalty tax. Effective immediately, the 10% early withdrawal penalty will not apply to distributions if an individual's doctor certifies they have a terminal illness expected to result in death within 84 months.

Cash-outs May Be Increased to $7,000. This is effective for distributions after December 31, 2023. The current limit is $5,000.

Recovery of Overpayments. Plan sponsors currently are required to make-up non-returned overpayments to their plans. Effective immediately, plan fiduciaries have discretion over whether to seek recoupment of mistaken overpayments (with certain exceptions for forfeiture restoration or a material impact on a pension plan's ability to pay benefits). Rollovers of the mistaken overpayments will be treated as eligible rollovers. Any recoupment of overpayments is subject to new restrictions.

Qualifying Longevity Annuity Contract (QLAC) Changes. QLACs are annuities allowing payment at or near life expectancy to hedge against participants outliving retirement savings in defined contribution plans. Effective for QLACs purchased or received on or after December 30, 2022, participants can use up to $200,000 (indexed) to purchase a QLAC. Previously, participants were only permitted to use up to 25% of their defined contribution plan balance to purchase a QLAC. SECURE 2.0 also provides additional changes to QLAC rules regarding spousal survival rights, as well as to free-look periods for QLACs purchased or received on or after July 2, 2014.

Eliminating Unnecessary Plan Requirements Related to Unenrolled Participants. Effective for plan years beginning after December 31, 2022, plans are not required to provide certain notices to eligible individuals who elect not to enroll, but have already received a summary plan description and certain other notices regarding initial eligibility. However, such individuals must receive an annual eligibility reminder and any documents they request.

Participant Disclosures for Lump Sum Distribution Windows. Effective within a year of final DOL regulations (which are to be published at least one year after SECURE 2.0 is enacted), participants offered a lump sum distribution option under a defined benefit plan must receive a special notice. The DOL will provide a model notice, and it will provide information to retirees to compare the lump sum option with other benefits offered under the plan. The notice must be provided at least 90 days before a participant is eligible to elect the lump sum, and a copy of the notice must be furnished to the Pension Benefit Guaranty Corporation.

Long-Term Care Contracts Purchased with Retirement Plan Distributions. For distributions beginning three years after SECURE 2.0 is enacted, retirement plans may make distributions to purchase quality long-term care insurance contracts. The amount that may be distributed is the lesser of: (i) the amount paid annually for the long-term care insurance; (ii) 10% of the vested plan balance; or (iii) $2,500 (indexed for inflation). Such distributions are exempt from the 10% penalty on early distributions.


Section 403(b) plans, sometimes called tax-sheltered annuities, are available to employers that are 501(c)(3) non-profit organizations and public schools. While once a distinct market dominated by insurance companies, 403(b) plans now operate much like 401(k) plans and are served by many of the same providers. SECURE 2.0 continues the process of conforming the operation of 401(k) and 403(b) plans.

Ability to Join MEP and PEP Arrangements. The IRS only recently opened up the pre-approved plan process to 403(b) plan providers. SECURE 2.0 takes the additional step of allowing eligible employers (except church plans) to adopt 403(b) plans through multiple employer plan ("MEP") and pooled employer plan ("PEP") arrangements. The IRS is required to issue model plan language. While this provision is effective in 2023, it will begin to benefit small non-profit organizations when such arrangements can be established for 403(b) plans.

Hardship Withdrawals May Include Earnings. One of the remaining anomalies between 401(k) and 403(b) plans is that in the latter, hardship distributions from elective deferrals could not be made from earnings on those deferrals. This difference is eliminated, but not until plan years beginning after December 31, 2023.


Savers Credit Converted to Match. One of the most significant changes from the House version of SECURE 2.0 is a restructured savings incentive for low-income participants. There is an existing non-refundable tax credit equal to a percentage of elective deferrals, up to a maximum of $2,000. A 50% credit is available only for those earning less than $21,750 in 2023 or $43,500 for joint filers. The percentage decreases with income and phases out completely above $36,500 or about $18 per hour full time ($73,000 jointly). This credit has been under-utilized since it is wasted for those who have no tax liability; only an estimated 12% of eligible workers claim the credit. SECURE 2.0 restructures the credit as a government-paid matching contribution to the plan in which the elective deferral was made or another designated plan. The contribution is similarly a percentage of the elective deferrals, The percentage is initially 50%, phasing out over an income range of $20,500 to $35,500 ($41,000 to $71,000 for joint filers). The match is reduced by certain distributions from the plan during the taxable year, the preceding two taxable years, and the following year, until the filing of the participant's tax return. It may also be recovered in case of an early distribution that is subject to the 10% penalty. While the law says the match must be "claimed" on the participant's tax return, there are many mechanical issues to be worked out for such a program, which could affect millions of retirement accounts. Therefore it is not effective until 2027.

Small Company New Plan Tax Credits Expanded. The current tax credit for plan adoption costs is increased from 50% to 100% for employers with up to 50 employees. In addition, to encourage even small employers to make contributions, a tax credit is provided equal to employer contributions for employees earning up to $100,000, up to a per-employee cap of $1,000 (excluding defined benefit plans). This additional credit is phased out for employers with between 51 and 100 employees, and over the five years after the plan is adopted. This incentive is effective for taxable years beginning after December 31, 2022.

Small Financial Incentives Allowed. Prior to SECURE 2.0, financial incentives to encourage employees to contribute to 401(k) plans were prohibited (except for matching contributions). To encourage enrollment, effective immediately employers can make "de minimis" financial rewards such as gift cards available to employees who agree to defer, similar to other open enrollment incentives. The awards must be paid by the employer, not the plan, and are likely taxable income. SECURE 2.0 does not include any guidance on what constitutes a "de minimis" financial incentive.