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‘Secure Act 2.0’ and Your IRA 

By Ann E. Salek, Attorney at Law Critchfield, Critchfield & Johnston, Ltd. 

Congress passed the “Secure Act,” effective January 1, 2020, which drastically affected qualified retirement plan accounts such as IRA’s and qualified employer retirement plans such as 401k and 403b. Just before their 2022 year-end holiday recess, Congress passed “Secure 2.0 Act,” effective January 1, 2023 which is widely considered a “follow-up” to the first Secure Act. The Secure 2.0 Act includes a long list of new provisions affecting contributions and withdrawals to retirement accounts. This article will highlight a few of the provisions most meaningful to individuals. 

One of the most meaningful provisions of both the Secure Act and Secure 2.0 affects the beginning date to start required minimum distributions (“RMD’s”) from qualified plan accounts. Prior to January 1, 2020, the beginning age to start RMDs was 70 ½. The Secure Act increased that beginning age to 72 starting January 1, 2020 (only to be further confused with the CARES Act providing COVID relief provisions waiving the RMD’s in 2020). Secure 2.0 now increases the beginning age for RMD’s to 73 starting January 1, 2023, and then 75 starting January 1, 2033. Therefore, if you turn 72 in 2023, you do not need to start your RMD’s until 2024. 

Retirement account owners can still elect to make Qualified Charitable Distributions starting at 70 ½. Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity for a tax free distribution. There is an annual limit of $100,000 for a Qualified Charitable Distribution and the Secure 2.0 allows that limit to be adjusted for inflation starting in 2024. 

Secure 2.0 also increases “catch-up” contributions to certain retirement plan accounts. A catch-up contribution provision allows an individual over the age of 50 to make additional contributions to their employer retirement plan ($7,500 in 2023) or IRA ($1,000 in 2023). Secure 2.0 allows individuals age 60-63, starting in 2025, to increase their catch-up contribution to $10,000. However, Secure 2.0 adds a caveat regarding catch-up contributions. If you earned more than $145,000 in the prior tax year, any catch-up contributions must be made toward a Roth-type account using after-tax dollars which can grow tax free. 

Secure 2.0 includes several provisions meant to promote work place retirement contribution plans. For example, employees may designate any employer “match” be made to a Roth plan rather than a traditional 401k plan. Such contribution would be taxable income to the participant in the year of contribution but that contribution will grow tax-free and future withdrawals from the plan would be tax-free. In addition, beginning in 2024, employees paying off student loans can elect to treat a qualified student loan payment as a retirement plan contribution when determining eligibility for an employer matching contribution program. Also beginning 2024, RMD will no longer be required for participants in a Roth 401k plan. This will match the existing treatment for Roth IRA’s. 

Secure 2.0 does not have the sweeping affect of the original Secure Act. However, there are a laundry list of provisions that add a caveat or nuance to retirement planning that will likely affect individuals in some fashion. 

Opinions and claims expressed above are those of the author and do not necessarily reflect those of ScripType Publishing.