| Change |
What It Means |
Applies to* |
Mandatory or Optional |
Effective |
| De minimis financial incentives to employees for contributing to a plan. |
Currently, an employer is not permitted to offer any incentive to employees to entice them to participate in a plan, other than matching contributions. SECURE 2.0 allows employers to give employees de minimis financial incentives for contributing to a 401(k) or 403(b) plan as long as the expense does not come from plan assets. The new Act does not say what “de minimis” means, but a gift card in a small amount is given as an example of what type of incentive would be acceptable. |
401(k) and 403(b) plans |
Optional |
2023 plan year** |
| Optional treatment of employer contributions as Roth contributions |
SECURE 2.0 allows a plan to permit participants to elect to receive employer matching and nonelective contributions as Roth contributions. |
401(a), 401(k), 403(b), and governmental 457(b) plans |
Optional |
Contributions made after December 29, 2022 |
| Clarification of vesting service rules for long‑term part-time employees |
The original SECURE Act required employers to allow employees who work at least 500 hours in a consecutive three‑year period (long-term part-time employees) to make deferrals to a 401(k) plan. The rule allowed periods of service before 2021 to be disregarded for purposes of determining eligibility, but not for vesting. This meant that even though a plan did not have to allow for employer contributions for these employees, if it did, service before 2021 would have counted for vesting purposes. SECURE 2.0 changes this and provides that service before 2021 is disregarded for all purposes.
SECURE 2.0 also reduces the three-year period to two years, and makes the rule applicable to 403(b) plans as well. Those provisions are not effective until 2025, so we’ll tell you more about them in an upcoming eAlert. |
401(k) plans (and beginning in 2025, 403(b) plans) |
Mandatory |
As if included in the original SECURE Act (so back to 2021 for the part about disregarding service and 2025 for reduced determination period) |
| Limit on repayment period for qualified birth or adoption distributions |
The original SECURE Act allowed participants to take distributions in the case of a qualified birth or adoption, if authorized by the plan, and to repay the distribution at any time (with the repayment treated as a rollover contribution). The new Act requires that the repayment be made within three years of the distribution to qualify as a rollover contribution. |
401(a), 401(k), 403(a), 403(b), and governmental 457(b) plans |
Mandatory if qualified birth or adoption distributions are authorized by, and the distribution was taken from, the plan |
Distributions made after December 29, 2022. The repayment period for earlier distributions ends December 31, 2025 |
| Participants can certify that hardship conditions are met |
Current law allows participants to self‑certify that they do not have other funds available to address a hardship. SECURE 2.0 extends this by allowing participants to self-certify that they have had a safe harbor event that constitutes a deemed hardship (or for a 457(b) plan, an unforeseeable emergency). |
401(k), 403(b), and governmental 457(b) plans |
Optional |
2023 plan year |
| Exception to 10% additional tax on early distributions for terminally ill individuals |
There is an additional 10% tax on early distributions from tax‑qualified retirement plans, subject to some exceptions. SECURE 2.0 adds an exception for distributions to a terminally ill individual with a physician certification that death is reasonably expected to occur within 84 months. It also allows for the distribution to be repaid within three years. |
401(a), 401(k), 403(a), and 403(b) plans |
This provision does not permit a plan to provide for a new in‑service withdrawal option. The tax provision automatically applies to an individual for whom distribution is permitted for another reason but would otherwise be subject to the additional 10% tax. |
Distributions made after December 29, 2022 |
| Special rules for use of retirement funds in connection with federally declared disasters |
The new Act provides permanent distribution rules in connection with federally declared disasters. It allows up to $22,000 to be distributed to affected individuals. These distributions are not subject to the 10% early distribution tax, are taken into account as gross income over a three‑year period, and may be repaid within three years.
If a participant takes a distribution before the disaster to purchase a home in the disaster area, but ends up not using the funds because of the disaster, they may recontribute the funds to the plan without taxation if done timely.
Finally, a plan that allows loans can allow a larger amount (up to $100,000 instead of $50,000) to be borrowed by affected individuals and the participant gets additional time to repay the loan. |
401(a), 401(k), and 403(b) plans |
Optional |
Disasters occurring on or after January 26, 2021 |
| Increase in age for mandatory distributions |
The original SECURE Act raised the age at which required minimum distributions must begin from 70 ½ to 72. SECURE 2.0 raises that age again, to 73 for individuals who reach age 72 after December 31, 2022. In 2033, the age will increase again to age 75 for individuals who reach age 74 after December 31, 2032. |
401(a), 401(k), 403(a), 403(b), 457(b), and defined benefit plans |
Mandatory, although plans may continue to permit distributions at an earlier age |
Mandatory distributions made after December 31, 2022 |
| Reduction of RMD penalties |
Existing law imposes a 50% excise tax on missed required minimum distributions. SECURE 2.0 reduces the tax to 25%. If corrected within two years, it is reduced to 10%. |
401(a), 401(k), 403(a), 403(b), 457(b), and defined benefit plans |
Mandatory |
2023 taxable year |
| Changes to rules involving overpayments of benefits |
A plan fiduciary is not required to seek recovery of an overpayment. Subject to some limitations, the plan does not need to be made whole by the participant or beneficiary, plan sponsor, or other party, which was the rule until now. If a distribution would have otherwise been eligible for rollover, the fact that it is an overpayment will not make it ineligible for rollover.
If the fiduciary decides to seek recovery of the overpayment, restrictions on the timing, amount, and method of collection apply. |
401(a), 401(k), 403(a), 403(b), and defined benefit plans |
Mandatory |
Immediately with retroactive relief for good faith interpretations of current rules |
| Expansion of self-correction program |
SECURE 2.0 expands the errors that may be self‑corrected under the IRS correction program to most “inadvertent failures,” including loan failures, that occur despite the existence of administrative practices and procedures. |
401(a), 401(k), 403(a), 403(b), and defined benefit plans |
Mandatory |
Immediately |
| Eliminates unnecessary notices to unenrolled participants |
Plans are required to regularly give plan participants various notices about the plan. Before the new Act, this included employees who are eligible to participate but have not elected to contribute (“unenrolled participants”). |
Defined contribution plans required to send periodic notices |
Optional |
2023 plan year |
