The Securing a Strong Retirement Act of 2021, or “SECURE Act 2.0” as it’s commonly known, is expected to be approved later this year. While it has to pass a vote by the House of Representatives, it was unanimously approved by the House Ways and Means committee last month. This rare bi-partisan support suggests that it’s likely to pass and become law, sooner rather than later. How might this bill affect you? Here are some of the highlights:
Increasing the Required Minimum Distribution age from 72 to 75
The proposal would raise the RMD age over a 10-year period, starting with a bump to age 73 in 2022, age 74 in 2029, and age 75 in 2032.
Increasing catch-up contributions for qualified retirement plans and IRAs
While catch-up provisions currently apply to those age 50 and up, the bill proposes an additional, higher catch-up amount for those ages 62-64. This would provide older workers who may be behind on retirement savings a chance to make larger contributions.
Allowing employer matching into a 401k for student loan payments
The bill would allow employers to treat student loan payments by an employee as elective income deferrals for the purpose of an employer-matching contribution. This could be a great benefit for those paying off student debt.
Indexing Qualified Charitable Distributions to inflation
The current QCD limit is $100,000 upon turning age 70.5. The bill would index this amount for inflation, providing potentially higher limits. It would also allow a one-time distribution to a charitable gift annuity or charitable remainder trust that can create an income stream for a period of time, with the remainder going to charity.
Enhancing Qualified Longevity Annuity Contracts (QLACs)
The bill aims to repeal the 25% of account balance limit, but it would still leave the $135,000 total limit in place.
Other proposed changes in the bill include incentives for small businesses to offer retirement plans, and allowing Roth contributions to SEP and SIMPLE plans.
The SECURE Act 2.0 has some encouraging provisions that may help your saving and retirement efforts. Although it’s not yet law, we will be watching closely and will let you know if and when the bill is passed. If you have any questions on how these proposed changes may affect you, please contact us anytime.